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Speculation seldom shows wisdom, knowledge or understanding; like a virus, it spreads to destroy both good and bad narratives. When speculation comes from the quarters of otherwise respected leaders, it worsens; it misleads, misdirects, and impoverishes the minds of otherwise sensible people. Indeed, it fosters mistrust and leaves a sour taste of envy, spite, and bitterness. 

 

Bankers have always been the butt of misconceptions. Sometimes, these misunderstandings have been supported by non-bank observers having limited knowledge of the operations of financial institutions and their strict governance codes that limit the capacity of their executives to run rogue with depositors’ funds. This is more so in contemporary times further to changes made to improve and build on the mistakes of the past. In other times, they have been built up by the experiences of consumers and the public to actions by rogue bank executives whose actions have perpetuated a notion of a sector laden with corrupt elements. Whichever way you look at it, there is a fine line between myth and reality and commentators must learn to decipher in making categorical statements. What we must however accept, is that banks are amongst the most heavily regulated enterprises on the planet, and Nigeria is no exception. If we have a failure, we can locate it within the regulatory architecture that is permissive of acts that sustains such myths.

 

Does that mean that Nigerian banks are saints and do no evil? Far from it. Local Nigerian banks can be just as institutionally clever as the next bank anywhere in the world. For example, as recently as October 2023, the Central Bank of Nigeria (CBN), in frustration at the relative ineffectiveness of policies to address the one-way decline in the foreign exchange value of the Naira, bluntly accused the local deposit money institutions of roundtripping foreign exchange. According to the CBN statement, ‘Government through the CBN, plans to probe hoarding and roundtripping with heavy sanctions awaiting defaulters. The statement noted that ‘the government plans, through the CBN, to address the issues of speculation comprehensively and through sanctions.’

 

Within the context of the money market regulator’s concerns is a 2023 interview that has now been rehashed to suit the context of a tragic development, the purpose of which is undoubtedly meant to rile up the public. In the viral video, a notable and respected political stateman expressed harsh opinions about Nigerian banks, their management and their actions. Amongst the various complaints expressed were the roundtripping of FX by banks and their large net open FX positions that enabled them to make huge FX revaluation gains in their interim results for 2023. The elder statesman was right in raising concerns over banks’ FX activities for which we ourselves published an Analyst note on, especially the roundtripping of the naira and the shorting or aggressive hoarding of the dollar to sell at a sizeable profit.

 

Be that as it may, the gentleman, an experienced public official captured the sentiments of the public appropriately and in doing so got a few things right and made a few wrongful applications of contextual facts; thus, delivering a misread of key shifting parts in Nigeria’s fast evolving socioeconomic and political landscape, now headed southwards.

 

This is an important point, and beyond the crude way it came out; the matter deserves an expository review of the comments, as a bedrock for the much-needed conversation between citizens, our elected officials and the institutions of trust that defines our engagements, for which the banking industry plays a central role. Lost in all these is the nexus between corruption and the role of the banking industry often swept under the carpet.

 

In fact, beyond the roundtripping of FX, our market intelligence unit submits that certain top executives of large banks have used Trust Funds and similar special non-disclosure arrangements to aid politically exposed persons (PEPs) to ‘quarantine’ funds in investment vehicles that are shrouded in the strictest of confidence, which suggests that the CBN may have a tougher systemic transparency challenge than had earlier been thought. How can the CBN lift the veil of owners of blind trusts to establish linkages between PEPs, public sector purses, and deposit money banks (DMBs)? How is it that the CBN leadership lacks the courage to make such a move, and if it does, would it help to mitigate the severity of the decline in the external value of the naira and reduce the choking domestic inflation rate?

 

These and more are the issues which this piece seeks to address.

 

When Elders Could Do Better

The trending online video refenced above, though dated but yet relevant, had queried how the late Herbert Wigwe, the erstwhile Group Chief Executive of Access Corp Holding Plc, could have establish a world-class university in Nigeria. This is befuddling, yet raises unspoken wealth build-up and application issues, even if the governance issues inherent remained masked. The elder stateman repeated the worn-out argument that the late banker could not have legitimately set up a university because he did not have a factory and was not into manufacturing. While there are arguments that can be advanced but this one was not one of such. How manufacturing equates to a capacity to set up a university is unclear.

 

Access Corp has an asset size of N20.85trn as of H1 2023, making it the largest bank in Nigeria, and the second largest in West Africa. The bank had 35.5bn shares outstanding, with Wigwe being the largest individual shareholder with 4.1% outstanding, translating to 1.6bn shares. According to the banking group’s 2022 audited annual financial statements, the bank declared a total dividend of N1 per share (interim N0.30 and final N0.70), meaning that Wigwe would have been entitled to roughly N1.6bn before tax (Wigwe’s shares as of 2023 rose to 9.09% or 3.2bn units).

