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Is Lamido Sanusi (CBN Governor) Pursuing A Hidden Agenda?

So much has been said about the sack of the  MD/CEOs and top management of 5 banks in Nigeria.

So much has also been said about the reasons for the sack (recklessness, mismanagement, dimunition of capital).

Some have mentioned that Sanusi may be pursuing a hidden agenda. What do you think?

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Article is by Emmanuel Jakpa

Battle for the Soul of Nigerian Banks

Malam Sanusi is a man of convictions, no doubt. We are living with those convictions at the moment. His draconian demarche of Friday 14th August will live in memory for a long time to come.

At this junction it may be pertinent to note that I do not know the CBN Governor or any of the sacked bank CEOs personally. However their actions and that of the CBN Governor affect us all and it therefore behoves us to interrogate those actions.

Some have hailed the bank action of Friday as timely intervention. Reuben Abati, former Chairman of Guardian Newspapers editorial board hailed it as assertive and courageous. He did not stop there but lampooned those who read sectional or religious under/over tones into the action as intellectually lazy. But others insist that the action seems premature and that only a premeditated intent could have led to such haste. For them that intent must be sectional. They point to the considerable bellyaching of some northern power brokers who complained of the north’s disenfranchisement in the consolidation exercise. For example Vanguard of Monday March 23, 2009 screamed group plots takeover of five banks and said text messages were being sent to customers of some of these bank to de-market the banks. At the same time the Secretary of Arewa Consultative Forum in a press release complained of illiquidity in the banking system which he said was due to over exposure to margin loans and the oil and gas sectors. Most commentators are not swayed by either the audacity of the CBN helmsman or the swirling allegations of sectional interest, what matters is the facts of the matter.

Reading through Mallam Sanusi Lamido Ahmed Sanusi’s statement on Friday leaves no one in any doubt as to why he struck: to contain the possible spread of financial contagion. He said these five banks posed a risk to the financial system. The evidence was that they were indebted to the CBN and to other banks. No one wanted to borrow them any more money unless CBN would guarantee such borrowings, meanwhile the same CEOs remained in place perhaps making the same reckless decisions which put their banks in danger in the first place. This situation had become intolerable, coupled with the fact that their delinquent behaviour was driving up inter bank rates as well as deposit rates. And as any knows deposit rates determine credit rates. So far, so good.

For me however, there are any number of questions raised by the procedure adopted in dealing with what is obviously a serious problem, the question is will this action not lead to even more serious problems?

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First of all, why the Gestapo tactics adopted by the CBN Governor? In the course of his interview granted the Financial Times of London on the 18th of June 2009, barely two weeks after taking office as Governor, Malam Sanusi stated emphatically that a situation where the board of a bank would be forced out and government money and government appointed directors take their place was only contemplable as a last resort and going by our past experiences of government takeover of financial institutions and it would not augur well for these institutions. For avoidance of doubt, the relevant sections of the interview is reproduced verbatim FT: Could you envisage a situation where there would be government-appointed boards having to run some of these banks?

Lamido Sanusi: I would not like to have that. It would be a last resort. They’ve got boards. If you need to have a transition in the institution, the boards can appoint a new CEO. I don’t think there is compelling evidence that in the past having government officials managing financial institutions has worked. My preference is to get private capital.

Why did he invert the self proclaimed order of things and do the last thing first? How could the CBN Governor stoop so low as to order the takeover of bank boards with armed mobile policemen. That’s Gestapo. It will not take a prophet to say that much legal wrangling will follow from that singular action and the true intentions may never be realized.

