Perspectives on the Nigerian Financial Safety-Net:

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NIGERIA DEPOSIT INSURANCE CORPORATION

PERSPECTIVES ON THE NIGERIAN FINANCIAL SAFETY-NET:

GANIYU ADEWALE OGUNLEYE, OFR Managing Director/Chief Executive Officer Nigeria Deposit Insurance Corporation (1999-2009)

Perspectives on the Nigerian Financial Safety-net

PERSPECTIVES ON THE NIGERIAN FINANCIAL SAFETY-NET

GANIYU ADEWALE OGUNLEYE, OFR MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER NIGERIA DEPOSIT INSURANCE CORPORATION (1999-2009)

NIGERIA DEPOSIT INSURANCE CORPORATION

AN NDIC BOOK

©2010 Nigeria Deposit Insurance Corporation

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or y any means without the prior permission of the copyright owner.

ISBN: 978-978-906-978-1

NIGERIA DEPOSIT INSURANCE CORPORATION 447/448 Constitution Avenue P. M. B. 284, Abuja, Nigeria. Tel: 234-9 - 460 1380-9

Design & Printed by: ADOLNESS NIGERIA LIMITED Tel: 0803 452 1917, 0802 354 2958

TABLE OF CONTENTS

I. FOREWORD II. PREFACE v ix III. MY YOUTH, EDUCATION AND CARREER x111

CHAPTERS 1.

A Review of Banking Activities and Its Regulatory Framework in Nigeria: The Past, Present and Future

1

The Regulatory Imperatives of Implementing Universal Banking Concept In Nigeria

19

Regulatory Challenges in a Consolidated Banking System: NDIC Perspective

33

The Causes of Bank Failure and Persistent Distress in the Banking Industry

49

Ethics and Professionalism in Banking: Lessons from the Recent Distress in the Nigerian Banking System

77

Bank Frauds: Challenges and Solutions

91

Proactive Measures to Guard Against Fraud/Cash Theft in the Banking Industry and in Organisations

109

Concept and Relevance of Deposit Insurance in Africa

127

The Role of Deposit Insurance in the Stability of Financial System

143

III

Perspectives on the Nigerian Financial Safety-net M 10. The Role of Deposit Insurance in Promoting Financial

153 System Stability in Nigeria

11. The Role of Deposit Insurance in Promoting Economic Inclusion in Nigeria

177

12. Post-Consolidation Banking Era and the Nigeria Deposit Insurance Corporation: Issues and Challenges

197

13. Small and Medium Scale Enterprises as Foundation for Rapid Economic Development in Nigeria

207

14. The Role of Regulatory Institutions in the Management of Capital Flows.

231

15. The Global Financial Crisis: Lessons for Deposit Insurance Systems (DIS) in Developing Countries

253

269 References

Foreword T he safety and soundness of the financial sector is a critical objective of any government. Hence the importance of strong and viable financial safety nets is being increasingly recognized in the vast majority of nations. Safety nets are set of institutions, laws, and procedures that seek to promote an efficient and stable banking system during normal times and to manage the eventuality of a financial crisis. The components of a financial safety net are prudential regulation and supervision - the monitoring of banks and their business so as to enhance bank soundness and reduce the risk of bank failure; the lender of last resort (LLR) – facilities of Central Bank to address financial institutions' liquidity problems; and deposit insurance – to deal with a bank solvency problems.

The book - Perspectives on the Nigerian Financial Safety-Net is to make available to the wider public a compendium of written articles and papers on economic and financial issues inspired by the author's exposure to practical banking operations and personal involvement in policy design and implementation. The book is designed to throw some light on major developments which had occurred in the Nigerian financial sector with respect to bank regulation/supervision as well as deposit insurance.

