It was on Friday evening and I was just making plans on how best I could maximise the weekend when the news broke that the Central Bank of Nigeria (CBN) revoked the operating license of Skye Bank Plc.
“Haa! My money… and they warned me to withdraw my money from the bank, I refused,” David, a colleague who was a depositor of the bank screamed, thinking the CBN’s decision had swept off his hard-earned money.
“David, calm down… let’s listen to the reason behind this,” I tried to relieve his worries while we both paid attention to the CBN Governor, Godwin Emefiele, as he addressed the press.
Why CBN revoked Skye Bank’s License
According to Emefiele, the development followed the failure of Skye Bank’s shareholders to recapitalise the bank after several warnings. This prompted CBN, in consultation with the Nigerian Deposit Insurance Corporation (NDIC), to establish a bridge bank, known as Polaris Bank, that will assume all the assets and liabilities of the defunct bank.
Under the new arrangement, the Asset Management Company of Nigeria (AMCON) will inject a sum of N786 billion into the bank to bring the total net asset to zero. This, according to Emefiele, would stabilise the bank and return it to the path of profitability for the purpose of selling it to interested investors.
Skye Bank was faced with series of crises including financial losses, liquidity challenge, inability to meet customers’ obligation and poor performance driven by governance issue which eventually undermined the overall confidence of its customers.
Worried by the poor performance which apparently was not impressive, the CBN being the regulator intervened in the affairs of Skye Bank on July 4, 2016, to salvage depositors’ funds and ensure the sustainability of the bank.
Emefiele, in his answers to questions on the controversy surrounding the apex banks’ decision, said the CBN compelled both the entire board and the executive management to resign during its intervention in 2016.
According to Emefiele, it became important for them to leave in order to conduct forensic audit on the bank since it was clear the bank had slipped into negative capital, largely driven by its increasing non-performing loans.
“The result of our examinations and forensic audit of the bank has, however, revealed that the Skye bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN. The shareholders of the bank have been unable to recapitalise it,” Emefiele disclosed while announcing the apex bank’s decision to revoke Skye Bank’s license.
“We wish to assure all depositors that under this arrangement, their deposits shall remain safe and that normal banking services shall continue in the new bank on Monday, 24th September, 2018, to enable customers to transact their businesses seamlessly.
“Thus, all customers of Skye Bank shall be automatic customers of the new bank and their accounts and records duly purchased by Polaris Bank.
“Given the good performance of the board and management, the CBN shall retain them. In addition, all employees of Skye Bank shall be absorbed by Polaris Bank under a new contract unless any employee decides to opt out,” Emefiele added.
After Emefiele ended his address, David heaved a sigh of relief knowing fully well that his money remained safe despite Polaris Bank taking over Skye Bank.
While I was trying to put the rationale behind the decision into writing, the social media was already agog with mixed reactions on the matter. I waited till Monday to capture customers’ reactions at various Skye Bank’s branches within Lagos.
Very early on Monday morning, I set out for the task and after some hours of driving through the horrible Lagos traffic from the mainland to the island, Skye Bank Plc. Falomo branch was my first contact. It was already 8:15 AM, so I did not give it a second thought to visit the bank.
Standing at the gate were two security guards looking straight without any traces of smile, there was no apparent difference in the bank as the building was still carrying Skye Bank’s logo and colour, seven people were already on the queue to use the Automated Teller Machine (ATM).
While I was trying to approach the bank to gather some pieces of information, two septuagenarians in native attires were also trying to access the bank. “What happened to the bank (Skye Bank)?” one of the old men queried. “Baba, nothing happened, they just changed the name, your money is safe,” a security guard politely replied.
Why CBN couldn’t retain Skye Bank’s name
Coincidentally, the security guard’s response was just one of the concerns Nigerians raised, particularly on social media. Some criticised CBN over the assignment of a different name for Skye Bank, while some others suggested that Skye Bank could have retained its name even with AMCON’s capital injection.
But Emefiele, while fielding questions from journalists last Tuesday at the end of a two-day Monetary Policy Committee meeting in Abuja, cleared the air on why the regulator changed the defunct Skye Bank’s name to Polaris Bank, even when its board and management remained the same since their appointment in 2016.
According to him, it was important for CBN to change the name of the bank for legal reasons since the government and the CBN had invested a total of N786 billion into the bank. He said the bank must be owned by the CBN pending when AMCON would stabilise and bring in new investors to buy it.
“The name had to change for legal reasons, having gotten to the point where the CBN and government had invested close to N800 billion in this bank. At some point, it must be seen to be owned by the CBN until we find investors that can pay a fair price in this enterprise,” Emefiele said.
Polaris. What is in a name?
The CBN Governor also made clarifications on allegations that the details of Polaris Bank were not found on the website of Corporate Affairs Commission (CAC), prompting insinuations that the company was not registered as required by law. But according to Emefiele, the insinuations were false and cannot be substantiated.
He said all necessary registrations had been concluded by the enterprise before it was declared as the bridge bank to take over from Skye Bank.
According to him, “the bank was first of all registered as a limited liability company few weeks ago, and was registered as a bank on Friday.”
