John O Ojikutu
The average Nigerian commercial banks are generally known for declaring excessive profits in billions of naira in their yearly financial statement returns without evidence of considerable long-term financial investment on the industrial and commercial ventures or manufacturing. A critical examination and analysis of these banks equity and shares would show keen observers that the major investors or shareholders are politically exposed individuals who have closed links or affiliates with those with authorities in government. Their main interest is to grow their equity with slouch money from loose funds in government through budget appropriation for their business interests and their allied banks. The government on the other hand, though has no shares or equity in any of these banks, owns more than 50% of cash deposits in these banks through ministries, departments and agencies.
The huge profits declared yearly by these banks are made mainly from charges on the government deposits and interests on loans to credit customers. In spite of the huge deposits of the government funds in these banks, the politically exposed individual in ministries, department and agencies always find it very convenient to source for loans for critical projects from their banks at ridiculous market rate even when there is alternative sources of funding such projects at much less interest rate from the Central Bank of Nigeria (CBN).
The Aviation Sector has been a major source for slouch funds where the politically exposed individuals and their banks have been exploiting over the years to fund their business interests within and outside the country. In 2007, a N19.5 billion aviation intervention fund was said to have been facilitated by a certain politically exposed Chief Executive Officer of a bank, who was a member of a panel set up by government for the project of resuscitating some aviation infrastructure following the incessant aircraft accidents of 2005/2006. The implementation required government supplementary budget and appropriation by the National Assembly. Constitutionally too, the process for all borrowing undertaken by government agencies to fund infrastructural project must have the National Assembly approval.
The politically exposed officials in the Ministry of Aviation decided to borrow and fund the project from one of the commercial banks at 25% interest as against the Ministry of Finance recommendation and the Federal Executive Council approval that the funding of the project be sourced from the Natural Resource fund domiciled in the Central Bank of Nigeria at 2% interest. That action resulted in the sourcing of a loan of N6.8 billion from Zenith bank at 25% in 2007 for the procurement of Safe Tower for NAMA
Conversely, the N200 billion Aviation Intervention Funds of 2010 for Private Airline Operators influenced and facilitated by some politically exposed bank CEOs was sourced from the CBN at 6% interest rate. Curiously, this intervention fund, according to the CBN executives at the Public Hearings on the intervention fund, was not meant to re-fleet the beneficiary airlines, but was meant to service their bank loans. The fund was approved by the Central Bank of Nigeria but was processed and disbursed without the knowledge of the ministry of Aviation, and there were also no evidence that the airline debts portfolios were sufficiently verified with their banks and other creditors.
The revelation that came out from National Assembly Public Hearings of 2012 and 2016 on the 2010 Aviation Intervention Funds, showed that there were enough evidence suggesting that certain banks and their politically exposed executives have some explanation to make about their involvement with debts owed by some airlines and the manner of disbursing the intervention funds to the airlines. In particular, the debts owed by the defunct Virgin Air and the loan granted to Air Nigeria by UBA has generated unresolved controversy on the intervention fund between the airlines, CBN, UBA and Bank of Industry.
The devious manners politically exposed individuals in government ministry and these banks executives’ access government funds through ministries, department and agencies without the knowledge of the responsible ministries or National Assembly appropriation require the EFCC/ICPC critical investigation. In particular were the manners by which loans were procured and facilitated for government public agencies through commercial banks at interest rates as high as 25%. While on the other hand, government had been influenced by these individuals to provide intervention funds from the Central Bank of Nigeria for private operators at ridiculous interest rate as low as 6%.
In spite of the low-interest concessions given by government on intervention funds to these private airline operators, there had been other concessions given to them to spread their debts for long-term payment, zero duties on aircraft spare parts importation and now tax exemption. Yet, they remain seriously indebted to the government public agencies and private service providers that are providing them various Safety Air and Ground Services that keep their businesses on going
Seriously, do these private airlines need all these concessions that the government is giving to them? Hear what a Chief Executive Officer of a financial institution in Nigeria said about the Nigeria airlines “Airlines are major players in the aviation industry and they are rarely borrowers. They have lots of cash and are mostly depositors. The model of airline business shows they sell lots of tickets which are usually paid for in cash and not on credit. Therefore, these airlines usually deposit cash in banks, convert them to foreign exchange and repatriate them as capital flights in case of domestic airlines or to their head office in case of foreign airlines” (Omar Hafiz MD/CEO Citibank Nigeria ; Punch 8, May 2015)