 

Apart from CEOs of oil companies and telcos, it would be difficult to find any managing director in manufacturing with such legitimate executive compensation beyond their nominal annual salaries. The remark is validated by Proshare’s CEO Remuneration report for 2023. In 2022, Access Corporation’s then-CEO, Wigwe, was the highest-compensated CEO of firms listed on the Nigeria Exchange Limited (NGX), while the banking sector was the fastest-growing sector after telecommunications (see Illustration below).

 

Illustration 1:

 

 

In 2022 Nigeria’s 10 highest paid CEOs, as represented below, had two chief executives of Nigeria’s largest banks by asset size represented (see illustration below).

 

 

 

While considering executive or C-suite pay, it must be noted that there exists no law in Nigeria that bars bank CEOs from owning other businesses that generate legitimate income. This may change as we seek to strengthen our peculiar governance issues in the future.

 

But for now, Wigwe’s earnings are what they are, the funding of such a historic landmark investment would have likely involved a structured funding arrangement from willing investors to fund Wigwe University’s take-off. Indeed, observers have rightly asked: what is wrong with naming a tertiary institution you arranged funding for after your family and building a legacy that will outlive you? The more of such bold, hairy, and audacious moves, the better for Nigeria and Africa; if done within the ambit of the rules of engagement.

 

According to a banker who requested anonymity, ‘Wigwe has been one of the finest minds in arranging project funding on the continent and suggesting that he could not legitimately arrange for the funding of a world-class university in Africa is laughable. The difference between a good banker and a great banker is that while one sees opportunities, the other finds a way to actualise them; Wigwe belonged to those that actualised; he was fearless.’

 

According to the earlier commentator, ‘the questions to ask are: Do Nigeria and Africa need a university that can match the educational standards of America’s Harvard, Yale, and MIT? Would the benefits of having such a university address the continent’s strategic human capital retention needs, and would it meet the strategic intelligence considerations that support continental resilience? Would the multiplier effects of having such a university in Nigeria not improve the socioeconomic well-being of citizens? If the answer is yes, then the digressions of politicians fall on the sword of clear reasoning.’

 

Analysts believe that a Wigwe University is an educational game-changer whose time has come, and bellyaching over whether a banker conceived and delivered the institution is what behavioural economist Rolf Dobelli has described in his book ‘The Art of Thinking Clearly’ as ‘cognitive dissonance’ or sour grapes. In other words, because you could not stretch your arms to reach the juicy red apple dangling seductively from a tree, you decided that the apple was tasteless anyway!

 

Analysts have noted that we must move beyond needless digressions collectively.  There are much more qualitative issues around the social impacts on the family unit that siting this University will address than the owners/partners of the institution have offered. We hope to learn more in the days ahead; and this conversation should help us all to understand this and the role of the private sector as a bridge between our critical infrastructure deficit, the resource capacity deficit and the needs of industry to power a resurgent nation.

 

Our elders have brought us up to know that they would not be in the market square and leave a child’s head dangling askew at his/her mother’s back. Elders are within their rights to point out errors and recommend remedies, but they should not be cheerleaders, raising dust when they could more productively provide the much-needed support to understand, appreciate and encourage the finer points around our developmental gaps.

 

The Building of Nigeria’s Biggest Global Financial Brand 

Herbert Wigwe took over the helms of affairs of Access Bank from January 01, 2014 till May 2022 when he moved upstairs to manage the Holding company (Access Corporation) as the group chief executive officer (GCEO). The premise for the banks growth had been jointly laid by the bank’s inaugural CEO, Aigboje Aig-Imoukhuede, whom with Herbert Wigwe as co-founder bought Access Bank from its earlier owners in 2002. The story of some of the moves made speaks to the cultural and moral hazards that is still being understood.

 

From the initial take-over, the new entity made its strategic playbook clear to the market. Its strategic objective was to grow the bank inorganically by acquiring other institutions seen as viable targets for mergers. This philosophy was rolled along from one strategic plan to the next, starting with the acquisition of Marina Bank and Capital Bank (formerly commercial bank Crédit Lyonnais Nigeria) in 2005; and the acquisitions of both Intercontinental Bank (2011) and Diamond Bank (2021). There is a history to these moves and commentaries must pay attention to context, learning to see clear lines and not devoting entire focus to reading between the lines.

Analysts’ Closing Thoughts

Politicians may have their say, but logic and integrity should always have their sway. Improvised passion as a substitute for credibility is for old men while elders, on the other hand, should be devoted to showing the way out. That said, we of all people should know that the African elder should NEVER be disrespected because our elders ALWAYS defer to the wisdom and moderation that come with age and experience.

