Shortly after he became Nigeria’s central bank governor in June 2009, Lamido Sanusi decided to find out more about the health of five banks. The lenders, three of them among the country’s biggest, were showing serious signs of liquidity strains and were borrowing huge amounts from the central bank’s discount window.
The governor was shocked by what he found. Non-performing loans at the banks, which were highly exposed to the crashing stock market because of their rampant margin lending, had soared. Without central bank liquidity, they would have likely collapsed.