•Reveals Why So Many Banks Are In Trouble
Osifo Samson is a brilliant Accountant. He is also a Financial Management expert. He was formerly the Financial Director of OSAFURE (NIG) LTD and also a Senior Consultant with Emma Elliot & Associates where he specialised in investigating financial statements and debt recovery.
He is the founder of Fasam Institute where he lectures Financial Management, Taxation, Financial Reporting and Management Accounting. He was formerly the Account Officer of Amingo International Limited. Presently, he is the Principal Partner of OSIFO SAMSON & Co. Managing Director (MD) of OMORONTIONMA (NIG) LTD and FOSAM GLOBAL INVESTMENT LTD. located in Georgia in the USA.
OSIFO Samson has his first degree in Accounting and Masters of Science Degree (M.Sc) in Finance both from Olabisi Onabanjo University, Master of Science (M.Sc) in Accounting from University of Lagos; he also has Master in Business Administration (MBA) specialist in Financial Management from Lagos State University, presently he is working on his PhD in Financial Management and PhD in Financial Economics from Lead Beckelt University formal Metropolitan University. He is a member of the following professional bodies: (i) Association of Chartered Certified Accountant (ACCA)-UK, (ii) Chartered Institute of Finance & Control of Nigeria (iii) Chartered Institute of Taxation of Nigeria (iv) Fellow of The Institute of Chartered Economists of Nigeria (v) Fellow Of The Institute Of Credit Management of Nigeria (vi) Institute of Management Consultant of Nigeria (IMCON) (vii) International Professional Managers Association(UK) (viii) West Africa Institute of Management Consultant-GHANA (ix) Certified Institute of Auctioneer, Nigeria. He is also on the Board of Several Companies in Nigeria.
He runs Osifo Samson & Co., a consultancy firm that focuses on Financial Advisory Rules, Facilitating Bank Loans and Overdraft, Financial Investigation, Debt Recovery, Bank charges review and Reconciliation, Tax Management, Project Management, Market Planning and Business Development.
Osifo Samson & Co. entered the consultancy service based on the vast knowledge acquired in finance and financial management and in general corporate financial reporting.
The essence of our brand is to provide management and financial services with a difference (locating best global practices). We have employed a requisite and adequately mentored workforce that can drive the dream and walk the talk. His company has successfully resolved over 500 bank debts without clients going to court, likewise the bank also, due to its alternative strategy to recovery.
Last week, Osifo Samson spoke to City People Publisher, SEYE KEHINDE on a wide range of issues. He spoke about the prevailing issues in the financial sector like why banks fail, especially the liquidity management crisis currently facing commercial banks in Nigeria. He is of the opinion that you rarely find an executive director of today’s bank who possesses the knowledge of liquidity arising from credit management, hence the failure of the banks to stay afloat and remain in business.
Osifo takes serious exception to a number of state governments running to the federal capital to pursue federal revenue allocation to be able to sustain their governance. He believes they lack tax management skills and experts who could drive the states’ administration, thereby making huge revenue without recourse to the federal allocation.
The financial guru condemns the acts of banks sealing and repossessing properties lodged as collateral from customers who default in loan facilities. What are the implications of such acts, consequent upon hundreds of staff that are thrown into the labour market as a result. The World Bank recently made a pronouncement that Nigeria’s economy was slipping, what’s his take on this. It is an interesting interview.
Many of the banks usually get into trouble. Why is this so?
The reason why banks will always fail is that most banks now in Nigeria focus on asset management and not liquidity management. I always tell people that liquidity management is an important course that every banker and individual should be able to practice in his lifetime.
If as a Customer, I go to a bank and I can get my money, whether they have structure or not I don’t care, as long as I can get my money out from the bank, I go away. So Liquidity management is key.
What is Liquidity management?
Liquidity management is all about the ability of an organisation or an individual to pay his debtors or clients or creditors as at when due. Now, why would banks fail? It is because they focus on asset management, not liquidity management.