Moreover on Monday 10th of August 2009, Ijeoma Nwogwugwu a columnist with Thisday Newspaper had lampooned the newspapers which had gone to town with the ‘rumour’ that CBN was about to dispatch four bank boards, she said they did not pass the litmus test of responsible investigative journalism. Unlike them she had called to verify the rumours and managed to get the CBN Governor at an ungodly hour in faraway Nairobi who reassured her that the board of CBN was intending no such thing. In every government there are bound to be policy statement leaks, when that occurs the preferred way of dealing with it by evasion and spin not brazen denial with intent. The joke is on Ijeoma, she will have to add lie detector testing to her repertoire of investigative skills. Poor Ijeoma, she was up against Gestapo tactics.

Now considering these factors, one possible conclusion is that CBN policy is not being driven by the CBN Governor, because repeatedly he says one thing and does another. Hands of Esau, but voice of Jacob?

Now the next question, is why the haste? Malam Sanusi assumed office June 6th 2009. As at 14th August he had been in office for over two months. When he gave his London FT interview he estimated six to eight weeks for the audit process to be completed, they ought to have been completed by 1st week of August. We understand if things take a little bit more than anticipated to be completed. But what most people are asking is why undertake such far reaching action at this point in time. The audit is a preliminary process. So why take an action which you earlier declared you will not take unless all else fail, before you try any thing at all. This is where a lot of people get their notion of bias. The haste suggests a pre-determined outcome. In fact a post-prandial statement credited to the CBN Governor quoted in Guardian of 17th August seems to suggest that the process is not likely to yield any further outcomes of this severity. This, at a time when 14 banks are yet to be fully audited. So, timing was definitely wrong, it smacks too much of desperation. There was even no time to confer with the Stock Exchange to perhaps place a technical suspension on trading of the shares of the affected banks.

From accounts in the public domain the management of these banks got hauled before the CBN hours before their sack, how much defence can they muster in the hours they have to prepare. I seek lawyers licking their chops and reviewing Savannah Bank vs CBN. They never learn, if you ask me.

Now that raises a third question, what other measures could have been taken other than the draconian measures of management sack? The answer lies in Malam Sanusi’s FT interview. I think Malam Sanusi’s comment as to what he would do when the audit is completed is quite revealing

FT: Are there steps that you might take that would encourage it? (Infusion of private capital)( interpolation mine).

Lamido Sanusi: I would send the signals that I would try to create as much as possible an environment that would make it possible — if it means showing some flexibility, if it means giving some forbearance, if it means providing some incentives. On a net cost- benefit basis, if it is seen that those incentives, or those forbearances, would cost the Nigerian people much, much less than having to put in capital in those banks and then manage them, then I would make the recommendations. Ultimately, the decision as to how far the government will go is that of the president, and I will have to discuss with him. ( Interview available at www.chairmanking.com)

He said he would consider releasing the findings of the report to the public, which by the way was what the ACF had called for in their communiqué, then he would give them the option of mergers or any other method of infusing cash to meet adequacy ratios. He considered imposing new disclosure rules similar to IFRS, sending signals to the owners of the banks to consider merger with healthier banks or to bring their own money or go into partnerships with foreign banks, etc. He even considered an Asset Management Company as far resort on condition that the ailing banks write down such toxic assets. The most important element in all of these possible solutions is to let the private sector take the lead in restructuring. Why then did the CBN Governor go off the far end so fast? Did he give the private sector all these opportunities before bringing Government money into the matter?

Somewhere in the interview Malam Sanusi made it clear he would not shy away from sacking bank CEOs, but my understanding of what he said was that if they were involved in cooking the books. Were they?

Still does that justify government intervention when private capital has not been tried? Are we witnessing the second coming of big government and the commanding heights theories?

These actions by the CBN Governor with the full backing of the President might be an early sign of Government’s disillusionment with a market led economy. In the name of regulation we will witness more intervention

There isn’t more to say that once upon a time there was one other malam who tried to do the right thing the wrong way but in the end, had to run away the wrong way.

Emmanuel Jakpa, a lawyer wrote in from Warri, Delta State

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I said the agenda is hidden under my bed.

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If you take time to read the articles that have been posted since Friday, you will see why.