V

Perspectives on the Nigerian Financial Safety-net M The author, Mr. Ganiyu Adewale Ogunleye, OFR, can aptly be described as an "oracle” on issues that affect the nation's banking industry. After working in the Central Bank of Nigeria (CBN), for 25 years, rising to the position of Director, Banking Supervision Department in 1992, he was appointed in October, 1999 as the Managing Director/Chief Executive Officer (MD/CEO) of the Nigeria Deposit Insurance Corporation (NDIC) and re-appointed in 2004. What is more, Mr Ogunleye was a pioneer Council member of the International Association of Deposit Insurers (IADI) and pioneer Chairman, Africa Regional Committee of the same Association, (i.e. IADI). It is therefore, obvious that he is eminently qualified to write on bank regulation/supervision and deposit insurance in Nigeria. His perspective and his rich store of experience as a bank supervisor, central banker and deposit insurer, have served him well.

The book's contents have been organized in such a manner as to provoke the interest of the reader from chapter to chapter. From issues relating to deposit insurance and banking system stability to a review of the banking sector and its regulatory framework, universal banking, banking consolidation, causes of bank failures, ethics and professionalism in banking, bank frauds and measures to guard against them, small and medium scale enterprises as foundation for rapid economic development in Nigeria, the role of regulatory institutions in the management of capital flows and the lessons for deposit insurance systems (DIS) from the global financial crisis; the book can best be described as reader's companion for banking practitioners, students as well as lecturers of banking and finance.

Without doubt, the author's argument on the need and rationale for the establishment of a deposit insurance scheme in Nigeria leaves no one in

Perspectives on the Nigerian Financial Safety-net VII doubt. He articulates brilliantly the concept and relevance of Deposit Insurance and its role in promoting financial system stability in Nigeria. The author also examined the modus operandi of fraudster in perpetrating fraud in our environment and identified the needed measures to be taken in order to deter, prevent and detect fraud in a timely and effective manner.

Over the last 3 decades, the Nigerian banking industry had undergone substantial structural changes due to series of reforms in terms of the number of institutions, ownership structure, as well as depth and breadth of operations. Among the various reforms were deregulation, implementation of universal banking as well as the introduction of banking sector consolidation. In spite of their proclaimed potentials, the author as shown in the book, enumerated some of the challenges posed by those developments and that dealing with the challenges was crucial for the efficient and effective functioning of the nation's financial system. Recent developments in the banking system, which warranted Central Bank's regulatory intervention in the later part of 2009 have no doubt, vindicated the author.

Among other issues, the recent global financial crisis and lessons for deposit insurance also featured in the book. In examining the global financial crisis, the author discussed the nature, causes and its impacts on the Nigerian economy. Based on the developments in other countries, an attempt was made to highlight some of the measures taken in some selected countries aimed at reducing the effects of the crisis on their economies and the lessons for deposit insurance systems in developing countries.

There is hardly any aspect of banking supervision/regulation and deposit insurance that was left untreated in the book. Even the future of banking

Perspectives on the Nigerian Financial Safety-net VIII business as contained in Nigeria's visioning process for an effective and efficient payment system is interestingly discussed as to be easily discernible, even to the uninitiated. Policymakers, bankers and the academic community cannot resist reading this book. Apart from serving as a veritable literature on some of the developments which have taken place in the banking industry over the years, the book is a credible source of information for researchers.

The author laid bare his experience over the years in the nation's banking industry. His thoughts as contained in the book are like words coming from an oracle. No one can ignore them. Perhaps the greatest contribution that the author has made is to present these papers in lucid and non-technical language that the wider public will have no difficulty in understanding.

Having read the book and found it very informative and educative, I do not hesitate in recommending it to all stakeholders in the financial sector and the wider reading public. The book will definitely serve as an invaluable reference material to members of the public who may from time to time need to know more about issues relating to bank regulation and deposit insurance in Nigeria.

Mallam Adamu Ciroma, CFR Former Central Bank Governor and Former Minister of Finance Federal Republic of Nigeria

December, 2010.

