Re: CBN and Corporate Cover Up

By Paul Nwabufo

I was filled with apprehension and anxiety when I saw the above online publication in the Guardian Newspaper of 3rd May 2021, written by Geoff Iyatse (Assistant Business Editor).

I was apprehensive because I thought that a massive fraud perpetrated by the Central Bank of Nigeria had been uncovered. I was also anxious because of the magnitude of damage such exposure would cause the financial system and the economy.

The opening paragraph of the write-up actually heightened my apprehension and anxiety, see: ‘Until last week, many Nigerians without insider knowledge of what goes behind the banking halls thought the country could count on a stable financial system as it pulls through the battered economy’. In the next paragraph, I was expecting a bombshell of dirt dug up by this ‘investigative journalist’ only to be confronted by his confusion and pedestrianism: ‘Sadly, the Central Bank EXPOSED (emphasis mine) what has become clandestine affairs (sic) between it and the country’s topmost old generation financial institution, First Bank of Nigeria Limited’.

So, it was actually the central bank that ‘exposed’ itself and not the result of any painstaking investigation? Why on earth should a business writer describe the relationship between a regulator and a deposit money bank as ‘clandestine affair?’ I’m wondering; is this a business editor’s language or that of a junk news reporter? Isn’t the central bank the regulator of the financial system in any economy? Isn’t the maintenance of financial stability a core function of CBN? Is this major role lost on this writer to the extent of describing the relationship of CBN and a bank in such vulgar language?
As you read along, you’ll further discover his obvious bias when he out rightly impugned the maturity, wisdom and integrity of the central bank with this closing sentence in the paragraph; ‘……. which raises a question on the genuineness and sincerity of the intention of the Regulator’.

What was the issue that led to all the brickbat? According to him, ‘ the Bank (First Bank) rejigged the board with Gbenga Shobo who was the Deputy Managing Director elevated to the position of Managing Director and Chief Executive Officer’. He agreed that this appointment among others were ‘awaiting regulatory approval’ and that it was made contrary ‘to an existing understanding between the board and the Central Bank of Nigeria’.

Without giving any serious thought to this position, he continued his deprecatory remarks thus: ‘For years, the Central Bank of Nigeria in a fashion typical of a civil society organisation exchanged memos with an institution it has regulatory oversight over but was either too timid to invoke relevant provisions of the law or too partisan to act as expected’. ‘Act as expected’ by who?’. So, beyond being ‘civil’ by ‘exchanging memos’, you expected them to use armed men to ‘scatter’ the place? Arrest everyone and lock up the place so they won’t be seen to be ‘too timid’ or ‘too partisan?’.

He continues; ‘this raises the question as to how many other regulatory breaches the central bank is covering up and how many more years the regulator would have looked the other way while the financial system was subjected to systemic risks supposing the board continues to pander to the undeclared interest of the Regulator’.

Meanwhile, the Central Bank Governor had in his press release of 29th April 2021 titled, ‘Governor’s Statement on the Purported Management Change at First Bank of Nigeria Limited,’(copy must be with this editor), clearly explained and stated the reasons why the regulator had to intervene by reinstating the erstwhile Managing Director, he said amongst other things,

‘Ordinarily, the board is vested with authority to make changes in the management team subject to CBN approval. However, the CBN considers itself a key stakeholder in management changes involving FBN due to the forbearances and close monitoring by the bank over the last five years aimed at stemming the slide in the going concern status of the bank.

“It was therefore surprising for the CBN to learn through media reports that the board of directors of FBN, a systemically important bank under regulatory forbearance regime had effected sweeping changes in executive management without engagement and/or prior notice to the regulatory authorities.

“The action of the board of FBN sends negative signal to the market on the stability of the board and management and it is in the light of the foregoing that the CBN queried the board of directors on the unfortunate developments at the bank.”

He went further to state the various measures taken by the regulator to stabilise the bank as follows:

I. Change of Management team under CBN’s supervision with the appointment of a new Managing Director/Chief Executive Officer in January, 2016.

II. Grant of regulatory forbearance access to enable the bank work out its non performing loans through provision for write-off of at least N150bn from its earnings for four consecutive years
III. Grant of concession to insider borrower to restructure their non performing credit facilities under very stringent conditions
IV. Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.

With all these pieces of information at the fingertips of this editor, you begin to wonder the exact purpose of the write-up. Was it to give the central bank a bad name or give balanced information as it relates to the issue at hand?

He acknowledges that First Bank is a ‘systemic important bank’ but fails woefully to connect the actions of the central bank to the preservation of the healthy status of the bank knowing that doing otherwise would affect the whole financial system. Isn’t he aware that since the global financial crisis of 2008-2009, every financial system throughout the world is taking robust measures to avoid bank failures of any type particularly those in the class of ‘systemic important banks?’

Perhaps the editor does not fully comprehend the regulatory role of the CBN as stipulated in the Banks and Other Financial Institutions Act 2020. If he did, he would have appreciated the effort of the CBN in following due process in firstly bailing out a systemic important bank as well as checkmating the impending boardroom imbroglio that would have caused chaos in the banking system.

Indeed, no regulator of any financial system in the world would sit back and watch the board of a bank run the affairs of the bank without check, nor will it allow a Shareholder who will not subject him/herself to regulatory control and authority to remain a director of any bank.

Why then should one make light of the enormous contributions of men and women at the Central Bank who work tirelessly to ensure systemic and financial stability? Criticism, particularly of an institution like the Central Bank must be made of sterner stuff. The least we should do is to use opportunities available to us to put down people and institution doing everything possible to protect the banking system, the financial system as well as the entire economy.

In the instant case, the central bank has disclosed that its various interventions and windows created since 2016 at the commercial bank are paying off, particularly with the collaboration and understanding of the reinstated Managing Director and the board. Fruits of intervention activities everywhere in the world take time to fully mature. First Bank with the regulatory direction of the Central Bank of Nigeria is moving in the right direction so, why try to upset the applecart?

Nwabufo, a financial and public affairs analyst, wrote in from Abuja