African Outlook Online

George Ayittey

Awakening the Sleeping Giant: Making Nigeria Work Again (III)




By George B. N. Ayittey, Ph.D


In a three-part series on the Nigeria question, Prof. George B. N. Ayittey dissects the problems besetting Africa's most populated nation. Here is the third and final segment in the series:

Collapse of the Banking System
During this period under military rule, there was no rule of law. No one followed any law; building contractors made up their own “laws” as did bankers. In November 1992, the Central Bank of Nigeria (CBN) declared 46 banks as “insolvent.” Alhaji Abdulkadir Ahmed, the CBN governor, “pinpointed huge debts that are doubtful or bad, fraud and forgeries, boardroom quarrels and inept management” (West Africa, Feb 1-7, 1993; p.148). The governor explained further that:


“Most Nigerian banks, especially the state-owned ones, have poor loan portfolios — for state government-owned commercial banks, the proportion of classified loans (bad and doubtful) was 66.3 percent in 1991; while the proportion of privately-owned banks was 32 percent, and for merchant banks (all privately owned) the classified loan portfolio was only 27 percent (West Africa, Feb 1-7, 1993; p.148).


Fraud soon started to threaten the integrity and stability of the banking system. Between 1988 and 1990, fraud cases rose 800 percent. In 1991, for example, a total of N360.2 million was lost. Of this, the loss to privately-owned commercial banks was N25.5 million and N28.3 million for merchant banks. The bulk was incurred by state-owned banks. In May, 1993, the CBN took over the management of five state-owned banks: African Continental Bank, Cooperative & Commerce Bank, Mercantile Bank of Nigeria, New Nigeria Bank and Pan-African Bank. In January, 1994, the CBN revoked the operational licences of two banks (Financial Merchant Bank and Kapital Merchant Bank) for “total erosion of their capital bases and dissipation of the depositors’ funds” (African Business, May 1994; p.31). Three weeks later, the Republican Bank Limited and Broad Bank of Nigeria Limited, were suspended. But few of the fraudsters were prosecuted as most had fled the country.


To bring sanity into the banking system, both the government and the CBN resorted to desperate ad hoc measures to mop up excess liquidity. On April 5, 1989, the CBN it issued a directive that the commercial and merchant banks should within 21 days recall all loans and advances with offshore guarantees and collaterals, since such loans were guaranteed with foreign exchange that should have been repatriated. About N1.03 billion (or $144 million) was involved. The directive sent panic in the banking system. Nineteen banks could not comply with the 21-day ultimatum.


In May 1989, the government followed CBN action by ordering all government agencies’ to withdraw their funds from commercial and merchant banks and other non-bank financial institutions. This order “spread fears that some banks were about to collapse” (African Business, Oct 1989; p.25). Panic set in, triggering a run on the banks. Though the Nigerian Deposit Insurance Corporation was established in 1988 to protect depositors against bank failures, only N5,000 was covered, exposing large depositors to bank failures. “One notable multi-millionaire caused panic when he gave his bank the mandatory seven days’ notice to withdraw his N200 million ” (African Business, Oct 1989; p.25).


To be fair, the CBN’s culpability in the banking crisis was limited. With a gun pointed at its head, it lacked room for independent action. Even when it took an independent action, this could always be overridden by the marauding federal government hijacked by a military junta. But the CBN exacerbated the banking crisis with its own autocratic style of management. In April, 1993, CBN yanked a whopping N33 billion ($1.31 billion) from the vaults of the banks.


Before banks could recover from the cash squeeze, CBN introduced Open Market Operations, selling N250 million in Treasury Bills. But in late August, CBN reversed itself and “released N1.5 billion in the form of loans to bail out 14 banks which were adversely affected by the withdrawal of government funds from the banks” (African Business, Oct 1989; p.26). But “By Sept 1, 1993, literally all the banks were unable to meet their obligations to customers. Depositors were in most cases not allowed to withdraw amounts in excess of N1,000 (in some cases, even less), irrespective of their credit balances” (African Business, Oct 1993; p.17). The banking system had in effect collapsed.