He noted that it was possible for the authorities involved in the registration of companies to have failed to update their online platforms. “If that server that they are looking at is not updated, it does not mean that this bank – Polaris Bank – was not incorporated,” he added.
Emefiele urged the public to focus on the real issue, which he said, was the apex bank’s resolve to keep the banks alive, protect depositors’ monies, and also ensure that the over 5,000 staff of the defunct Skye Bank are not thrown into the labour market.
But beyond CBN’s protective measures on the bank’s depositors, emerging facts have shown that there are more to what led the financial regulator to revoke Skye Bank’s license, particularly the role of the bank’s directors until they were flushed out in 2016.
Brutal and systematic rape of Skye Bank
Before the exit of the board and management of the bank, the Chairman of the board, Tunde Ayeni, who was appointed into Skye Bank’s board in 2010, had been enmeshed in some controversial deals with other companies within the country.
Ayeni, who was the Vice Chairman of Integrated Energy Distribution and Marketing Ltd (IEDM), led a successful bid to take control of the Ibadan and Yola Electricity Distribution Companies (DisCos) after the privatisation of the asset of Nigeria’s state-owned energy firm, Power Holdings Company of Nigeria (PHCN), in 2013.
Ibadan DisCo, which has the widest coverage of all the distribution companies, covers most of the South Western states including Oyo, Osun, Ogun and North Central State of Kwara, while Yola DisCo services Adamawa, Borno, Taraba and Yobe states. Its sale was recently announced by the Federal Government after it realised it was not viable for it to continue.
Ayeni, alongside other members of IEDM management board, claimed the difficulties encountered in running the Yola Disco were due to the activities of Boko Haram insurgents in the North Eastern region of the country. This development prompted Integrated Energy to pull out of the venture after asking the Federal Government to buy its 51 percent stake in the firm.
The source of funds Ayeni used in investing into the two power firms became a subject of controversy and remained unclear until 2017 when the new management of Skye Bank wrote the Presidency on how Ayeni allegedly used his position to take huge loans from the bank.
Ayeni sealed the deal to take control of the two power companies in 2013 and the bank’s sojourn to bankruptcy became obvious thereafter.
An analysis of Skye Bank’s audited financial statements submitted to the Nigerian Stock Exchange (NSE) revealed that there was an indirect relationship between the bank’s profit after tax and its non-performing loans records.
￼Between 2013 and 2015, as the bank was increasing its impairment on loans, there was a gradual decline in its post-tax earnings. The bank moved from a profit of N18.53 billion in 2013 to a loss of N40.73 billion in 2015.
The number of directors who received fees and other emoluments – excluding pension contributions and “certain benefit” – worth N5 million and above range increased from 5 in 2014 to 8 in 2015.
Although, reports indicate that Ayeni refunded N4.5 million quarterly to the bank with regards to the facilities which he obtained in favour of his investment in the electricity distribution companies.
Upon the appointment of Muhammad Ahmad as the new chairman and Adetokunbo Abiru as Group Managing Director (GMD) of Skye Bank by the CBN in 2016, a report by TheCable revealed that the duo stated that the bank engaged PWC to conduct half-year audit of its financials as of June 30, 2016 of which it was later extended to cover the full year to December 31, 2016, while KPMG was engaged for forensic audit of the bank’s IT platform and management information systems.
According to the statement, “The forensic audit revealed that the bank operated two sets of financial accountability/books and this was responsive for the regulators/auditors inability to detect the massive losses and infractions, particularly the balance of N280 billion in suspense accounts.
“The bank’s total exposure to Ayeni as of the date is about N70 billion. It is clear that he used his position as the chairman of the bank to obtain inside loans well above the regulatory thresholds for the acquisition of the following government enterprises: Ibadan Electricity Distribution Company, Yola Ibadan Electricity Distribution Company and Nitel/Mtel. All the facilities are presently seriously challenged.
“As of today, Ayeni’s total industry indebtedness, covering both Nitel and the Electricity Distribution Companies is estimated at about N150 billion, and little, if any, of these obligations, are being doubtful that he will ever be in a position to service these loans satisfactorily.”
Besides, the document, which also indicted all former GMDs of the bank including Akinsola Akinfewa, Kehinde Durosinmi-Etti and Timothy Oguntayo, also alleged that N33 billion was traced to Ayeni out of which he “disbursed N7 billion without due process to various individuals and corporate organisations on the request of Godknows Igali, a former permanent secretary of the Federal Ministry of Power.
“The monies appear to have been expended essentially on the Jonathan-Sambo electoral campaign in 2015. That sum remains outstanding as at today.
“There is ample evidence that Ayeni, among others, received large amounts of cash, totaling N29.5B from the bank, which appears to be connected to the purchase of Mainstreet Bank Limited, but which has not been accounted for.”
These spending including the acquisition of Mainstreet Bank Limited, which a bank’s chief executive familiar with the acquisition deal described as “reckless desperation”, weakened the bank’s financial health after 2014.
The bank’s total assets at the end of the year December 31, 2014 stood at N1.42 trillion, this represents 27.27 percent increase from its total assets value of N1.12 trillion recorded in the corresponding period in 2013.
