Babs AjayiSunday, February 9, 2014
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Gatineau, Quebec, Canada




here have been several responses to the first article with this title. The general impression out there is that the executives of Nigerian banks simply treat the banks they manage as their piggy banks and as a source to free-flowing access to a life of endless cash. The bank executives often avail themselves of interest free loans that run into hundreds of millions of naira, and at the very expense of shareholders and depositors. The worst side of the interest free madness is that executives who are owing a bank often collude with one another to write a bigger cheque for each other and use part of the new cheque to pay off the outstanding interest free loans they previously took from the bank. It is very improper for these executives to loan themselves huge sums of money and still charge no service fees. Executive management meeting can quickly turn out to be nothing but a pie sharing get-together for the big boys.

"Ol boy, I would love to bring Maria Carey to play for me in Nigeria."

"Why not? What is stopping you? You can if you so desire."

"That will cost me bundle."

"But you can bring her. Man, bring her! Let the boys enjoy and have some fun!"

"Don't you get the gist? I said I cannot spend my money to bring her."

"You are the one who is not following my drift. You can still bring her by letting the bank bring her. It is as simple as that."

"Umm…perhaps the bank can bring her, but for what?"

"New year party, Christmas Party, Send off party, the options are limitless."

"Remember Ladi brought Anita Baker, an old school diva to Nigeria for his spouse's birthday?"

"I remember. Gaining entry into that by-invitation-only birthday bash was as tough as the camel trying to go through the eye of the needle!"

"But this will be bigger and better…"

"And special, and the bank will pick up the tab!"

"We'll show them that we're top players."

"We are the movers and shakers of Naija."

"The Big Boys!"

"Trust me, Lagos will shake."

"It will be the best and a blast."

"A blast like no other."

"That will be a master stroke! The stroke of genius!"

"But how about the loan thing? I need some money badly. I want to put down a deposit on the land in Lekki."

"But we all still owe the bank from the loans we took just over a year ago."

"We'll always owe the bank my friend. Why don't we just take 50 million Naira each and that way I can retire the N22 million I currently owe the bank and the boys can retire theirs. What do you think?"

"Uh-huh, I think you are talking sense. I need some money as well. I want to roof the house in Abuja."

"You see what I mean, we all have very strong need for cash and the girls are bringing in new deposits every day."

"At 15 per cent interest? How do we cover the interests?"

"I have always told you not to worry. What is COT there for?

"But Sanusi wants to end the COT ride."

"He can't end it. We have all the big boys behind us and they know they will not be getting anything if they allow that boy to block our COT."

"Rather than getting into the game and sorting himself out the guy is trying to block all roads to easy cash."

"He is a fool, don't mind him."

"But he is one determined fool."

"When do we meet to rubber stamp the loan deal?"

"Tell the others and ask The Law to fix a date for month end."

"Did you say month end? No, not at all. That is too far. I want the money in my account by next week."

"Ok then, let us call a meeting for Monday, but let us calibrate everything this weekend when we meet at the Zone."

"Will Chief be coming? Has he been informed?"

"Chief? The man with an ear to the ground? He is in the loop and nothing, not a jot of info escapes that guy."

"That man sef, na wah for him! You know we have to continue to work with Otunba and the other boys in the other banks to make sure that COT remains the golden egg for all of us."

"We'll see to that. It is one reason the boys plan to gather this weekend, relax, enjoy and talk business."

"We'll meet at the Zone."

"Oh yes, we'll meet at the Zone."

The Zone is where the damage is done to the banks, the economy, the shareholders and the depositors. COT was introduced by the Central Bank of Nigeria (CBN) in 2004 with the hope that it will eliminate the conflicts between banks and their customers. But since COT is being grossly abused by the banks and customers are being repeatedly charged, the CBN wants to eliminate COT altogether, and the banks are already charging customers other fees. The CBN realized that allowing the banks to continue to charge COT and many other fees amounted to double-dipping. COT is charged on a customer's account when he lodges a cheque into his account. He is charged COT again when he gives someone a cheque from the money recently deposited into the account. For a small scale business or a self-employed artisan that can mean a drain on his capital. COT has the ability to drive up the cost of doing business and the price of goods. The garri seller and the hairdresser must factor COT into garri and the price of hair care otherwise there may be nothing left.

COT is being gradually wind down and will be completely phased out by 2016. Are Nigerian banks ready to focus on core banking and dedicate their attention to helping the economy to grow and less to their own getting rich quick schemes? Foreign Exchange (FOREX) used to be the darling of the banks in the days when there were two rates in Nigeria; when Babangida and his fellow annihilators chose to prosper where they have not sown. With the CBN plan the banks will not be able to charge on returned outward clearing cheques or on transfers to other accounts in the same name, the same branch or at another branch of the same bank. Without doing any decent professional banking, the banks in Nigeria are merely living off the common man. Millions would prefer to be paid their salaries and wages in cash these days if allowed to do so.

The banks are hoping they can bank roll the people the people currently in power to reverse the incoming policy regarding COT. COT is hurting millions of low income earners, and what should go towards buying food for their families is being taken from them and being used by the banks to fund the excessive lifestyle of their executives. Once upon a bank managing director who used to open his trouser pockets and reveal its content for everyone around to see as a proof that he was not stealing from the bank and declare that he did not have money, but the truth was that when this man ate lunch, drank water, hosted a party in his house, dedicated and named his children, sent his kids to private school, traveled overseas, donated an organ to his church, etc. the bank paid for it. He calibrated everything in such a way that the bank picked up all his bills, domestic and foreign. Even his shares in the bank was paid for with the bank's funds. How cool and clever was that eh? How crookedly clever it was to use the bank's money to gain part-ownership and control of the bank?

Most Nigerian banks are not structured to do banking. They have all positioned themselves for highway robbery, voodoo financial services and cash-grabbing schemes. Until Nigerian banks return to core banking and financial services and focus wholly on the business of developing the economy, supporting small and medium enterprises with loans at reasonable rates, develop the housing industry through the introduction of mortgage programs at interest rates that will draw millions to approach them for mortgage loans, and create investments that will bring them profitable ventures and earn them fees that is a direct result of their core business, they will remain fringe players and seekers of easy profits. There are millions of middle class people out there in Nigeria hoping for a reasonable mortgage loans at rates below the double digit rates most banks in Nigeria are offering. Mortgage loans to a million middle class paying at an interest rate of about 5% and paying regularly will yield good returns for the banks, but they would rather go for quick profit and dabble in dubious deals. Some of the banks are even building houses and offering them for sale at unbelievable prices because some of their executives have over bloated the cost of the building project! When does it become the function of banks to build and sell houses? Building houses just leaves the door open for bank executives to inflate the prices relating to the construction of the houses, which takes the final cost of the houses way up, and at the end of the day it was not the bank that benefit the most from such uncouth projects.