Economics Finance

For those experiencing any problems of a financial nature, the best idea is to contact a bankruptcy attorney. Hire an experienced bankruptcy lawyer or bankruptcy attorney will give you some insight into what can be done to save the family from financial ruin or from filing bankruptcy.

Many families these days are experiencing heavy debt burdens which only serve to bring down the whole financial structure which is supposed to protect the family from any kind of crisis. Indeed, the entire world is in one of the most profound recessions since the great depression experienced since the 20th century. Images of Wall Street suicides still abound in living memory and the world’s super powers are doing everything in their power to pour money into stimulus packages. But this doesn’t help the man in the street in a timely fashion.

It is very common, when people find themselves bereft of hope, to find individuals who are in what they conceive to be financial ruin, to give up and either run away or get ravaged by financial institutions. But insolvency doesn’t mean that all hope is gone. The professionals know exactly how to delay or postpone these crises to let the individual have some breathing space and hopefully recover from the mess that they have found themselves in. Continue reading ‘How to Map a Route Through a Crisis’ »

Since Friday August 14, the Nigerian banking system has not been the same. What started as a rumour that some bank chiefs were about to be sacked became real. The CEOs of Intercontinental Bank, Oceanic Bank, Finbank, Union Bank and Afribank went to the office as CEOs in the morning and returned home early and jobless and with the real prospect that they were also on the verge of losing their stakes in the banks they have sat on as owner managers for close to two decades.

The Central Bank of Nigeria (CBN), the apex regulatory organ for Nigerian banks had taken the decision to wield the biggest stick in the Nigerian banking industry. Sacking five CEO’s, three of whom before the sack, were considered among the top five banks in the country, have been described as the Nigerian banking tsunami.

Justifying its action, the CBN facts are convincing. The five banks according to CBN had given out loans of close to N2.8 trillion of which close to 50 percent were classified as none performing. The five banks, said the CBN, had become virtually illiquid accounting for 90 percent of inter bank borrowing over a seven month period, first through the CBN expanded discount window and then when the window was closed and the interbank market opened, they borrowed from the interbank window to pay down their debts at the EDW. This, no doubt was a clear sign that these banks had run out of money to meet their day to day operations and will collapse like a pack of cards if they are not able to borrow short term funds from the interbank market.

Besides, their desperation at the interbank market was also distorting rates at that window where the CBN was doing all it can to reduce the lending rates. As long as these big banks engaged in desperate borrowing from this window, the CBN efforts to bring down interbank lending would be fruitless. It was obvious that these banks could only survive their critical liquidity challenges with a fresh injection of equity or debt capital.

But considering the state of both local and international capital markets, it was obvious that any attempt by these banks to raise fresh capital may be like a camel going through the eye of the needle.

So the CBN was left with the option of injecting its own capital, arranging a bail out of the banks like it happened in America. In its wisdom however, the CBN felt that, it would not pump in capital and allow the same managers, which by their action and inaction allowed their banks to run into this state of illiquidity to continue to sit at the top of management. Most importantly, it is obvious that the CBN felt that it was time, that it sent a strong message out there that poor banking practices in the industry will no longer be allowed.

But in the process of sending out this message to the industry has the CBN “over killed.” It is obvious that Sanusi Lamido Sanusi, riding on his strong reputation as a risk manager, may have unduly focused on curtailing poor credit risk practices in the industry without taking into consideration reputational risk. So in an attempt to pluck the loop holes created by poor credit risk practices, the Sanusi may have left the banks exposed to reputation risk damage that the concerned banks may never recover from and the banking industry at large may take a long time to overcome.

Continue reading ‘Nigerian Banking Crisis: From irrational market exuberance to regulatory exuberance’ »

How would the current crisis in the Nigerian banking system affect the way banking is done in the country? What are the lessons to be learnt and what are the strategies Nigerian banks should adopt to overcome the many negative impact that this crisis will leave behind? Do the regulators stand to learn from this crisis? What should the business community expect or learn from this crisis when it blows over? These are the many questions that should be going through the mind of everyone watching the unfolding crisis in the Nigerian banking industry.

Taking these questions one by one, we will attempt to answer them and possibly paint a picture of what banking will look like after the current crisis which has been termed the Sanusi banking Tsunami.

How would the current crisis affect banking in Nigeria?

The first casualty will be the ranking of the top banks in the country. Three of the five banks taken over by the CBN are ranked among the top five banks in the country. These are Oceanic Bank, Intercontinental Bank and Union Bank. These banks are likely not to retain this position when the current crisis blows over. Though feelers show that these banks may not have experienced the massive run that most had expected them to experience after the CBN takeover, nonetheless confidence in them as strong financial institutions may have been irreparably eroded that it will affect their ability to compete as they have done before. Going forward, these banks will fight to survive than compete.

Also the fact that the CBN has plans to put these banks on sale will mean possibly new priorities for whoever takes over these banks. The new owners of the banks may decide to forego growth for stability or be a core player in a specific field than a general market player. There is also the real possibility than the former owners may lack the drive of the former owners.

Entrance of foreign banks?

Foreign owned banks are said to be waiting on the wings to enter the Nigerian banking market. Before now the strong presence of Nigerian banks and disposition of the CBN towards foreign owned banks has been a hindrance. Now the current CBN under Sanusi is ready to handover a 100 percent ownership in Nigerian banks to foreign owned banks and some of them are said to be willing to take the opportunity of the current crisis to enter into the Nigerian market. Any of the five banks would definitely be a good pick for them depending on how they want to play in the Nigerian banking industry. Also the stricter reporting standards and transparency that is expected after the current CBN action will create a more favourable environment for these banks to operate in the system.

Continue reading ‘The future of Nigerian banking after the current crisis’ »