Decay of State Institutions

State institutions and commissions became paralyzed. Laxity, ineptitude, indiscipline and unprofessionalism thus flourished in the public sector. Of course, Nigeria had a police force and judiciary system to catch and prosecute the thieves. But the police were themselves highway robbers, under orders to protect the looters, and many of the judges were themselves crooks.


“On Oct 16, 2001, armed robbers had operated for about four hours along the Osogbo-Ikirun road, dispossessing their victims of valuables. Villagers in the area subsequently mobilized themselves and descended on the suspected robbers. They were however shocked, according to reports, to discover that the persons caught at the scene were a police inspector and other policemen. “When the policemen were accosted, they fled into the bush abandoning their vehicle. The inspector was however caught and subsequently beaten up by the angry villagers. Reports of the armed robbery prompted police authority to send two patrol teams to the scene, but on arrival, the teams were attacked by the mob who accused them of complicity in the robbery operation. A total of three police vehicles with registration numbers PF 5737, PF 5730 and PF 5660 involved in the whole incident were all lying in the bush at the scene” (The Guardian, October 17, 2001).


In another case, “Two Nigerian policemen were among a gang of eight armed robbers arrested as they attempted to snatch cars passing a major Lagos bridge. Police Assistant Superintendent Paddy Ogon said the two, whom he declined to name, stopped cars crossing the 3rd Mainland Bridge linking Lagos island and the continent while their accomplices forced the passengers out, robbed them and snatched the cars. Acting on a tipoff, police stationed detectives at points overlooking the bridge and caught the robbers and their police colleagues redhanded, he said” (Daily Times, 11 August, 1998; p.3).


“Nigeria had many fine lawyers, but the judiciary is tainted by trials settled with bribes. It had fine academics, but universities were tarnished by the trade in diplomas. It had respected chiefs, but the nobility had been mocked by the sale of chieftaincy titles. In many ways, the institution which has suffered the most under this military regime was the military itself. `Military men are not soldiers anymore’ is a common Nigerian observation (The Economist, 21 August 1993; Survey, 6). Nigerian cities have fire departments, but often there is no equipment. When a three-story apartment building and a bakery were destroyed by fire in Umuahia “one volunteer, Mr. Timothy Nwachukwu, said that the fire service did not help because they had no working vehicles” (African News Weekly, 24 February 1994, 12).


Institutional break-down and the failure to provide the most basic essential services created an environment inimical to development. The cost of doing business in such an environment increased enormously. Simple, routine applications took weeks to be approved. Security of persons and property could seldom be guaranteed. Increasing production became chancy, given intermittent disruptions in the supply of electricity and water.


There were no checks against brigandage. The worst was the military — the most trenchantly perverted institution in Nigeria. In any normal, civilized society, the function of the military is to defend the territorial integrity of the nation and the people against external aggression. In Nigeria, the military was instead locked in combat with the very people it was supposed to defend. Wole Soyinka (1996) handed the postcolonial soldiers a blistering rebuke:


“The military dictatorships of the African continent, parasitic, unproductive, totally devoid of social commitment or vision, are an expression of this exclusionist mentality of a handful; so are those immediately postcolonial monopolies that parade themselves as single-party states. To exclude the sentient plurality of any society from the right of decision in the structuring of their own lives is an attempt to anesthetize, turn comatose, indeed idiotize society, which of course is a supreme irony, since the proven idiots of our postcolonial experience have been, indeed still are, largely to be found among the military dictators.” (139).


A simple rule of thumb on Nigerian development emerged: The index of economic well-being of the country was inversely related to the length of time the military held political power. The longer it stayed in power, the greater the economic devastation. Said African News Weekly in its September 1, 1995 editorial:


“No military coup in Africa has produced a vibrant economy to replace the bankrupt one it set out to redeem. In almost every case, the army boys have imbibed the ways of the corrupt politicians they pushed out of office and even taken their crookedness to a higher level” (7).