Let’s focus on an individual for you to understand what I mean. A young man makes N50 million and decides, he needs to buy a property because that is his priority. As a black man, we are asset-oriented, we are asset-driven individuals, not managing liquidity. The same thing applies to banking too. But this individual will most likely go down the deal, struggling from the beginning. That individual looks at the house as an asset. He looks at what he has achieved with that N50 million as an asset, not looking at the activities that connote him, or, that drove him to that value of N50 million. In 5 years to come, do you know that man will be a poor man? He will find out that his son is going to school and he is begging for money. But don’t forget that this individual has earned N50 million before. Now, what Liquidity management is telling us is that such individual that earned N50 million can put the N50 million to good use. He can buy a Treasury Bill for that year, whilst he earns Interest on that money. He will still continue with the business. Now, he can rent a house of N500,000 per annum and still have the interest on the Treasury Bill with him. He can plan his life, through that means in 10 years time, that man can save N100 million. In the long run, he can go back to go and buy that house of N50 million he had wanted to buy and still have his N50 million in the bank. That is what Liquidity Management is all about.
Now, if the bank focuses on Asset it will get into trouble. Look, I put N500 million in a bank. Another person came to borrow the same N500 million from you, and you are focusing on Asset for that man to pay back that money. In the long run, if the man fails to bring back the money, technically, you run to Central Bank to borrow money or you run to Bank B to borrow money.
So you can pay off the money. Such a bank will claim that the asset is in their Book value. Now, when such asset is in your Book value, who is buying an asset. You can put up an asset for 10 months nobody is buying, whilst the bank from that day begins to have issues, because they will not be able to meet their liquidity as at when due. So, they go to Bank B to borrow money excessively, to pay. What I am trying to say in essence is this: Most banks that focus on Asset Management, technically fail. When you look at Section 35 of the Banking & Other Supervision Act, you will see why Banks fail, clearly. You cannot focus on Asset because the kind of business bank does is liquidity. You must be liquid at all time so that your client or customer can get their money as at when due. Immediately you focus on Assets your clients will be stranded and that is what is happening to banks now. So, they focus on Assets in their books. So, you will see N20 billion. But when you see that, ask for the Total value of depositors money. The bank can have N100 billion assets, whilst the depositors’ money is N190 million for instance, or N90 million. Technically, the assets of that bank is just N10 billion. What that connotes is that banks that focus on Asset Management will always have what we call Liquidity Crisis and we always fail at the end of the day.
So the lesson to learn from this is that we need to understand the kind of business that we do. As an individual too we need to understand how to manage money and liquidity issues. That is why some bank executives become poor after they leave office. It is because as Black people, we are asset driven individuals.
We feel I must have 20 houses before people know I am rich and I have money. At the end of the day if you have 20 houses and you cannot send your son to good schools you are empty. So, we must learn from the home the understanding of liquidity management. What I am saying is that your first N100 million must serve you, and give you a security that you are not going to be poor any longer. You don’t need to go and buy a car with the N100 million because if you do that you are going down gradually.
Once an Executive of a bank understands this what they will do when it comes to loan financing is to look at the risks involved in that transaction. They should be able to interpret it very well.
So that they can secure the liquidity, not focusing on the collateral. If you look at the reason why AMCON came into place, you will see that it is because most banks were not able to manage their assets very well. So, AMCON came in and bought all those assets off them. Technically, if AMCON had not come in, those banks would have been liquidated. It shows that Bank Directors focus on Asset management. We need to change that narrative in the banking sector. We need to let the Banks know that Asset does not connote you to be a billionaire because of the kind of business you do. In the Banking industry, Asset does not connote you as a strong party. If you have N200 billion today as Liquidity and you have assets of N500 billion, I can tell you that such bank can liquidate because if an individual has N200 billion with you, it shows that if he collects the money you are empty. So, you now need to go and borrow.
(Part 2next week)