Indisputably, Nigerians are currently enduring the most severe economic downturn in the nation’s history.
As President Tinubu grapples with the problem, it’s generally agreed that he is handicapped by a lack of accountability and transparency in the oil sector; a consumption-driven economy; an over-bloated bureaucracy; profligacy in government; a seemingly intractable security challenge, and a failed anti-corruption war.
The biggest failures of the Economic and Financial Crimes Commission (EFCC) are the unabated monumental corruption in government and colossal economic crimes in the banking sector.
Healthy banking systems are key components of all sound economies and help accelerate economic growth, while poorly functioning ones like those in Nigeria impede economic progress.
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Paradoxically even as the nation’s inefficient, fraudulent, unethical and corrupt banks fail to foster development and are disinclined towards lending money, their condemnable habits of understaffing, casualisation of labour, overcharging for transactions, deceitful debits from accounts, and fraudulent foreign exchange practices, make them extremely profitable enterprises.
Nigerian banks have failed to live up to expectations because they are riddled with mismanagement, unprofessionalism, fraud, corruption, misappropriation, inefficiency, and atrocious customer service. A billionaire Nigerian bank CEO class has developed as a result of factors such as insider abuse on lending, foreign exchange manipulations, lending to high-risk customers, as well as deficiency in banking regulations and supervision.
The biggest issue plaguing Nigeria’s banking system is poor corporate governance (i.e. fraud and corruption at the top level). The rules, processes or laws by which they are operated, regulated and supposedly controlled are too lax.
Good corporate governance means the Board of Directors remains accountable to the shareholders and always acts in the best interests. The Central Bank of Nigeria (CBN), which is supposed to regulate commercial banks, is riddled with fraud, illegalities, unconstitutionalities, and a shameful lack of integrity at the top. It is in itself a need for regulation!
As for commercial banks in 2009 in order to save the banking system from collapse the CBN conducted a deep assessment exercise on Nigerian banks which exposed large-scale fraud which led to the removal of eight executive directors and eight chief executives of Nigerian banks for corporate governance infractions. Criminal charges were laid against five of them for offences including fraud, market manipulation, concealment and grant of credit facilities without adequate security.
Bank CEOs routinely get away with unethical and fraudulent behaviour because the Nigerian justice system has long since broken down and as a result only one case has been successfully prosecuted while the rest are stuck in the interminable Nigerian legal system of unending dismissals, appeals and re-trials.
Going back in time, prior to colonialism no formal banking institutions existed. Back then, trade by barter was used and entrepreneurship was carried out through commodities exchanges. The development of formal banking followed the demand for exchange networks from traditional indigenous economies to colonial exchange with the European world.
Initially banking management was about adhering to the interests of shareholders and depositors and colonial-era banks relied on the prudence of British banking practices to ensure sufficient capital bases and well-trained staff who adhered to a code of professional conduct. Deposits gathered in the colonies were transferred to the London Money Market where safe returns were earned.
When the government embraced market liberalisation, indigenous non-state dominated financial services institutions took over the economy and Nigerian banks developed into a cartel or oligopoly dominated by a few large firms who are able to collectively agree on the low level of customer care, high-interest rates and exorbitant charges they collectively impose on customers.
As unethical, morally deficient, and corrupt indigenous bankers took centre stage they became billionaires simply by deducting money from customer deposits for all sorts of spurious reasons. They also profited from selling foreign exchange and facilitating the accumulation and transfer of ill-gotten wealth.
The money market is supposed to provide a valuable instrument for local industrial development, but ordinary Nigerians struggle to get loans because bank managers personally gain from approving risky large-scale loans which, after appropriate kickbacks are paid, will later be written off as bad debts!
The aversion of banks towards assisting the poor in small-scale localised needs has resulted in the proliferation of unstable financially unsound “Micro Finance” banks which give out loans at extortionist rates.
There is a need for the Ministry of Finance and the EFCC to address the issue of commercial banks having evolved into personal businesses run by unscrupulous buccaneers. Rather than increase dividend on shares or reduce charges to customers, Nigeria’s “superstar” bankers revel in social media displays of affluence, philanthropically donate other people’s money, and assuage their guilty consciences through donations to religious bodies.
These “gurus” have succeeded in appointing themselves as warehouse managers of the nation’s foreign exchange. They are billionaires because supposedly “scarce” foreign currency and new Naira notes issued to banks which customers cannot access are openly for sale for extortionist prices in public places! Nigerians are now forced to treat currency as an item of trade and “buy” cash from POS operations owned by bankers! What is going on is nothing short of daylight robbery and unbridled criminality.
Government and the EFCC must wake up to their responsibilities and remedy the financial and economic wrongdoings of the majority of bank CEOs. As long as fraud and corruption in the banking system continues unabated the economy will never recover from its downturn.
