By Fola James
Few days after the United Bank for Africa, UBA Plc released its half year results the biggest debate in the industry is not about the declining profit of one of Nigeria’s top banks, which stood at less than N44.4 billion by the end of June, rather what’s agitating the minds of many is its performance in the area of complying with various Central Bank of Nigeria, CBN regulatory instruments.
Recall that on Wednesday April 29, the bank held its virtual Annual General Meeting, AGM where the its chairman, Tony Elumelu, reiterated his bank’s continuous support for the CBN governor, Godwin Emefiele.
Elumelu had praised the CBN Governor for his various initiatives in mobilising the private sector to provide support, medical care and palliatives to reduce the effects of the corona virus pandemic on Nigerians.
He also assured the federal government and CBN that his bank’s “commitment to improving lives in Africa is a long-term one, which we do not take lightly, as we assist governments in Africa to curb this pandemic and help sustain employment across the continent.”
As a good measure, the Pan African Bank donated a whopping N5 billion to the federal government to stop the spread of the pandemic, one of the highest donations so far.
UBA Antagonistic To CBN
But in spite of the effort to portray UBA Plc as a responsible and peoples’ bank, experts in the sector insist that the lender has not shied away from being antagonistic to CBN policies of the federal government.
In fact, a source told the magazine that some UBA management staff still consider Emefiele as a former colleague “who was lucky to have been employed by government as CBN governor. The feeling that this guy used to be one of us is still a factor in the relationship between the regulator and commercial banks CEOs in the country,” he said.
The apex bank governor is a former managing director of Zenith Bank Plc.
This is the story.
In January this year for instance, the CBN governor was so much worried by the volume of cash in circulation, which according to him, has led to serious inflation in the country.
As a way out of the problem, Emefiele consulted widely, including with commercial banks chief executives in the country on the issue, following which the regulator decided to use one of its control instruments to curb the menace of excess cash in the economy not knowing that some banks have their own plan.
The CBN at its Monetary Policy Committee, MPC meeting on January 26, 2020, decided to mop up excess cash by increasing the Cash Reserve Requirements, CRR of commercial banks in the country to 27.5 percent from 22 percent it earlier set in the last quarter of 2019.
The CRR is the statutory percentage of customers’ deposits commercial banks keep with CBN.
UBA’s Huge Customers’ Deposit
According to the 2019 half year results released by the UBA to the Security and Exchange Commission, SEC customers’ deposit stood at N3.51 trillion out of the total assets of the N5.10 trillion at the time.
UBA customers’ deposit is one of the highest in the industry, and it has been on a steady rise, considering that the 2019 figure represents 4.8 percent increase from the N3.35trillion for the 2018 financial year.
Despite the phenomenal rise in its customers’ deposit, analysts insist that it should ordinarily not be difficult for the bank to comply with CRR, but this has turned out not to be so, as the Kennedy Uzoka-led bank has consistently failed in this regards, according to records obtained from CBN.
Experts Condemn Bank
“The issue became so worrisome for the CBN that at a point, the governor and his team had to find a way out of the problem because at it seems, UBA and few others were not ready to play ball. They are only interested in pushing money out without considering the negative impacts on the economy,” Sanjo Alabi, a financial expert in Lagos said.
While other banks have adjusted to the new reality “UBA is still dragging its feet despite its deposit size as one of the biggest banks in the country. It does not seem the management understands the need to respect regulatory authority,” Alabi said.
He may be right.
UBA Defies President Buhari
This is not the first time the bank has had a brush with the government, watchers of the bank say.
In 2016, UBA ignored President Muhammadu Buhari’s directive that all funds belonging to the federal government should be paid into the Treasury Single Account, TSA.
It was later discovered that the bank had surreptitiously concealed a whopping N58.8 billion belonging to the Nigerian National Petroleum Corporation, NNPC from the federal government, for which it was later fined N2.9 billion by CBN as a punishment for the act.