Preface D uring the course of my engagements as the Director of Banking Supervision in the Central Bank of Nigeria (CBN) and as a member of the NDIC Board representing CBN before ascending to the position of Managing Director/Chief Executive Officer of NDIC, I was deeply involved in the business of regulation, supervision and the implementation of Deposit Insurance system in the nation's financial system. As a result of that, I acquired a lot of knowledge and experience, for which I was often called upon to share with the public at different fora within and outside the country. Having recently completed my tenure as the Managing Director and Chief Executive Officer of NDIC, I felt there was the need to put together in a book form some of the presentations I made on topical issues regarding regulation, supervision and deposit insurance for wider readership as well as to add to the existing literature particularly on deposit insurance that is still scarce both in Nigeria and other African countries.

It would be difficult to present readable materials that would cover my experiences on the topics in this book. However, I have made some efforts to cover certain areas that I consider relevant and important in banking regulations and supervision as well as the practice of Deposit Insurance Management in Nigeria. I have carefully chosen the selected topics in an attempt to avoid repetition which is common in a text of this nature.

X

Perspectives on the Nigerian Financial Safety-net X The book, "Perspectives on the Nigerian Financial Safety-net” which is organized into fifteen chapters and written in lucid and simple language, serves as my own humble contribution to the dissemination of knowledge on banking regulation and supervision as well as propagating the gospel of deposit insurance in Nigeria. It must be appreciated that public awareness remains a major challenge not only to the deposit insurance in Nigeria but also to other systems even in advanced economies, hence the need to propagate it at any given opportunity.

This book project could not have been successful without the support of the Acting Managing Director/CEO, Alhaji Umar Ibrahim, mni. To him, I express my sincere gratitude. I also wish to acknowledge the experiencing- sharing platform provided through IADI. In particular, I wish to thank all my colleagues (past and present) in the Governing Council of the Association whose wealth of experience in deposit insurance had assisted me in no small way in up-grading my knowledge in the field. Furthermore, I wish to appreciate the efforts of the research team led by Dr. J. Ade Afolabi (Director of Research Department) that did the selection of the articles as well as carried out editorial work on the book. Other members of the research team are Mr. Sunday A. Oluyemi (Deputy Director, Research), Mr. Rotimi W. Ogunleye (Assistant Director, Research) and Mr. Hashim I. Ahmad (Assistant Director, BEU). I wish to acknowledge the team members for exhibiting high sense of professionalism and for their invaluable contributions in ensuring that the book project became a reality.

The members of my family deserve special mention for their encouragement. A sincerely appreciate my darling wife, Fehintola for her cooperation and understanding throughout my working career and in particular for her steadfastness in the belief of my value system. I also

Perspectives on the Nigerian Financial Safety-net XI thank all my children: Hakeem, Folashade, Abimbola, Folake and Jumoke for their unflinching support and love for me. Finally, I wish to thank almighty Allah for his mercies and grace over me throughout my career, in particular, and my life, in general.

It is my believe that regulators/supervisors, the banking public, academia and the general public would find this book useful.

Ganiyu A. Ogunleye, OFR Managing Director/CEO Nigeria Deposit Insurance Corporation Abuja (1999 – 2009)

December, 2010

Perspectives on the Nigerian Financial Safety-net

My Youth, Education And Career

My Youth

I was born in Lagos. My father worked in the Nigerian Railway Corporation (NRC) before moving to Nigerian Ports Authority (NPA). At that time, we were all living in NPA quarters. I grew up in a cosmopolitan environment. When we were living in Apapa, we had our own association of boys and girls that organised football matches and indoor games.