He (Sanusi) said these five banks were regular at the EDW (Expanded Discounted Window), the banks alone made up 90% of those borrowing from the CBN through the EDW. When he shut the EDW and guaranteed inter bank loans, the banks were still the one doing majority of the borrowing. Thats why he said the banks should be looked into first with other big banks.

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why did Sanusi start with these five? Unity bank is there if he wanted to sanitize. If he skipped that to go to these five, then he should have said why. Yaradua regime has brought back Savannah Bank. Then appointed Lamido with a clear northern bias. Lamido is now a major proponent of islamic banking as a life saver for the economy. Now he suddenly fires five bank executives. Interesting times await us.

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In all honesty, its to early to comment. i would like to keep my fingers cross. i have a grouse with the fact that he didnt have a full audit injstead of this partial audit, true some banks were in liquidity crisis, but as i said lets wait and see

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The Sanusi coup: Real reasons why five bank chiefs were axed

By EMEKA OKOROANYANWU and AMECHI OGBONNA

Monday, August 17, 2009

•Sanusi, CBN Governor

Photo: The Sun Publishing

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In what many have seen as another shock treatment package to stakeholders in the banking industry, the Central Bank of Nigeria Friday sacked the management of five commercial banks in the country, citing grave financial and operating conditions as the basis for its action.

The policy decision which was taken pursuant to the powers conferred on the governor by section 33 and 35 of the Banks and Other Financial Institutions Act 1991, as amended was announced at a world press conference in Lagos Friday by the CBN governor, Alhaji Sanusi Lamido Sanusi, in company of his deputy governors

The sack of the five banks was coming barely two months after the exit of Professor Chukwuma Soludo and the confirmation of the appointment of the new governor, by President Umaru Yar’Adua, on June 4, 2009.

Those who had followed the banking industry since the 2005 consolidation programme, saw Professor Soludo’s five-year stint as CBN governor as quite significant in the life of the banking industry in Nigeria for several reasons. They contended that it was during his tenure that the number of institutions were drastically reduced from about 90 to just 25 at the end of the December 2005.

At the same time, the banks’ shareholders funds, branch network, capital base and other parameters were on the upswing, as Nigerian banks were for the first time listed on the ranking of 1000 global financial institutions. It is also believed that the consolidation programme facilitated the global expansion of Nigerian banks to locations in Europe, Asia, Africa and very soon America and the Middle East.

Under him the Central Bank of Nigeria had always said the 22 per cent capital adequacy rating of the nation’s banks was the highest in the world, considering that the Basle 11 standard which is in the neighborhood of 8 per cent.

Most of the banks also won awards within and outside the country, while their rating soared higher.

But the fresh twist to the industry story and the taking over of the banks showed that perhaps it may not have been bubble capital alone that the CBN has been targeting under the present dispensation. In fact, some financial analysts who spoke to Daily Sun on Friday saw a Northern agenda in the Sanusi’s sanitization programme.

They argued that the North is still sulking over the loss of their banks during the Soludo led consolidation exercise in 2005 and are bent on redressing the imbalance.

In announcing the changes last week, Sanusi said new investors would be invited to recapitalized the banks, a statement analysts saw as more an attempt to give money bags from the Northern part of the country, an opportunity to enhance their shareholding position in some of the banks.

Another question being asked in some quarters is the rationale behind the take over of 92 years old Union Bank and Afribank, which undoubtedly are doing better than Unity Bank, considered by many as a Northern bank.

It was gathered that the CBN governor politely refused overtures by some top politicians, traditional rulers and religious leaders who were lobbied by some of the affected banks to intervene on their behalf, insisted that the banks need to be saved from total collapse because innocent people and stake holders have stakes in the institutions.

Last Friday, five out of the 10 institutions so far investigated became the guinea pigs that the authorities have used to show how bad the nation’s banking industry had deteriorated following the high level of exposure and management recklessness.

