Skye Bank On Edge Of Total Collapse?

August 29, 2016

Skye Bank

By Dipo Olowookere

It is no doubt that since the Central Bank of Nigeria (CBN) changed the leadership of Skye Bank some weeks ago, the bank has not remained the same again.

Skye Bank and CBN have had to assured depositors and the general public that all is well, trying every possible means to allay the fears of people, especially depositors.

Also, the Lagos State government, which uses the bank for collection of different levies, including for tax collection and payment of workers’ salaries, has also said the bank is healthy. In fact, it told civil servants under its payroll not to close their accounts with the bank.

Vanguard takes a look at the issue and below was what the respected newspaper said on the issue.

Why CBN and Lagos state might fail to save Skye Bank

“SKYE Bank is not distressed.” CBN advert in several newspapers.

The Central Bank of Nigeria, CBN, and the Lagos State government have different reasons for desperately averting possible Skye Bank distress. Even the hint of likely distress inhibiting deposits and inviting a run on the bank is not in their interests. For the CBN, the collapse of any bank, at this time, is likely to create collateral damage affecting other banks, governments, the organized private sector and the financial system. So their anxiety on this matter is understandable.

Before the CBN advertisement, the Permanent Secretary, Lagos State Ministry of Finance was reported to have told Lagos State employees not to close their accounts with Skye bank.

The report was not clear whether what was issued was an order, a plea, or advice. None of them is without its perils for all concerned – Lagos State, the bank and the employees.

It is questionable if an employer, even a government can issue instructions to its employees regarding the bank to patronize after paying them.

While it might be acceptable for administrative reasons to request all employees to open accounts with a bank for salary transfers, it is doubtful if the state can force the civil servants to keep their money in the designated bank and risk their funds going down in case of distress.

Who then will suffer the consequences?

Advice, the public servants definitely don’t need especially when only the state’s and the bank’s interests will be served by compliance. SKYE bank certainly needs all the deposits it can get – more than ever before.

The state being a major shareholder in the bank also needs the bank to recover the confidence of other stakeholders in order to survive and perhaps improve its performance.

Depositors, including the staff of Lagos state, however, need a different sort of counsel. They need to be honestly informed about the real situation of the bank.

The CBN does not, without reason, order the change of directors and management of a bank unless a lot of things have gone wrong and some individuals charged with the management of the bank were involved – deliberately or inadvertently.

More perplexity is introduced by the fact that the directors and managers removed will apparently walk away without sanctions for putting every other stakeholder at risk.

Hundreds of thousands of depositors of SAVANNAH Bank and SOCIETE GENERALE Bank are still holding to empty air more than ten years after those banks were closed without previous warning from the CBN.

OCEANIC, INTERCONTINENTAL, BANKPHB etc were presented to the public as still strong banks until Sanusi replaced Soludo who helped to keep up the fiction of soundness.

So, why should depositors rely on a CBN which had failed them repeatedly and made them to pay dearly for it? To be quite candid, the last organization to declare a bank distressed is the CBN. Usually by then the depositors have been taken to the cleaners and their funds irretrievably lost.

Lagos state has its own problems with regard to SKYE Bank. Its shares in the bank, which sold for N17.50 per share in October 2008, are now going begging at 65 kobo per share.

The state has lost hundreds of millions of naira on that investment.

The quantum of loss is one of the most closely guarded secrets of the progressive governments since “Con-Soludo-tion” imposed by the CBN under Professor Soludo.

There is no shareholder alive who was not a victim of the calamity called “Con-Soludo-tion”. Lagos State is one of the biggest victims of the rush to acquire shares under “Con-Soludo-tion”, and it is understandable why the current government is eager to minimize the losses.

But, the truth remains. A grave mistake had been made; an error of judgment committed at the topmost levels of government.

As Agathon, 447-401 B.C, has reminded us, “Even God cannot change the past.” Lagos State is unlikely to recover those investments even if Ambode serves a second term.

The statement issued by the Perm Sec, if followed by public servants in the state, carries with it the risk that the state’s funds, now largely lost, will be followed down the drain by those of its staff – if anything goes wrong with SKYE Bank.

That would amount to a great disservice to the workers who were not consulted when the Governor who committed the state took the decision – admittedly in good faith.

But, such is life. There is always a lot of risk in banking. If there is none, everybody will be in banking. There is also a lot of risk in shareholding. If not, everybody will be in that venture too. In Nigeria, the combination of the two had almost always proved painful for a lot of people – except the insiders and manipulators who invariably walk away free. To some extent the reason Nigerian banking appears to be perpetually embroiled in crisis can be traced to our very lax laws which allow directors of banks to get away with their larcenies.

Until we stiffen the penalties for contraventions of banking rules, the nation will reel from one crisis to another.

Finally, it is curious that while others are desperately working to save the bank, its own directors are doing nothing. They are not reaching out to public opinion molders to present their plans for restoration of the bank.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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