For First Bank, Huge Profits are Reaped from Public Sector Graft

First Bank is the news again for all the wrong reasons. The bank has been named as a major facilitator of the police pension fund scam where money meant for retired policemen was laundered through the bank and moved into personal accounts after deals were cut with the bank’s officials. And despite the public outcry, the bank has remained aloof, refusing to publicly comment on the matter.
Arguably Nigeria’s largest bank, the country’s oldest financial services institution has been around since 1894, its iconic elephant a fixture in the minds of several generations of customers who have watched the bank morph from a staid, lumbering giant to a somewhat modern brand seeking to add discerning and upwardly-mobile Gen Xers to its aging client base. That has been a tough battle given the swift ascendancy of nimble upstarts such as GTBank and Diamond Bank.
However, First Bank has remained a money-minting machine hitting new targets with each passing year and raising billions of dollars from hungry investors. Its 100 billion naira public offer in 2007 was so successful that a class-action lawsuit was filed by disgruntled subscribers who felt that the bank’s decision to return their money was a breach of contract.
But First Bank has a dark secret. It doesn’t really need to do much to mint money and as long as Nigeria’s corrupt quangos are allowed to park public funds in commercial banks, the bank’s fortunes will continue to soar. Over the years, the bank’s management team has been adept at conniving with mandarins and politicians to launder government funds and shortchange the treasury. This practice is not limited to the bloated federal government, First Bank has forged similar relationships with states such as Bayelsa, Cross-River, Rivers and Ogun where it expends a lot of money on questionable CSR projects and other incentives in order to manage plum accounts. The bank invests millions of dollars in jamborees such as the Calabar Festival, Calabar Carnival, Rivers Carnival projects that make it easy for governors to launder money as a result of lax controls.
First Bank has been able to get away with this for several years because of its extensive connections and ties to politically-exposed persons many of whom are shareholders of the bank. And like Goldman Sachs, which is sometimes derisively referred to as “Government Sachs” for its policy of pushing its staff into government jobs, First Bank ensures that many of its executives make the transition to the public sector. The governor of the Central Bank Sanusi Lamido Sanusi had a short stint as the bank’s chief executive before moving to the apex bank while Yerima Ngama and Remi Babalola were executives.
The problem is that over the years, the bank has seen its strategy become almost exclusively hinged on its ability to maintain its hold on juicy public sector accounts plunging it deeper into the vortex of corruption that dictates business dealings in the labyrinthine world of Nigeria’s public sector. And the bank’s humongous size and influence make it an elusive target. The Central Bank of Governor has said that all banks guilty of involvement in the pensions scam will be punished but then First Bank execs won’t be taking that threat too seriously.
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