Having realized that it was not just change of the management that would solve the distress in the industry, the bank said it was injecting about N400billion over the next few months to keep the five banks alive.

The CBN facility is coming in the form of tier 2 capital which will be repaid from the proceeds of recapitalization in the near future , pointing out that the injection would be sufficient to resolve and stabilize all the institutions and enable them continue normal operations.

The CBN boss said the Yar Adua administration has no intention of nationalizing any financial institution.

He said: “our financial system is not strongly integrated into the international financial system as well as the relatively simple nature of financial product and strong capitalization and liquidity of Nigerian banks.

“However, there are many who have been aware for a while now that whereas the system is in general is likely to absorb and survive the effect of the crisis……. A few Nigerian banks mainly due to huge concentrations in their exposure to certain sectors, (capital market and oil and gas being the prominent ones), but due to the general weakness in risk management and corporate governance have remained continued to display signs of failure.”

Sanusi noted that as at October last year, some of the banks showed serious liquidity strain and had to be given financial support by the apex bank through its Expanded Discount Window where it extended credit facilities to banks on the basis of collateral in the form of Commercial Papers and Bankers Acceptances often of doubtful value.

According to him, the Nigerian banking industry as at June 4 when he assumed office as the apex bank helmsman, the total amount outstanding at the Expanded Discount Window was N256.571 billion and most of it was owed by the Five banks on which its sledge hammer fell upon.

Strains of the distress in the banking industry had been noticed under the former CBN Governor. To assist the banks to weather financial storm, the apex bank under Soludo had Expanded its Discount Window to enable the banks and discount houses borrow funds for as long as 360 days as against the overnight arrangement that was in place before. This measure sort of allowed the banks easy access to funds anytime they are in need.

The CBN had also reduced banks liquidity ratio to 30 per cent, from 40 per cent and freed some N1.7 trillion for their use. This enormously improved the liquidity of the banks.

As at the end of September 2008, the total shareholders’ funds of the banks stood at N2.7 trillion as against N293 billion in 2003. Soludo had said that even if the banks were to write off their entire exposures to the capital market, they would still have about N2 trillion shareholders’ funds saying that at this level the banking system would still be two times adequately capitalized.

Figures from the CBN also revealed that banks’ aggregate credit to the economy was in excess of N7 trillion, while their deposit base hit over N9 trillion. Between January and September 2008, about N2.2 trillion new credits were created by the banks.

“With these figures, the banks would still remain strong even if they decide to write off their exposures to the capital market at once,” Soludo had confidently said, noting that the value of the new credits were more than what the government had spent.

With these strong words, the CBN Governor laid to rest the controversy over the state of health of Nigerian banks.

But with the revelations from the new CBN Governor and the actions taken on Friday, the question now is, what has happened to the banking

industry in just these few months?

http://www.sunnewsonline.com/webpages/news/national/2009/aug/17/national-17-08-2009-04.htm

Read the bold lines carefully and u will believe that this CBN guy has something up his sleeves.

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i am sure Sanusi and his team are after something we dont know.

how can he suddenly turn the table round within this short period. the timing is too short to make things happen; unless, of course he is a wizard.

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Quoting Witty,

Lamido is a man of integrity and of a great mind he will not want to soil his name and the name of the royal family where he came from. What this man is pursuing is the agenda of the populace to get our savings secured, ensure job security for the people working in these banks and secure the funds of the share holders. The 400 billion Naira injected into these banks is it for the North? After-all some of these issues ought to have been thrashed by Soludo if he is really whom he claimed to be I wont be surprised if he is accused of negligence in this matter. We are all aware of the atrocities being committed by these people they cook up figures during AGM, give loans irregularly without good collateral, mismanagement funds, aiding and abetting in money laundering and so on. The weeks to come will unfold some of theses issues by then we shall be able to Judge clearly. Meanwhile Lamido Should please continue his good work.