My Education

Based purely on my father's decision, my siblings and I schooled in the village and not in Lagos. In those days, before we started formal school, we passed through a preparatory school where we learnt alphabets. So I had to go to school at home, that is, at Baptist Day School, Ijagbo. When the time came for me to go to Secondary School, I thought I would go to school in Lagos but my father decided otherwise. So I had my Secondary School education at Provincial Secondary School in Ilorin, Ilorin Province. The school later became Government Secondary School, Ilorin. That was where I did examinations for both O' Level School Certificate and Higher School Certificate. After my higher school, I worked briefly at the Nigerian Ports Authority (NPA) before proceeding to University of Ibadan, where I studied and obtained a B.Sc (Hons) in Economics in 1973.

XIII

Perspectives on the Nigerian Financial Safety-net XIV My Career In The Central Bank of Nigeria (CBN)

Shortly after my graduation, I started my career at the Central Bank of Nigeria (CBN). I worked in various Departments, first at the Loans office. I also worked in such other Departments as Accounts and Banking Operations Department. From Banking Operations Department, I was transferred to Jos Branch of the CBN. However, in 1981, the Management transferred me from Jos Branch to Banking Supervision Department (BSD) in Lagos. I was in BSD for a period of 18 years. It was in BSD that I rose to the status of a Director.

In BSD, we had three divisions which included Field Examination (which handled on-site examination of licenced banks). That time we had Commercial and Merchant Banks. I was in Field Examination for seven years before moving to another division called Central Supervision. My main responsibility while in the Central Supervision Division (CSD) was processing of applications for banking licence. All banking licence applications, particularly after the deregulation of the financial services industry, a part of the Structural Adjustment Programme of the Federal Government in 1986, passed through me.

The era of deregulation witnessed a significant increase in the number of licenced banks. As at 1987, we had 47 banks, but by 1990, the number of banks had increased to 120 merchant and commercial banks. That was a busy period for us indeed. The job schedule of staff in my Department then was very tight. We were working everyday of the week. The CBN was under the Federal Ministry of Finance (FMF) then. When the CBN Management was satisfied that the requirements for a banking licence had

Perspectives on the Nigerian Financial Safety-net XW been met, a recommendation would be made to the Minister of the Federal Minister of Finance. The Minister would prepare a Council Memo for the Armed Forces Ruling Council (AFRC) for consideration and approval. Processing of applications for banking licence was a delicate exercise and anyone doing the job needed to be very careful. Most of the bank promoters were powerful individuals who had connections with the highest authority. Oftentimes such people would complain of delays in processing their applications without disclosing that they did not provide all the requirements.

There were challenging assignments we faced in BSD. In the case of Societe Generale Bank of Nigeria (SGBN), there was a serious ownership tussle between Dr. Olusola Saraki and Chief Sokoye. I handled that investigation. We also had the case of Pan African Bank (PAB) where the State Government had contracted a management firm, ABC Fund, to manage and turn around Pan African Bank. We had petitions as to the competence of ABC Fund to turn around the bank. I also handled that investigation. At the end of the investigation, we were not satisfied that the ABC Fund had the managerial capacity to turn around Pan African Bank. The report I wrote warranted the State Governor to come to CBN to present his case. He presented his case and made some claims that our report was based on rumours and not on facts. As it were, he did not provide any new information. After his presentation, the response of the CBN Governor was very motivating to all of us who were examiners. The CBN Governor made it clear that any information that was not in the bank would not be used as evidence. In fact, the CBN Governor then informed the State Governor that he could not change the contents of the report. At that point, it became clear to the State Government that they had no case to present. The CBN stood by its position. Later the bank continued but as we all know, it never survived.

Perspectives on the Nigerian Financial Safety-net XM Also in 1989, the Federal Government decided that all public sector funds should be withdrawn from commercial banks and deposited with the CBN. That decision caused a major liquidity crisis in the banking industry. The CBN needed to respond to the liquidity crisis that ensued and that led to the setting up of a Liquidity Crisis Management Committee. The report of that Committee provided a basis for the intervention that took place, whereby the CBN and NDIC provided accommodation bills to banks that were in dire need of liquidity. Of course, the CBN discounted the bills. In fact, NDIC was very young then, just only three months old when that decision was taken.

