Democratic Socialist Movement

For Struggle, Solidarity and Socialism in Nigeria

By - DSM

ZOMBIE BANKING SECTOR IN CRISIS: For Nationalisation of Banking Sector under Democratic Control

ZOMBIE BANKING SECTOR IN CRISIS: For Nationalisation of Banking Sector under Democratic Control

By Damilare Etti

The banking sector, like the rest of the Nigerian economy is experiencing contraction. The CBN is bailing out the banks again with the meager public resources, albeit indirectly: By keeping the key monetary ratios in double digits, creation of FX ecosystem that act as an enabler for capital flight, speculative activities on Naira and forex arbitrage opportunities, and unsustainable deployment of treasury bills instrument in such a way that transfers wealth to the banks and saddle the public with unproductive debt. A parallel can be drawn on the causal reason for the present economic downturn and the perennial banking sector collapses; mismanagement engendered by the undemocratic management of all the sectors of the Nigerian economy for the benefit of the few and shared misery by the majority of the populace.

The recent regulatory action taking by the CBN in saving SKYE Bank from imminent collapse due to mismanagement has once again reaffirmed the notion that the sector has become a liability on the economy. By injecting liquidity (public funds) into the banks under the guise of wanting to protect the financial sector from the contagion effect of a bank collapse, CBN has continued with the practice of making the society pick the bill for a failed private sector.

Asset Management Company (AMCON), was set up six years ago to rescue the banking industry with over N3.9 trillion expended by the then CBN governor, Sanusi Lamido Sanusi with a promise that the risk based supervision he introduced will ring-fence the industry from future crisis. Not only has the government been saddled with N5.2 trillion debts as a result of that bailout exercise, the banks are back in the pit, with more banks teetering on breaching minimum regulatory prudential ratios in terms of liquidity, NPL and capital adequacy. There are more Skye Banks out there!

According to The Nigeria Deposit Insurance Corporation (NDIC) annual report for 2015, the value of Non Performing Loans (NPLs) in commercial banks in the country is put at N648.8 billion as at December 2015. That is a whopping ten percent of the national budget for 2016! And it is still growing. You might want to ask; why are the loans going bad? Did the banks disburse loans without properly securing them? Or why are the underlying assets with which these loans were secured not been realized?

The truth is that, loan administration in the banking industry as was disclosed during the banking industry crisis of 2009 and the Skye bank debacle of recent, is designed to feather the nest of the political-economic class. Loans are taken by “captains of industry” and “captains of politics” without any intention of paying back. They (captains) are in unholy alliance with directors of banks. The directors grant unsecured or partly secured loans to the economic sharks and their fronts (which they are part of), and they get rewarded with “juicy” public positions. While small scale enterprises have to pass through the proverbial eye of a needle before securing needed credit lines, banks queue behind the oligarchs literarily begging them to take loans that would not be repaid.


In Nigeria, as is usual under capitalism, privately owned banks and their owners have historically fed fat on the Nigerian people. Apart from the very low deposit interest rate that is prevalent in the industry, usually in the lower band of a single digit, they also charge extortionate double digit rate on loans between 20% and 30%. These oppressive rates have contributed in no small way to the collapse of industries in the country, while the banks declare billion of Naira as profit annually.

More worryingly, is that the astronomical increase in profit of Nigerian banks has not translated to more quality jobs been created in the sector. Just this year, Diamond bank has sacked over 200 staff, 1040 gone in Ecobank, Skye Bank and Unity bank have both shaved 200 jobs each. Casualization of the workforce has also risen in tandem with the pace of profit accretion. Long hours of job; usually in excess of twelve hours a day and six/seven days a week has now become the norm in banks. The ratio of core staff to contract staff now stands at 1:4, and this is even higher in new generation banks. Just like Wells Fargo saga in the USA, Nigerian banks have also created a “pressure- cooker” environment, where, unrealistic marketing and operational targets have led to widespread unethical business practices.

Private banks have no fiduciary responsibility to society, and they are a willing vessel for the ruling class to launder and facilitate the transmission of illicit funds. From the CBN to all the banks it regulates, tales of widespread connivance with the politicians in looting the nation’s scarce resources have been established. CBN vault was allegedly appropriated by the government of Goodluck Jonathan for reelection. The MD of Fidelity bank, an executive director in First bank, a bank manager in Zenith bank and other highly placed individuals in the banking industry became a bureau de change and money laundry agents for the thieving class in the society.

Even though the much touted anti- corruption campaign of APC federal government is in full swing, nobody in the banking industry has been arraigned in court for colluding with the last government officials to milk the treasury dry.


The usual response of the authorities to banking crisis in Nigeria is to;

  • Bail out the banks
  • Introduce more regulatory controls
  • Enact new laws and regulations
  • Creation of new institutions to avert future crisis
  • Sending few operators to short sabbatical stay in prison

All these initiatives have failed because the underlying cause remains intact. The banks pursue profit maximization at all cost. The cost to the society is destruction of the economy.

To therefore safe the banks and indeed the society, the wellbeing of the mass of our people must take priority over profit. The banks and the entire financial industry must be nationalized and taken under the democratic control of the workers, consumers and relevant professionals so that the banks can be made to work for the generality of the citizenry as against the interest of the unproductive and extremely wealthy one percent. This is different to the situation sometimes seen under capitalism where banks are temporarily nationalized in the interests of the wider capitalist system. We demand nationalization in the interests of the working people and poor.

However the full potential of this could not be realized under the present capitalist system. Workers, artisans and the oppressed layer of the society must therefore organize to replace this oppressive system with a genuine democratic socialist government that will manage the resources of the society for the benefit of the mass of our people in a sustainable way.