- Efforts to reform the economy and tame corruption will fail unless banks elect to act right
IN order to make any impact whatsoever in its reform efforts, the new dispensation must necessarily march through the hallways of banks and indeed, the financial sector with an axe and sanitiser, to clear cobwebs and thoroughly disinfect that smudged labyrinthine passageways of mammon.
For a little more perspective here, and in order not to sound arcane and appear brutish at the same time, we state categorically that hardly any headway would be made in the current bid to revamp the economic and financial sector without first addressing the banks and exorcising the ghouls inherent in them.
The reasons for this seeming hard stance are numerous and obvious, but three quick examples would suffice. Just last week, the Central Bank of Nigeria (CBN) threatened to sanction banks over their finagling with the power intervention funds. Just a few days earlier, the apex bank had raised eyebrows over illegal foreign exchange transactions. And the third example is the well known case of some banks criminally holding back huge sums in foreign denominations, thus flouting the orders of the Federal Government on the Treasury Single Account (TSA).
The power intervention fund amounting to about N213 billion was last year set aside by the CBN for onward lending to power distribution and generating companies, DISCOs and GENCOs. But the mandate banks which are deposit money banks (DMBs) are supposed to disburse and manage this fund which was set aside as electricity market stabilisation fund.
But so far, many of the DMBs have managed the fund in the breach. Among the infractions are failure to provide a statement of accounts maintained by the borrowers from the fund, that is, the power firms; allowing revenues to be paid into unauthorised accounts and allowing withdrawals to be made by unauthorised personnel.
The CBN has therefore levied monetary sanction against the defaulting DMBs and indeed, threatened to terminate the mandate of some of them.
As concerns illegal forex transactions, the CBN in a circular accused some DMBs of round- tripping and fraudulent foreign exchange transactions. The circular reads in part: “The CBN has noticed that some authorised dealers have continued to buy and sell foreign exchange referred to as ‘free funds’… Against the background, authorised dealers are to note that dealing in foreign exchange without appropriate documentation, which includes relevant entries, blotters, physical documents and non-disclosure to the regulatory authorities is a breach of extant regulations.”
On the third instance, the Federal Government had slammed nine DMBs for withholding about $2.3 billion of the Nigerian National Petroleum Corporation’s (NNPC) fund and neglecting to send same to the STA as directed by the government. The banks were barred from participating in the forex market but were later left off the hook upon appeal and on grounds of the consequence of the suspension on the economy.
These three instances in the last one month are symbolic of the nature and mode of operation of many DMBs in the country today. Needless to recount that fraud in banks has shot up several notches as exemplified by the large amounts that are reported lost annually through all sorts of malfeasance and unscrupulous practices.
Bad debts have also mounted, often occasioned by insider loans and unethical behaviours. The misconducts emanating from today’s banking are numerous and the image of today’s banker and banking is murky and unenviable.
As we have said several times, there is a need for thorough house cleansing. The CBN needs to apply the big stick where necessary if its efforts at sanitising the sector are to yield fruit.
Indeed, the reform ought to start from heavy sanctioning in the errant banks. There cannot be different rules for bank high chiefs and the rest of the citizenry. In cases of serious infractions, the heads should go or better still, big heads should roll. A few examples would send the appropriate message through the system.