 

When we reduce serious economic conversations to beer house speculation, self-re-examination becomes needful. At a time of economic rebuilding, bringing a sledgehammer to the construction site is unhelpful.

 

Why? Banks and banking as we know it are critical in growing economies, and pitting the public against them will not serve society’s best interest, even when we are all agreed that we can do better with the governance of the sector. Proshare analysts are, therefore, of the following views:

  • The accusations that bank’s roundtrip FX are true but proof is in short supply. Bankers, ex-bankers, legislators, private entities and regulators have at one time or the other made generalisations premised on experiences, which we cannot ignore but the absence of evidence and regulatory action has placed this in the realm of allegations; even as it hurts the perception of industry and created a trust deficit. These are factual. The African culture however recognises that words are the kola nuts that give imagination flight. Therefore, words are used with the deliberateness associated with wisdom. Those who speak about such matters, must do so with appropriate weight given to the lack of proven evidence that raises concerns about regulatory oversight over an industry. That should not stop questions and posers being raised but it must hold the CBN responsible to live up to its words and act on its well-documented concerns about roundtripping. CBN will not be doing us all a favour but discharging its responsibility to deliver supervision and enforcement.
  • The suggestion that the Central Bank is responsible for monetary and fiscal policies is inaccurate. Here, he was wrong. Central Banks are only responsible for monetary policies. The Ministry of Finance is responsible for fiscal policies in collaboration with agencies such as the Debt Management Office (DMO), Customs, and the Federal Inland Revenue Services (FIRS). As the principal banker to the federal government (FGN), the CBN can work out fiscal funding arrangements to help relieve fiscal pressure temporarily but cannot (and should not) take over the roles of the fiscal authorities. The point we see here is the unspoken attention the speaker draws to the absence of a “whole-of-government-approach” to governance such that the public is left befuddled about who does what. This again is a key point of resolution; we have yet made a front burner issue.
  • The viral interview muddled facts and context; which may be due to editing, thought-flow, misunderstanding of process and perhaps, plain politics. UBA’s Tony Elumelu was never a ‘floor banker’ because no such banking position or designation existed. More clearly, Elumelu did not get his banking license simultaneously with Fola Adeola and Tayo Aderin1okun of GT Bank. The GT Bank co-founders were frontrunners; they pioneered the evolution of customer service-centric banking and set the tone for later institutions like the new UBA and Access Bank. While we recognise that opinions are free, facts must be held sacred on matters of historical timelines and market development.
  • Finally, the elder stateman was right to show indignation at Mr Godwin Emefiele’s interest in becoming the President of Nigeria while serving as a sitting CBN Governor, as well as on his abominable conduct that has brought the hitherto esteemed institution to a state of opprobrium that is daily gathering news with severe damage on the psyche of staff members, operators and users of their service. The state of distrust is real yet the damage from the exposures will have severe ramifications, the extent of which remains unknown. It will be helpful therefore, that as more revelations of conduct considered grossly wrong or vicious is revealed, leaders of thought should help moderate same for the institution’s sake.

 

It is imprudent therefore to get ahead of ourselves and ill-advised to heat up the polity when the country suffers from a fragile economy and social edginess. Truly, Nigerians face several existential issues that require cool heads and agile minds. Burdening them with off-handed comments and second-handed information is far from the best practice. In the words of one economic observer, ‘ …I think we are dangerously getting to a point where we criminalize wealthy people even if they are not in public office. The attacks on Elumelu and co seem based on nothing but that they are rich.’

 

He further observed that ‘In the absence of any specific evidence or allegation of a crime against them, are these the kinds of statements we should be making with such ease? The BOFIA and the CBN have clear guidelines on insider-related loans. Borrowing is not stealing.  These guidelines set limits on shareholder funds exposed to insiders.  They insist that such loans must be fully collateralised.’

 

A director whose loans are non-performing will be asked to resign etc. If Elumelu’s business is good, and he borrows and repays as and when due within the guidelines approved by the CBN, what exactly is the problem here?   I would expect that he would recuse himself from approvals relating to him, and other directors are liable for improper approvals, if any.  They can’t use the chairman as an excuse.’ Perhaps this is where clarity rises above sensation.

 

The African culture recognises that words are the kola nuts that give imagination flight. Therefore, words are used with the deliberateness associated with wisdom. Through the mouth of elders, kola nuts develop their richness and maturity because the mastery of words separates the young and inexperienced from the old and wizened. We believe careful deliberation and contemplation is the elder’s rightful default mode.

 

The nation must confront the ills of its trusted and responsible officials as well as those of their collaborators in the private sector; but it must be done with a view to build and not tear down.

 

 

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