￼However, the bank’s total assets declined to N1.20 trillion at the end of December 2015, while its equity fell to N104.18 billion in the same period.
Recall that CBN said Polaris Bank would require an injection of N786 billion capital from AMCON to bring its total net assets to zero, indicating that until the time CBN revoked the operating license of Skye Bank, the bank had negative assets value of N786 billion.
This implies that the board and management of Skye Bank had successfully plunged the net assets value of the bank, which was formed in 2006, by N2.21 trillion from N1.42 trillion at the year ended December 31, 2014, but constantly depended on CBN for liquidity to meet its customers’ needs.
The bank’s credits from loans and advances which stood at N670.29 billion as at December 2014 rose to N741.17 billion in December 2015, while its cash depreciated from N44.77 billion as at December 2014 to N444.16 billion in the same period in 2015. This implies the bank was having serious liquidity issue within the period.
Skye Bank’s 2014 audited financial reports show that it continued to live on borrowed funds, the bank borrowed N116.09 billion in 2014 to repay another loan amount of N128.93 billion. However, in 2015 it could only repay N68.49 billion off its outstanding loan despite borrowing fresh loan of N158.12 billion.
The bank total domestic and external borrowing rose in 2013 to N136.69 billion, declined in 2014 to N131.28 billion reversed the decline in 2015 by about 65 percent to record N216.45 billion.
Also, the bank’s Earnings Per Share (EPS), an indicator of company’s profitability which is the portion of a company’s profit allocated to each outstanding share of common stock, dropped from 137 Kobo to -299 Kobo, further indicating poor governance on the part of the company’s board and management.
In addition, the bank was also contravening CBN’s regulations. This caused the fines it paid for non-compliance to rise from N300 million as at December 31, 2014 to a whooping sum of N4.07 billion in the corresponding period in 2015. In fact, most of the performance variables of the bank were negative.
Lagos State Government an accomplice in the gang rape?
Another controversial issue was the bank’s relationship with Lagos state government. It was uncertain whether the Lagos state government and the board members had collaborated to inflict these woes on Skye Bank.
This is because the government had at some point partnered with Skye Bank on a number of projects in the state including transport buses and bus-stops. In fact, Skye Bank was the banking partner of Lagos State Government. Most of the payments made to the government of Lagos state were made at the bank before its license was revoked.
The Lagos State Government had, in a statement by the its Permanent Secretary in the Ministry of Finance/Accountant General, A. S Umar, commended the management of the bank on business development. It expressed confidence on the board, management and leadership of Skye Bank noting that the bank was safe and in good financial health. Umar had also noted that the Government of Lagos State was a major stakeholder in Skye Bank.
One would ask why a bank with significant support from the Lagos State Government could go down the drain by mismanagement, but allegations on how Lagos Metropolitan Area Transport Authority (LAMATA) was wrecked by the bank’s management and Lagos State Government, by purportedly taking cuts from funds the World Bank deposited with Skye bank that are meant to improve the scheme, leaves no doubt that both parties would have contributed to Skye Bank’s death.
While the two old men, David and some other depositors of the defunct Skye Bank at various branches thought they had lost their monies to the incident until they were assured by the financial regulator and they confirmed the monies were safe during the week, the shareholders of the bank, who are the financiers of the bank’s activities through equity investment, decried the decision of the CBN and that of the NDIC.
The decision did not go down well with the investors because since the bank was performing at a negative assets value and they failed to recapitalise it, with AMCON capital injection, all the shareholders’ investments were turned to ordinary paper and its value crashed to zero with little or no hope of appreciating again, no thanks to the suspension in trading of Skye Bank’s shares on the Nigerian Stock Exchange.
They said it was unfair for the regulators to come up with measures to protect only depositors’ monies without taking their investments into consideration.
Before the share was suspended, it joined the gainers last Friday rising by 4.05 percent to close at 77 Kobo per share but unfortunately all the gains have been washed away, leaving the equity investors devastated. On their part, they believed the board and management destroyed the bank and they were left unpunished.
EFCC on a wild goose chase?
The rape of Skye Bank and the loss of investments by shareholders may no longer be news. What is, is the promise to chase after the gang of rapists who brought the institution to its knees.
Hope of bringing the perpetrators of the heinous crime to book rose last Wednesday when NDIC Managing Director, Alhaji Umaru Ibrahim, disclosed that an investigation was ongoing on the directors of the bank, since it was becoming clear that Skye Bank’s assets were eroded by increasing non-performing loans largely contributed by the activities of the directors prior to 2016, a development which led the bank to record negative capital.
“They are being investigated and I can assure you that when the time comes the necessary security agencies will do their work,” Ibrahim stated.
The impact of the ongoing investigation by the Economic and Financial Crime Commission (EFCC) into the bank’s directors for their role in the erosion of the bank’s assets value remains to be seen, and the primary reason borders on the extensive connections of the individuals alleged to be involved in the heist. The other is the endemic corruption within the political, justice and financial systems which ensures that perpetrators of crimes when prosecuted are able to frustrate the cases to no end.
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