Dear Witty,

Soludo did a great job & i love and respect him for what he did. He created the EDW (Expanded Discount WIndow) from which this 5 banks were the more regular users (borrowers) based on which Lamido made his inferences. What Soludo did was his style & was good. He came to Intercontinental Bank's aid when dere were rumours that they were going under due to the errors/happenstances that were unique to them. He declared that it was still one of the safest banks to bank in. So you see, he did something. It's just that Lamido's style is different. & it's clear & as bright as the day that if you and I should be in the same position, what you will do & what i will do will differ cos we r different. so please give honour to the great man called SOLUDO.

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Some people will always see things in the light of tribalism or religious sentiment. But i donot see any thing wrong or any hidden agenda in the sacking of the five bank executives. They deserve what they got.

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maybe opting 4 the presidency!

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so what evidence will the courts have to annul the elections if voters don't show up to vote for their candidates?

how many thugs (uniformed & non-uniformed) will be used to rig versus how many potential voters?

if everyone seats at home becos it will be rigged they just make teh job easier for the thugs!

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Nigerians are fond of discrediting the good intention of reformists like Lamido Sanusi. The action taken by the CBN governor is based on available facts. The banks are mere shadows.

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Please, lets not politicize this incident. I think the man is on the right track. Its just that some of us are highly disappointed in the likes of Cecilia Ibru and the Intercontinental guy. Lets support Sanusi to make things right.

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I agree wit kevd4real. How come d sick man in aso rock is in a hurry 2 approve d removal of d MD/CEO of those banks wen there are more than enough pressing issues 2 be solved. like ive said in dis forum, wit a sick president come a sick nation. we were not as badly affected by d financial crisis as compared to d western world. even int'l organisations gave or banking sector a pass mark. who knows, maybe he's trying 2 acquire dem. however, i see another round of legal battle ahead.

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i do not think he has any political ambition but if he now have such,na him sabi,all i knw is that we need somebody to really sanitize this our economic down fall.

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Lamido is a man of integrity and of a great mind he will not want to soil his name and the name of the royal family where he came from. What this man is pursuing is the agenda of the populace to get our savings secured, ensure job security for the people working in these banks and secure the funds of the share holders. The 400 billion  Naira injected into these banks is it for the North? After-all some of these issues ought to have been thrashed by Soludo if he is really whom he claimed to be I wont be surprised if he is accused of negligence in this matter. We are all aware of the atrocities being committed by these people they cook up figures during AGM, give loans irregularly without good collateral, mismanagement funds, aiding and abetting in money laundering and so on. The weeks to come will unfold some of theses issues by then we shall be able to Judge clearly. Meanwhile Lamido Should please continue his good work.

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Must we reduce everything to tribalism? in this millenium? God save 9ja.

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Would sacking the management of those banks rectify the problem?i wouldn't know if lamido is pursuing a northern agenda,its too early to tell.but nigeria is too large to be fooled by a single ethnic group, not anymore!

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It is also some of these elites that are responsible for the ordeals of the banking sector. they collected all those loans and are not paying back. what happens to them? will they enjoy immunity as usual?

Dangote now NSE president. Hmmm so much for the transparency and fight against corruption even after the allegation of his involvement in illegal stock price manipulation.

My fingers are still crossed.

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I am sure there is more to this than we have just experienced

Would it have been better to sack people who worked all their life to set up businesses or to have agreed to proposed mergers which some of the affected banks have already put on the table, which would still get them out of their position anyway but at least secure their initial interest in the companies concerned?

Now lets see whither direction the banks' lot is cast

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I guess there is more to this than meets the eye. Time and events in this country has thought me not to be in a hurry to be excited on any government policy or action that seems to be in the interest of the masses on the face of it because eventually it turns out to be another gimic to give themselves more money and power.

It will be out of place to say that the banking industry in nigeria is without issues, but it is also in place to say that CBN's pressent stand might have been hurriedly taken and not encompassing.

let us compair these banks with the country!