In the late 1980s up to the 90s, there were observed weaknesses in financial reporting by banks. At a point the CBN decided to make banks have a uniform basis for assessing bank performance. That decision gave rise to the crafting of the Prudential Guidelines for income recognition and asset classification by banks. I played a very, very key role in crafting the Prudential Guidelines which are still in use today, with little or no revision, except for emergency reactions or responses. The recent revision was when CBN stipulated one percent for general provisioning and that was just for 2009 audited accounts. That document is still virtually what we had in 1990. To give the Guidelines the necessary legal backing, the CBN also collaborated with the Nigerian Accounting Standards Board (NASB) which issued statement of Accounting Standards (SASs) S. 10 for banks. That gave legal status to Prudential Guidelines. It was necessary to collaborate with NASB because it was not the responsibility of CBN to issue accounting standards. These were some of the major events or activities I can recollect we had while I was at the Banking Supervision Department.

We also had challenges in getting banks comply with rules and regulations. There were cases where banks preferred to pay penalties for infractions

Perspectives on the Nigerian Financial Safety-net XVII rather than do the right things because the benefit of committing such infractions far outweighed the penalties. Over the years, one had advocated that the penalties were inadequate to discourage unethical behaviour in banking practices. A case in point was that of Union Bank. The government had taken over that bank as part of sanctions against Apatheid South Africa. After the sanctions were lifted, during the era of sectoral allocation of credit, the bank took a position that they would rather violate those guidelines and pay penalty; that they needed to regain market share which they had lost over the period. That is an illustration of the attitude of some of our bankers. But the then Managing Director of Union Bank, Dr. Paul Ogwuma later became the CBN Governor.

We also had cases with banks that were disputing examiners' recommenda- tions for provisioning just because they wanted to declare huge profits. At that point in time, many banks including some accounting firms were not consistent in the way they treated financial transactions. Some banks were treating provisions as an operating expense while others were treating it as appropriation of profit. They would declare profit and then transfer it to provision. In the industry as a whole, there was no consistency in the treatment of financial transactions until the Prudential Guidelines were articulated. I was the Director of BSD for 7 years.

In The Nigeria Deposit Insurance Corporation

My association with NDIC was right from its formative stages. In fact, it appears that I was destined to work in NDIC. When the Corporation was about to take-off, the pioneer Managing Director of the Corporation, the late Mr. John Ebhodaghe, OFR, (who was a staff of CBN), selected some CBN staff to join him. I was number one on the list of staff he selected, but I chose to stay back in CBN. In spite of my staying back in CBN, I still

Perspectives on the Nigerian Financial Safety-net XVIII worked closely with him. Sometimes, when he had cause to ask for my opinion, I also obliged him. It is worthy of note that a team of International Monetary Fund (IMF) officials actually came and wrote a report, justifying the establishment of NDIC. When BSD was to comment on that report, it was given to two of us (Mr. Olaniran Alogba and I) to comment on. We made useful comments on the Report which the Management adopted. In view of my position as the Director of Banking Supervision Department, I had a close association with the NDIC.

As may be recalled, the first time I was appointed as the Managing Director/Chief Executive Officer (MD/CEO) of NDIC, I was not even in Nigeria. I was in Washington, D.C., USA. It was at the airport that someone said congratulations to me. That was during the administration of Gen. Abdulsalami Abuabakar (rtd). But when the democratic dispensation came into being, a panel was set up to review all appointments. We all know what happened then. In fact, I had to return to CBN. By October 1999, I was formally appointed by the democratic administration of Chief Olusegun Obasanjo.

By the NDIC Act, the tenure of the MD/CEO of the Corporation is 5 years, subject to reappointment. By virtue of my reappointment, I was in NDIC for a period of 10 years.