Fed up with their antics, West Africa magazine, in its June 20-26, 1994 issue, offered them this advice:

“Military people belong in the barracks not in the corridors of political power. Since independence, Nigeria has had an obscenely high number of military governments; they cited corruption and waste if taking over from a civilian government and something else if overthrowing another military junta.  Needless to say, the Nigerian populace is fed up. The armed forces cannot claim not to realize this. If a soldier should become bored, he can always go and play ping pong; it is good for keeping fit. (1078)


The military soon became the most thoroughly discredited institution.  A Nigerian pro-democracy activist, Arthur Nwanko, wrote devastatingly from jail:


“National wealth and resources have been scandalously pillaged by a band of armed booty-seekers and their retinue of civilian collaborators. Not content with the destruction of the economy; not content with inflicting enormous social dislocations on the polity; not content with raping democracy; people and fundamental rights; not content with institutionalizing corruption as a national art form; and not content with causing the decay of the nation’s agricultural, industrial, and social infrastructure, including the environment, the health and educational system through their planlessness and visionless leadership, these singleminded despots have moved into the area of violating the nation’s honor, sense of worth and dignity, and through that caused the massive debasement of the humanity of Nigerians in the eyes of the rest of civilized humanity” (Post Express Wired,. 17 June 1998).


The longer they stayed in office, the less they had “upstairs,” becoming “hardened coconuts.” In fact, one of them, V.I. Okafor, a retired Nigerian army Captain, confessed: “We are perceived as a class of marauding mediocres, vast in wastefulness, corruption and all sorts of vicious behavior a class devoid of men of honor and integrity, a class enveloped in infamy” (The Vanguard, 14 July 1998, 2). Yet, within six months of assuming power from the late General Sani Abacha, General Abubakar granted himself the country’s highest award, the Grand Commander of the Federal Republic. He also honored all past military heads of state, with the exception of the late General Sani Abacha. Some honor!


Nigeria’s military rulers proved themselves to be most incompetent in handling any task. When they took on the task of shepherding the country through a transition to democratic rule, they rather made the transition process itself permanent! From 1980 the ever-competent military vagabonds tried on NINE occasions to return the country to democratic rule. On the ninth attempt, they even annulled the June 12, 1993 election, which was won by the late Chief Abiola.


A Lagos newspaper, Weekend Concord reported that the Supreme Court judges had accepted Mercedes Benz bribes from head of state, General Babangida for a favorable ruling on the annulment. The judges employed one of Nigeria’s most prominent lawyers, Chief Rotimi Williams, to file libel suits against the paper, claiming $40 million. The Concord objected, complaining that the case would come up before the Supreme Court — that is, the judges would sit in judgment on their own case! But the “Chief Justice ruled that he was competent to hear the case and far from throwing it out, sought an accelerated hearing for the case” (New African, May 1994, 41).


It was during this period that Nigeria’s military regime pompously offered South Africa “technical assistance” for its transition to democratic rule. Mr. Banji Oloruntegbe, the executive secretary of Nigeria’s National Committee Against Apartheid, said that “Nigeria will train 500 black South Africans as part of its technical assistance to the world’s youngest democratic country. The training which will begin soon, will educate South African blacks in the key areas like local government, customs and immigration services, taxation, budget and communication development” (West Africa, June 6-12, 1994; p.1005).


The most egregious display of incompetence occurred in Nov 1995 when Abacha’s military regime set out to hang human rights activist Ken Saro-Wiwa on trumped-up charges of treason and murder. It took FIVE attempts to execute the dastardly deed because of equipment malfunction. An irate Kwesi Obeng of University of Science and Technology in Kumasi, Ghana, wrote “to register his protest and revulsion at the way African leaders have been disgracing the black race. Just look at the way Ken Saro-Wiwa and Co. were hanged like pigs without the benefit of an appeal” (The Ghanaian Chronicle, 18-22 January 1996, 4).


When it comes to beating up and shooting unarmed civilians, Africa’s security forces can do with efficient relish. But how really courageous were the security boys? On July 23, 1998, Colonel Anthony Obi, Osun State’s military administrator, strutted pompously to deliver a speech at a state function at Osogbo in the southwestern part of Lagos. As the Daily Champion (24 July 1998) reported:


“Panic-stricken Nigerian officials ran for safety when first a rat and then a python, apparently drawn by the smell of the rat, made a sudden appearance. The officials leapt up from their seats when the rat, described as having a “long snout and offensive smell,” appeared from beneath the carpet by the high table. Colonel Anthony Obi, Osun State’s military administrator, and his entourage nervously returned after security agents intervened and killed the beast. (p.1)