If government suddenly have our interests at heart, What are they doing about these other issues like, education, power supply, Good roads, Lagos State LGA saga, healthcare , Niger delta, high cost of fuel and the likes.

lets not forget that election is coming up very soon and Baba goslow definitely is not ready yet to leave and money is needed to fund that project.

having his grip on such a sector as financial sector is a big advantage. we all know that most of these bank's MDs are OBJ loyalist and Yaradua is gradually religating Obj to d background.

You will agree with me that the Ngerian polity is but a chess game in the hands of the elites.

Lets keep our fingers crossed while we watch helplessly hoping we wont be consumed.

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the shareholders own the banks.

they still have equity in the banks - they just don't call the shots anymore. if you want to remain fully in control of an entity you 'built from nothing' then don't go into banking, which is regulated by the government. end of story.

people are playing russian roulette with other's life savings , and people are crying tribalism when those people are censured. only in nigeria.

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LOL, nice one sweetpain

The kind of views we get on nairaland just indicates how far away we are from the 'one nigeria' that gets pushed around every now and then.

Can anyone of you think back to the Abacha era, when phoney banks would open, collect money from people and 3 months later, no one can find them? If you ever lost money to one of those, you would know what it is like.

The problem with Nigeria has always been that banks failed and nothing happened; CEOs and debtors walked off richer, but the salary earners like us suffered.

The only reason I have my money in any bank today is because the government has told us that these guys have met the requirements to do just that and my money is SAFE! Now the same government expresses concerns about how fine they are doing and takes action, then I start to bicker about how they built it from scratch??

Maybe we need a nigerian Madoff to set some heads straight, I just cant believe what I read here!!!

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@poster

Judging in jeers and rants will not help matters. And if u dont knw Mallam Sunusi ask well, he is a no-nonsense go area.

What we want in Nigeria is technocrats with Nigerian thinking nt ethnic or religion. Those with Iron hands to deal with the situation.

The only fear thats gripping me is, majority of the entire country are tribalist. See your life!

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@OP

It will be one hell of a good hidden agenda. Meanwhile, we want more heads.

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The need to politicize everything has come again, did the OP miss what happened in America and in Europe? BOA? Northern rock? AIG? Ford? GM? the list goes on, which politicking was going on then?

People who are playing with the money of the masses and all you can think about is that the person is playing politics how pathetic can we become?

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@ Oyb

He would not replace them with Northeners because that would give him away easily. Moreso, the North has not had some fantastic bankers since consolidation. The question is not who run the banks but who would own them eventually by the time he succeeds with his plan.

If he had remained long enough as FBN 's CEO we would have been able to assess his own managerial capabilities too. Don't forget that some of these people built those banks from nothing.

I am certain they knew he had something  up his sleeves and they played right into his hands. I try not to be parochial  or tribalistic but my hunches in this matter are far too great to be ignored.

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which kind of hidden agenda?why cant we just acknowledge the truth when we see it.these banks were on the verge of collapsing.if the cbn had not stepped in  we would all have lost our deposits then would you be talking about AGENDA!else where in the world the executives of such companies would have honourably RESIGNED.check out freddie May,enron,etc.so please save us fromm your ethnic B, ll

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Yes. There's a hidden agenda behind all this. And I know for certain because the agenda is hidden under my bed.

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Fcuz,these northerners,they are Nigeria's number 1 problem. If I'm president I swear,I'l wipe em all off the face of earth. They've done nufn but rule us brainlessly.

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@poster,

Lamido is not pursuing any hidden agenda. He is just doing his job without fear or favour.

He took a bold step by sacking the five bank M.Ds instead of allowing them to distress those banks. Or do you prefer that shareholders and depositors lose their hard earned money?

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well , i think he's doing both,

he's pursuing a hidden agenda as well as sanitizing the banking industry.

What he is really doing is morally right, but there is a secret twist to this whole scenario unfolding before us, TIME WILL TELL.

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