THE DEMISE OF SKYE BANK( FINAL PART)

Suffice to say, that there are many factors that led to the demise of Skye bank, but I want you to know that SkyeBank as a Company WAS NOT LIQUIDATED. The CBN issues a license to a bank to operate.

The CBN revoked the license of Skye bank to operate as a bank. The CBN did not dismantle the bank and nail the bank to the coffin or else that would have been disastrous to our fragile economy because Skye bank has over 260 branches in Nigeria with thousands of workers.

Skye bank also owns subsidiaries banks in West African countries such as Gambia, Guinea, Equatorial Guinea, Liberia, Angola and Sierraleon and imagine the impact of liquidating the bank on these ‘small’ economies.

The spillover effect of the bank liquidation would have a multiplier effect on all banks and financial institutions.

This might lead to panic withdrawals and erodes investor confidence in the banking sector and more importantly will lead to massive unemployment and loss of deposits by customers. CBN was incisive and immediately with AMCON appointed a bridge institution-Polaris to take over the management of Skye bank.

 Having said that, it doesn’t mean that investor confidence in Skye bank has not been dented. Let us look at two reasons for the demise of Skye bank. The first one is low liquidity ration and financial health/unethical practices by the company.

The bank has low liquidity ratios. Calm down! I will explain it to you.

Bank liquidity ratio: Any time you deposit to the bank, the bank collect your money and keep it safe for you. Who owns the money? It is you, but to the bank, that your money is a liability and anytime you come to the bank to withdraw your money, the bank is obligated to hand over your money to you. All the deposits in the bank are liabilities to the bank.

Liquidity ratio is the ratio of a banks liquid assets (cash or assets that can be turned to cash) to its liabilities (Mostly your deposits in the bank). In Nigeria's banks are supposed to have a liquidity ratio of 30%( The bank totals liquid assets is expected to exceed all the liabilities by 30%)

Skye bank liquidity ratio was very bad and it was a worrying sign because customers could want to withdraw their money and the branch WILL NOT BE able to hand over the customer money to him/her. So they resort to borrowing from the CBN to mitigate the embarrassment. The CBN governor said ‘’ The result of our examinations and forensic audit of the bank has, however, have revealed that the Skye bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN. The shareholders of the bank have been unable to recapitalize it.’’

The financial health and position of a Company are very important. How much profit is the Company making? How much cash does the Company have? How much debt is outside and who owes them? Does the owner of the Company withdraw money from the company at will? What is the level of drawings of the company investment and assets? Is their growth?

The Fiscal health of the bank was really worse. The Company loss in 2015 of N40.726 billion.was really bad and the downtrend continues unabated.If you are in a business like an ‘ajo’(credit thrift) business and you made a persistent loss in 4/5 years, something is wrong somewhere?

 Interestingly the bank did not deem it fit to institute cost-cutting measures to buck the trend. The bank employee benefits and emoluments increase by 95 per cent in 2015 and the general and administrative expense increased by 17%.  That year, bad loans jumped up by 47 per cent to N27.53 billion from N18.99 billion in 2014. Just imagine that?

 The lifestyles of the directors and key men leave more saliva to swallow.  The then chairman of the bank, Tunde Ayeni was indebted to the bank in excess of N70 billion. He used his position as the chairman of the bank to obtain loans well above the regulatory limits. (You see why I wrote my book ‘PREVENT YOUR EMPLOYEES FROM DEFRAUDING YOU’’)

The massive unethical and fraudulent practices in the bank leave much to be desired.

Blatant, Unethical, Criminal Mismanagement.

In 2017, despite Nigeria’s ailing recession and Skye bank woes and despite the debt and corruption scandals supposed to be hovering over his head, Tunde Ayeni threw a lavish 50th birthday party for his wife Biola Ayeni, filled with many who’s who, lots to drink, lots to eat and lots of lavish gifts..

There are other reasons why the bank license was revoked but the aforementioned issues outlined above shows that the CBN acted drastically to save depositors money but the CBN retain the old management and directors to continue to manage the company under the Polaris brand.

 I am of the view that as CBN has taken over the bank, it ought to have sacked both Board and Management and reconstitute a new Board and Management. The Directors and management of the bank were responsible for the collapse of the financial institution and so The Directors of Skye Bank must be held accountable; their properties should be sold to offset the debts and not the ordinary shareholders that entrusted the companies to them.”

LESSONS TO BE LEARNT

-Do not live beyond your means. Skye bank as an entity tried to grow beyond their means and it backfired.

-Workplace fraud is critical to the management of any company whether big or small. Keep your eagle eye on your company and ensure that you conduct an audit exercise on your financial operations on a regular basis.

-Spread your money. Do not deposit all your savings in one bank. Spread the risk by banking with 2/3 banks.

-Be interested in the financial health of your bank. Don't display don’t care attitude’.It will not help you. Contact me on my FB page(fb.me/baasinat) on how to go about it.

-Shareholders will definitely bear the brunt of the demise of Skye bank. Meet a professional stockbroker before making any decision to invest in shares of any company.

-Do a thorough feasibility/business plan before embarking on any project and ensure that the plan is followed systematically and any deviation must be properly analysed.

-Do not steal from your business. Most entrepreneurs are found wanting on this. They steal from their company. Remember the entity concept. Your Company is a corporate person and you are different from your company... Contact me on my FB page(fb.me/baasinat) on how to go about it.

Thanks for reading.

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