The Mass Burial

On January 16, 1998, the Central Bank of Nigeria revoked the operating licenses of 26 banks simultaneously — the largest single-day bank liquidation in African history. The banks included Abacus Merchant Bank, ABC Merchant Bank, Allied Bank, Allstates Trust Bank, Amicable Bank, Century Merchant Bank, Commerce Bank, Commercial Trust Bank, Continental Merchant Bank, Cooperative & Commerce Bank, Credite Bank, Crown Merchant Bank, Great Merchant Bank, Group Merchant Bank, Highland Bank, ICON Merchant Bank, Lobi Bank, Mercantile Bank, Merchant Bank of Africa, Nigeria Merchant Bank, North-South Bank, Pan African Bank, Pinacle Commercial Bank, Prime Merchant Bank, Progress Bank, and Victory Merchant Bank. The NDIC, appointed provisional liquidator for all 26, had to deploy its entire workforce and engage private accounting firms to manage the simultaneous closures. Total deposits at closure ranged from N68 million (Nigeria Merchant Bank) to billions across the combined portfolio. The Mass Burial was the terminal phase of a three-stage resolution framework: Holding Action (self-restructuring), Regulatory Takeover (interim management), and Liquidation. For most of the 26, all three phases had failed.

Between 1986 and 1989, the CBN licensed 43 new banks — an average of one every 25 days. The promoters were not bankers; they were retired military officers, politicians, traders, and contractors who discovered that a banking license was the fastest route to accessing oil rents, government deposits, and foreign exchange margins. Many operated from 'briefcases' — rented offices with no infrastructure, no risk management, and no intention of prudent lending. The 1986 SAP deregulation had lifted the licensing moratorium and abolished interest rate controls, but it did not strengthen supervision. By 1990, the banking sector had 107 institutions (58 commercial, 49 merchant) with 2,182 branches. But the quality of assets was catastrophic. Non-performing loans reached 44.1% across all banks in 1990, and 72.8% among distressed banks. The 'briefcase bankers' treated deposits slush funds, channeling loans to themselves, their relatives, and political patrons. When the CBN finally imposed prudential guidelines in 1990, First Bank alone had to make N395.2 million in provisions — a harbinger of the sector-wide rot.

In November 1994, the military government promulgated the Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Decree. The decree established special tribunals with extraordinary powers: they could lift the corporate veil to hold directors personally liable, try financial malpractices without the procedural delays of regular courts, and order the confiscation of property equal to the amount involved in the offense. The tribunals commenced sitting in July 1995. Between 1994 and 1998, over 178 bank directors were blacklisted and removed by the CBN. Shareholders and ex-staff of failed banks were barred from future financial institution appointments. The tribunals prosecuted insider lending, fraudulent practices, and non-performing loans that had been disguised through accounting fraud. The decree represented a fundamental shift: banking malpractice was no longer a civil matter or a regulatory slap on the wrist; it was a criminal offense punishable by up to five years imprisonment without option of fine, plus confiscation of assets.