Nigeria Banking Crisis: Crisis Of Capitalism
The current crisis in Nigerian banking system, which has witnessed the removal of chief executive officers of 5 banks and their directors and the ongoing show trial, has further underlined the utter failure of profit-first, iniquitous capitalist system and the incapacity of the neo-liberal principle that puts private institutions at the driving seat of economic development. The fact that the state has had to intervene is a shinning example of the limits of private ownership; it is a political blow against the ideologists of neo-liberalism and privatization.
This is not simply a Nigerian crisis. For the last two years the entire world has been gripped by an ongoing financial crisis. This brought to an abrupt end to the debt and speculation-fuelled economic growth that many countries, not only Nigeria, experienced over the past few years. Now in country after country the state has had to step in to rescue not just the banks but the entire financial system. Sometimes this has been by outside financial support, i.e. subsidies to the banks, while in Britain the majority of the banking system is now "nationalized". This is an answer to those who say privatize everything and remove all subsidies. It once again shows that capitalism is a system of regular crises. Unfortunately though, these "nationalizations" have been carried through with the idea of trying to save capitalism from itself, they are not socialist nationalizations. This is why now, faced with declining economies and the cost of propping up the capitalist financial system, governments after governments are saying that ordinary working people must pay the bill for bailing out the rich and their system. This is a recipe for class struggle around the world.
Here in Nigeria the five dismissed bank chiefs, viz. Barth Ebong of Union Bank, Cecilia Ibru of Oceanic Bank and Okey Nwosu of Finbank, Sebastian Adigwe of Afribank and Erastus Akingbola of Intercontinental Bank, are just fall guys of a failed system. No measures, both legal and economic, taken now on the basis of neo-liberal economic agenda, can forestall the re-occurrence of this crisis. It should be recalled that the failed bank decree promulgated during the military rule is still very much in operation yet another set of banks have almost failed. Indeed, some of the fired bankers, if not all, will in future find their way into high political offices or other strategic positions in the country. For instance, a caller to an AIT programme, Focus Nigeria, on August 18, reminded Nigerians that Sam Egwu, the Minister of Education, was of one of the directors of the failed banks that were fired by Abacha government, and yet since then he has occupied different political offices: commissioner, state governor and now a minister.
The banks which have been bailed out with public funds should be immediately nationalized, i.e. put under public ownership. In order to avoid the usual debacle and mismanagement typical of public owned institutions in Nigeria, the banks when nationalized should be put under democratic control and management of elected workers and trade unions. This will ensure that resources at the disposal of the banks are used for investment in developmental projects and businesses that are beneficial to ordinary people (including guaranteeing investment for small businesses and self-employed) and economy. It would guarantee the accounts and savings of ordinary working people. This is against the prevailing parasitic, speculative activities which constitute the main business model of banking sector in the country, as well as in all the major capitalist countries, in a rat race for super profit and that have now tolled the knell for the failed banks.
The five banks were bailed out with injection of N420bn public funds without appropriation by the National Assembly. This is highly instructive. One, it is much more than capital budget allocation to education, health, transport and power. Two, one of the arguments of the government for not being able to meet the demands of some unions which have had causes to go on strike is that money is not appropriated for their demands in 2009 budget. Moreover, Nigerian university students have been at home for over two months as a result of the refusal of the government to meet the demands of ASUU and other striking unions.
The affected banks, namely Intercontinental Bank, Oceanic Bank, Union Bank, AfriBank and Finbank, according to the Governor of the CBN, Sanusi Lamido, incurred bad debt from their exposures to capital market and oil and gas. Margin facilities, loans given to individuals or stock brokers to gamble at the stock market using the share certificate as collateral, amounted to N456.28 billion and exposure to Oil and gas was N487.02billion.
These banks and others have refused to lend money to the real sector of economy that could actually create mass employment. This along with infrastructure decay and high cost of energy in absence of public electricity has contributed to the continued collapse of industries in Nigeria. According to Manufacturing Association of Nigeria (MAN) at least 867 companies have collapsed in the last 8 years in the country. The banks, which are in business to make profits, do not give loans to the manufacturing sector because of the infrastructure decay that has increased cost of doing business. This has shown that contrary to the mantra of former CBN Governor Chukuma Soludo while mobilizing public support for banking consolidation, Nigerian banks as presently constituted and oriented, cannot be drivers for economic development but exist as parasites on the economy. They are in business to make super profit and not as agents of development. That is why they engage in speculation in stock market and oil and gas which, when the going was good, brought quick and cool profits.
The current revelation of gross under-capitalisation of the five banks two of whom (Intercontinental and Oceanic) are judged to be among 400 biggest banks in the world has shown that the much celebrated banking sector consolidation in 2004 is a fiasco.
The immediate past governor of CBN, Chukwuma Soludo had assured Nigerians in the wake of global economic crisis that Nigerian banks were immune because they were highly capitalized. The events in the last few weeks have proved this to be a blatant lie. Indeed, the CBN governor Sanusi Lamido, revealed in an interview with the CNN that the banks have been living on bubble capital all along giving false impression about their true state. But this does not mean that selling Nigerian banks to bigger international financial sharks is an answer. First of all the last two years have shown that none of the big international banks are 100% "safe", in Britain, Germany and the US most banks are only alive today because of government backing. Secondly selling the banks would only mean a greater grip over the country by the big imperialist powers. That is why a genuine nationalization in the interests of working people is the answer and the way in which the financial system could begin to work to really develop the country.
The Yar'Adua government, which has refused to commit public resources to infrastructure development and basic needs of poor working people and has resolved to remove fuel subsidy at the expense of the poor readily doled out N420bn to the failed banks. It has also been reported that the bail-out sum could rise to N1trillion. This anti poor government has to be shoved away. Labour and pro-masses organizations must facilitate the process of wresting political power from the thieving capitalist ruling elite by building the Labour Party as a mass, fighting working peoples' party that could usher in a workers' and poor masses' government run on socialist programme.
The current development, like what obtains with collapse of major banks and companies in the wake of global economic meltdown, has exposed the fundamental weakness of capitalism. The system is rotten and bankrupt; it must be defeated and replaced with democratic socialist order. This is the task of workers and working class organizations in Nigeria and internationally.