Banking has many functions but the oldest of these functions is the provision of safe place for valuables. These valuables include customers’ money among others. Another function of banks is the lending of money to investors whose activities keep the economy of nations vibrant. But banks safeguard themselves by requiring borrowers to provide some kind of collateral security to cover the value of the loan being given out to borrowers. This is the standard practice anywhere in the world.
It is therefore surprising to note that five Megabanks in Nigeria gave out a loan amounting to 747 billion naira to investors without the usual collateral security. A behaviour such as this is a crime in banking practice. How could banks do this in their very economically strategic sector without considering the consequences of their action on the overall economic well-being of the nation. However, the five banks in question are the Afribank, Intercontinental Bank, Union Bank of Nigeria, Oceanic International Bank and Finbank.
According to the Governor of the Central Bank, Mr Sanusi Lamido Sanusi, the persistence and frequency or the demand of the five banks pointed to a deeper problem due to non-performing loans. He stressed that it was clear that the five banks did not have the ability to meet their obligations to depositors and creditors as they were in grave situation. A special examination of the banks was therefore carried out to ascertain their financial health. After the examination the Central Bank of Nigeria discovered that their sickness included, among others, high level of non­performing loans in the five banks which was attributed to poor corporate governance’ practice and non-adherence to the bank’s credit risk management practice. Because of this, the five banks were seen to be undercapitalized for their current level of operation. The Governor of the Central Bank of Nigeria Mr Sanusi therefore acting in accordance with the powers bestowed on him decided to remove the chief executive officers of the five banks in question because they kept the banks in grave situation and acted in a manner detrimental to the interest of their depositors and creditors.
The Central Bank appointed new chief executive officers to take charge of the affairs of the banks. They are Mr John Aboh, Oceanic International Bank, Mr Mahumud Alibi, Intercontinental Bank, Mr Nebolisa Arah, Afribank, Mrs Suzanne Iroche Finbank and Mrs Funke Osibodu Union Bank of Nigeria. In any case, realizing that changing management alone will not solve the problem the Central Bank injected a total of four hundred billion naira into the banks to cushion the effects of the alleged financial recklessness of their former chief executive officers who are now being arrested by the Economic and Financial Crime Commission.
Meanwhile, there had many reactions to the development In the banking sector. For instance, the chairman of the EFCC, Mrs Farida Waziri says it is a shock to her that any bank anywl1ere in the world will give such magnitude of money without any collateral. She emphasized that her commission would not relent in its efforts to recover the non­performing loans owed the five troubled banks. And according to a former Head of State General Muhammadu Buhari the problem is traceable to indiscipline in the banking sector. He urged the government to observe legal provision and be steadfast in its efforts to recover public funds in the banks.
However, as already noted, it is unthinkable for any bank anywhere in the world to give out loans amounting to billions of naira without collateral security to cover the loan. Any banker who is worth his or her salt ought to know that it is a standard practice to give loan under collateral security cover. We are therefore worried that these five banks could give out as much as 747 billion naira without collateral. Something serious must have gone wrong somewhere. The EFCC must therefore find out what went wrong. Nobody should steal money deposited in the banks. Stealing money deposited in the banks is a criminal offence. Therefore, all those found guilty of stealing money deposited in the banks should be given adequate punishment. It will be recalled that many banks were distressed in Nigeria in the 1990s. And many people who had money in these banks lost their life savings. Some of them died. We do not hope for this to repeat itself.
In a similar development, the managing directors of two microfinance banks have been arrested for squandering depositors money. The banks are Allmon Microfinance bank, Ijanikin, Lagos, and First call Micro Finance Bank. Maryland, Lagos. The managing directors of these banks Messrs David Ahmed and Ochuko Akpabiohikh did not set up their banks with the aim of doing a legal business but to dupe unsuspecting members of the public. According to the police by the time Ahmed was arrested he had collected 180 million naira from depositors while Akpabiohikh had garnered 300 million naira from the unsuspecting public. This is the type of thing people experience almost monthly in this country. Many people without good training and upbringing go about setting up spurious companies and banks through which they dupe the unsuspecting public. This should be condemned in its entirety. Nigeria should be made a safe place for decent law abiding citizens.
At this stage, we call on the police to carry out a thorough investigation into the activities of these wonder microfinance Banks operating in Lagos and duping innocent citizens. Those found guilty should also be given adequate punishment.
Tolofari is a Fellow, Institute of Corporate Administration of Nigeria, Abuja.

Dr Mann Tolofari