Challenges I Encountered In NDIC

Limited Public Understanding of Deposit Insurance One of the daunting challenges I faced at the NDIC as the MD/CEO was that of limited public understanding of deposit insurance. In other words, the public lacked proper understanding of the mandate of the Corporation. The public did not understand the difference between deposit insurance

Perspectives on the Nigerian Financial Safety-net XIX and conventional insurance which is purely a commercial contract between 2 parties. Experience has shown that this limited understanding of Deposit Insurance System (DIS) is a challenge not only in Nigeria but also in other jurisdictions. Inadequate understanding is the major reason why many stakeholders do not appreciate why you do not provide full coverage for all bank deposits.

Inadequate Legal Framework Even the legal framework of the Corporation had been a challenge. When the Corporation was established, both the CBN and NDIC were under the Federal Ministry of Finance. But in 1991, CBN got autonomy via the Banks and Other Financial Institutions Act (BOFIA). But NDIC was still under the Ministry of Finance. Initially, when the Corporation had a Board structure that had the CBN Governor as its Chairman, it was a lot easier to get certain policies implemented. At a later stage, the arrangement changed. Since the Ministry of Finance became the supervisory authority, things also changed.

Lack of Enforcement Powers Another challenge bordered on the fact that the Corporation cannot implement the recommendations in its own examination reports. It relies on the CBN to implement those recommendations. But there were times CBN held a different view from those of the NDIC. That posed a challenge indeed. So an organization that has a mandate should have the necessary statutory powers to carry out the mandate.

Later, we initiated a review of the Act which culminated in the new Act. Yet it was not all the proposals we articulated that were reflected in the new Act. For example, we wanted the legal framework to be amended so as to enable the Corporation reimburse depositors once banks fail. But that was

Perspectives on the Nigerian Financial Safety-net X not reflected. In 1998 when the CBN revoked the operating licences of 26 banks, the bank owners rushed to court to challenge the revocation. It would have been better if bank promoters could claim damages, if they felt their licence was wrongly revoked. They frustrate the Corporation's efforts to discharge its mandate by resorting to unending litigation. The cases of three banks, namely, Peak, Triumph, and Fortune are still in court.

No Legal Protection for Officers and Directors of the Corporation Furthermore, the initial Act did not give legal protection to the officers and directors of the Corporation. Without that, directors and officials might be unwilling to take action because of fear. But that has been addressed in the NDIC Act 16, 2006. In any case, that should be tested. The legal protection states that officials of the Corporation should not be held liable for whatever actions they take in good faith in the normal course of their assignment.

It is still necessary for the Corporation to take action based on its own findings after examining banks, rather than relying on CBN's disposition. Sometimes, CBN prefers applying other sanctions. There was a case where an operator should have been sacked by NDIC, but CBN simply sanctioned him by making him pay some financial penalty.

Capacity Building In terms of capacity building, there were challenges in getting staff of the Corporation to acquire certain skills. We made efforts in improving IT skills of staff. There was need for NDIC staff to be able to interrogate banks' systems and make an objective assessment of their operations. I heard that we have started implementing Risk-Based Supervision (RBS). I also heard that some banks do not have Risk Management Framework. How can you implement RBS in such a situation? We shall see how effectively that can be done.

Perspectives on the Nigerian Financial Safety-net XXI Ignorance on the Part of other Regulatory Agencies

We have other supervisory authorities. Such agencies need to understand financial transactions. We once presented a paper to the Ministry of Finance for approval on interest waiver for bank debtors. But the Accountant General of the Federation said he could not waive government money. Even when he was told that it had nothing to do with government, he found it difficult to accept. In fact, we had to cite the case where government itself had been granted interest waiver. Such limited understanding on the part of supervisory authorities/agencies causes undue delays or outright denial of approvals.

The Problem of Favour Seekers Again, the general view is that NDIC has a lot of money. Oftentimes people attempt to use their position to get what they do not deserve or to make us do what should not be done. There was the case of a man who came to me claiming that the Minister of Finance said I should grant him a favour. But when I spoke with the Minister, he said I should ignore him.