But keen industry players insist that the bank appears not to have learnt a good lesson from that incident considering how bad it has performed with the CRR.
“UBA prides itself as Africa’s Global Bank. With that, one would naturally expect that the bank would show good example to others. But it beats my imagination why it has continued to show disdain for the CBN, knowing that the regulator is working for public good.
Can Elumelu and his protégés flout laws set by other African countries or the United Kingdom, UK where the bank also operates? The answer is very obvious. Its operation will be shut down immediately,” Alabi said.
“We operate in 20 African countries and in the UK and the USA. We also have presence in Paris, France,” the bank said on its website.
Bank Sanctioned By CBN
In April the CBN came down with the hammer by debiting erring banks N459.7 billion.
UBA was worse hit with N82.3 billion debited from its account, according to figures obtained by the magazine.
“UBA alone takes 20 percent of the fine, so one can conveniently say that one fifth of the infraction was committed by the bank,” said Okon Emmanuel, a risk analyst in Lagos.
“Don’t also forget that in May when the CBN debited erring banks N1.4 trillion, the Uzoka-led bank was debited to the tune of N204.7 billion,” he stated.
He said some Tier one banks have made some serious progress to comply with CRR after sanctions were imposed.
“In the last four months, some banks have actually increased their CRR compliance level which has in turn, reduced CBN sanctions,” he stated.
He said in June when the CBN made the deductions “some tier one banks had increased their compliance level as reflected in the sanctions by the apex bank. The combination of Zenith Bank, Access Bank, First Bank and GTB only had their accounts debited by just N91.3 billion.”
He explained further that the more liquidity banks control, the higher their flexibility to engage in unofficial, low risk ventures like round-tripping and other off-the-cuff businesses where they can earn higher returns.
He stated, for instance, that banks often want to keep huge liquidity in order to have enough naira cash to buy forex from the CBN.
Forex Manipulation
“Meanwhile after buying from the CBN, the forex are not made available for legitimate businesses, rather they are sold to bureau de change operators and currency speculators who make swift business after selling at higher rates to unofficial channels such as money launderers and sometimes, terrorists.
“You can now understand the patriotic duty of the CBN in trying to control the volume of naira cash in the kitty of commercial banks at every point in time,” he said.
Recently, an online medium reported a forex scam involving UBA’s Festac Town, Lagos branch manager.
A customer had accused the manager of selling fake dollars to her, in cahoots with a bureau de change operator.
The matter was reported to the Economic and Financial Crimes Commission, EFCC and Inspector General of Police, IGP, Mohammed Adamu.
Meanwhile, Emmanuel told the magazine that the CBN adopts CRR and other monetary instruments to control commercial bank’s forex manipulation, adding that the banks, by obligations are supposed to assist the apex bank succeed in this venture, failure which CBN should go beyond the slap on the wrist sanctions.
He said the CBN should blacklists commercial banks frustrating its public spirited efforts.
It must “ensure that banks in the country obey regulatory authorities and stop frustrating government’s efforts to build the economy.”
He noted that “The essence of the forex intervention is to reduce the pressure on the naira. But what normally happens is that banks come with huge forex demands, using their huge naira deposit.
And since the apex bank already realised that forex allocated to banks are not channeled to the real sector of the economy, all it needed to do was to control their naira power.”
He further explained that by using the CRR to reduce cash available to banks “the naira available to them is drastically reduced as such they would not be able to put the CBN under pressure for their forex demands.”
This, apparently, did not sit well with commercial banks which have found it convenient to cut corners, he said.
Initially the CRR deductions were done every month but when the infractions continued on a large scale, the CBN was forced to set up a CRR compliance team, which recommended a weekly deduction as a way of forcing the banks to comply.
Between December 2019 and July 2020, an estimated N4.8 trillion had been debited from bank deposits as CRR.
All efforts made to reach Ramon Nasir, the spokesperson of the bank on his telephone lines, to get his response on the issue were unsuccessful.
