Business Day newspaper / Published 31 August 2009

NIGERIAN society is reeling from the unprecedented corporate drama playing out before it, watching as the country’s blue-chip business elite is hauled before anticorruption officials in the media spotlight. The banking crisis, which has seen the Central Bank of Nigeria firing the CEOs of five banks — Oceanic, Union Bank, Intercontinental, Afribank and Finbank — has rocked the business world.

Central bank governor Sanusi Lamido Sanusi, in office for just two months, acted on the basis that large loan portfolios and poor governance had left the banks so poorly capitalised they posed a systemic risk. By Friday, 16 bank executives had been arrested and nearly 70 debtors, who collectively owe 5bn to the banks, were being questioned by the Economic and Financial Crimes Commission (EFCC) after failing to meet a deadline to pay up.

The names that have emerged are a who’s who of the business world; people many thought to be protected by their status and wealth.

Cecilia Ibru, former CEO of Oceanic Bank, is part of a family business dynasty in Nigeria; Barth Ebong, CEO of one of the country’s oldest institutions, Union Bank of Nigeria, is a household name. Erastus Akingbola of Intercontinental Bank is a celebrated banker . He , along with Ibru, is wanted by the EFCC for alleged abuses of credit process, insider trading, capital market manipulation and large-scale money laundering, and is challenging his dismissal in court.

No less powerful are those business luminaries being strong-armed into paying back their loans. Included on this list is Femi Otedola, head of two oil companies and estimated by Forbes magazine to be worth 1,2bn. He is also a member of the SA-Nigeria Joint Presidential Advisory Council on Investment established last year. Tycoon Aliko Dangote, who Forbes values at 3,3bn, is also on the list, as is Nigerian Stock Exchange head Ndi Okereke- Onyuike in her role as a shareholder in Transcorp, a company established by former president Olusegun Obasanjo and corporate heavyweights.

The crisis in the banking sector has not come as a huge surprise. When former governor Charles Soludo forced the consolidation of banks in 2005 by hiking the capitalisation requirement, many criticised him for the radical nature of his reforms. His boldness was vindicated — Nigeria’s banking sector became an acclaimed success story with banks soaring to international prominence, expanding regionally and introducing a myriad new products.

But there were concerns that regulation could be sacrificed on the altar of this success. Bad habits die hard, some warned, pointing to the fact that many banks in Nigeria had historically survived on opaque government contracts, money laundering, unsecured loans and currency trading . The reduction in the number of banks from more than 70 to 28 also meant heightened competition.

Late last year, the bubble burst. Although sparked by the global downturn, the problem was primarily fallout from over exuberant speculation and share manipulation in the market.

Sanusi is in for a tough time. The establishment will not take this lying down. One needs to be mindful of how powerful people in Nigeria dealt with Obasanjo’s anticorruption chief, Nuhu Ribadu. He was removed from his job as head of the EFCC, fired from the police and is now in exile.

Inevitably, the spectre of geography that haunts Nigeria looms large. Some suggest that Sanusi, from northern Nigeria, has an agenda to open up opportunities in the banking sector for wealthy northerners. In the past military era, political power was concentrated in the north and political and business activities continue to be viewed through this geographical lens.

Although powerful business and political interests continue to undermine Nigeria’s huge potential, the shock of seeing business “untouchables” being publicly hauled before the authorities will have a sobering effect on the economy. This can only be good for the corporate governance initiatives in Nigeria, allowing further strengthening of a key growth sector, and it will go a long way in supporting the improved business environment that many Nigerians are trying to foster.