My Impression About the Bank Consolidation Programme There are many reasons why some objectives of the consolidation programme were not realized. For instance, the short time frame given to banks and the speed with which the programme was executed were some of the contributory factors. The Asset Management Company (AMC) was a part of the 13-point agenda. But the company never materialized. I believe some of the reasons why the objectives were not realized was because when the policy was announced, some banks were terminally ill. But the author of consolidation decided to give every bank the same time frame of 18 months within which to recapitalise. Of course, some of the banks went to the capital market. Besides, most of the CEOs wanted to remain in the system as CEOs. So they resorted to desperate measures.

Perspectives on the Nigerian Financial Safety-net XXII There are critical steps that must be taken before banks can merge. One of such steps is due diligence. In the process of carrying out due diligence, some banks were found to be illiquid and insolvent. Their financial condition was far worse than whatever they presented. That was why some of such groups crumbled. A good example was the first group that came out which was made up of Gulf, All States Trust Bank, Hallmark Bank and others. Consolidation presupposes that merger partners should be truthful. But many were not. Besides, the deadline was short. Ordinary market-based combinations take a long time period. But during the consolidation programme, everyone was under pressure. For instance, the group that gave rise to Spring Bank came together during the last week of the programme even without any due diligence. Up till now, we all know the condition of Spring Bank. If we have illiquid banks coming together, what kind of synergy will they produce? You don't build a structure on a weak foundation. The case of Finbank was also problematic. If you have a group that came together without proper due diligence, you can imagine what the outcome would look like. In the case of Spring Bank, the CBN had to intervene.

The requirement that banks desiring to manage a portion of the nation's foreign reserves must have $1 billion also made many banks to go back to the capital market. If banks have capital they have not been able to deploy and at the same time they are raising more capital, what is the use? Our consolidation was a bit different from that of Malaysia, for instance. The banks in Malaysia made input into the policy document before it was released. But here in Nigeria, operators made no input whatsoever. Any major reform programme like that requires that the public and operators be adequately sensitized. That is the background to the non-realisation of some of the objectives of consolidation programme.

Perspectives on the Nigerian Financial Safety-net XXIII The consolidation programme increased the risk appetites of banks. As a result, the banks opened branches in several countries. They also began giving themselves accolades, claiming to be the best in different areas. The issue of consolidation could also be faulted in the sense that it placed undue emphasis on banks having huge capital. Also, by the time you have diversified ownership, it was expected that there would be stronger corporate governance arrangement and there would be more emphasis on risk management. But that did not happen. If you have a trillion dollars capital, a reckless management will mismanage it. So it is not just an issue of having huge capital.

The Most Difficult Decisions I took In NDIC

I did not have any easy decision. Every decision I took was in the best interest of the Corporation. In the case of Savannah Bank, we had discussions with CBN. I know what I went through at that time. Some people even advised me not to sleep in my house. But I ignored them, no matter whatever anybody wanted to do. All sorts of spurious allegations were made, but as afar as I was concerned, they had no basis. Societe Generale Bank of Nigeria (SGBN) was an issue between CBN and the owners of the bank. We know that the financial condition of the bank was weak. Initially, the CBN threw the bank out of the clearing system. The owners tried to return to clearing, but the CBN Governor then stood his ground. The risk exposure of CBN would have continued to increase if the bank had not been thrown out clearing. Both SGBN and AIB were thrown out of clearing the same day. Later CBN gave SGBN some conditions like the amount of money they should bring before they could return to clearing. They were not able to raise the money. The amount they raised is still with the CBN till today. The bank later went to court.

Perspectives on the Nigerian Financial Safety-net XXIV In the case of Savannah Bank of Nigeria (SBN), the court awarded general damages against the three respondents, namely, CBN, NDIC