Discordant issues of CBN’s intercession in Skye Bank

The recent sack of the board and some members of executive of Skye Bank Plc by the Central Bank of Nigeria, (CBN), has prompted a wide range of questions about the action. Many wonder if indeed customers’ deposits were threatened.

There have also been speculations about the health of a number of banks resulting from details of the apex bank staff report. Report on the last Monetary Policy Committee meeting in Abuja, showed that 18 out of the 22 deposit money banks recorded increased bad loans, while eight exceeded the five per cent limit ratio of bad loans to total loans. Also three banks recorded 10 per cent limit.

Financial sector watchers at a point became worried about Skye Bank following the delay in release of its financial results. That was the first red flag that all was not well. Its 2013 financials were released in August 2014, while that of 2014 came in May 2015.

The Nigerian Stock Exchange, (NSE’s), post-listing rule requires quoted companies to submit audited full-year figures 90 days after year-end. However, Skye Bank was reported to have a toxic loan book worsened by poor liquidity linked mostly to exposure to the oil and gas sector amidst falling price of crude and recession in the economy.

The CBN Governor, Godwin Emefiele, disclosed in his address that liquidity strain had made Skye Bank a permanent visitor to the CBN discount window in search of lifeline. The intervention, he said, was a proactive move to prevent erosion of customer deposits.

However, the National Coordinator, Independent Shareholders Association of Nigeria, (ISAN), Sunny Nwosu, contended that, one issue Skye Bank board and management may not run from was poor corporate governance, especially in dealing with treatment of insider related credits.

Nwosu’s position was corroborated by a report in Premium Times that a letter signed by CBN’s director of banking supervision, Benjamin Fakunle, on January 22, 2015, had notified Skye Bank of an extension of the deadline to shore-up its capital base to December 31, 2016.

The letter titled“Re: Insider Credit” and addressed to the bank’s managing director reads in part: “…our exchange of correspondence on the above subject and write to inform you that the Central Bank of Nigeria has granted an extension of time till December 31,2016, to enable you bring your insider related credits within the stipulated regulatory maximum of 10% of your paid-up capital per director including his/her related parties and 60% paid-up capital for total related credit.” The letter also stated that the bank was required to provide quarterly reports/ updates on progress made.

A business intelligent expert, Kingsley Ighomwenghian, expressed concern about the role of the CBN in all that had transpired. He said:“My question for Emefiele and the CBN board is that if Skye Bank had been ‘weakening’ since late 2013, why did it buy Mainstreet Bank for alleged N100 billion under the watch of the regulators in 2014? Is this not another incidence of regulatory recklessness?”

An analyst at BGL Plc, Mr. Femi Ademola also said: “The CBN needs to tell us what exactly went wrong. We need to hear more. We feel that the CBN needs to tell us what happened. Were there insider dealings? Did the directors steal money? What exactly went wrong that made the CBN to ask about 10 people to go?”

Also, Daniel Ikhuoria, a development researcher contended that though the move the apex bank made may not be good for Skye Bank, it is very health for the industry. He said: “Other banks would understand the consequence that is likely to befall them if they go the way of Skye Bank.

Ikhuoria noted that the action of CBN is to forestall any likely danger and that they had done well in this matter.

He said the current situation has helped to reveal those banks that are heavily dependent on the government and those that are largely private sector dependent.

He said: “We run an economy where the government is the biggest spender. Most of the private sector people are not doing so much because the government is also not spending. The moment the government starts spending, things will change.”

Aligning his position with that of Ikhuoria, the DirectorGeneral, Lagos State Chamber of Commerce and Industry, Dr.Muda Lawal said it was important to change the management and if there were corporate governance issues, “they have their way of dealing with it”.

He said: “We must not lose sight of the fact that some of the challenges they (Skye Bank) have may not have been within the control of the bank itself. A lot of things are happening in the economy, a lot of external factors; exchange rate, Treasury Single Account and many others.”

Lawal said that there were challenges that may have arisen due to the quality of the management and that there were those that may be out of its control because of the micro economic shock.

“What is happening is not just in the financial sector of the economy, even in the real sector, many of them are going down,” he added.

CBN spokesman Isaac Okorafor had repeatedly insisted that the intervention of the apex bank was adequate and that the speculations do not reflect the actual health of the banks and indeed, the entire banking industry.

Okorafor said: “It is important that we do not create problems when none exists.”