23 May 2010
By Ibrahim
Ribwan Ayagi
While delivering lecture during the convocation
ceremony in Bayero University Kano, some time in
February 2010, the Governor, Central Bank of Nigeria (CBN),
Sanusi Lamido Sanusi, quoted as saying “Discourse on
the Banking crisis has been left to journalist of
varying degree of sophistication and to faceless
agents and charlatans. The voice of intellect has been
noticeable in absence” The banking crisis is not an
exception to other socio-economic problems engulfing
our country today, which also demand the intellect’s
voice, but is in absence, and this can not be divorced
from nonchalance and lack of political will on the
part of leadership in Nigeria to often heed to
intellectual advice and do the right things without
fear or favour, that is why the charlatans will
continue to hold sway and remain relevant in shaping
public opinion on Government’s programmes and
policies. This situation has now gained wide spread
prevalence with sensitive National issues being
interpreted along ethnic and religious lines, the
technocrats keep mum and leave the scene for the
faceless agents whose only stock in trade is forming
and inciting a negative public opinion about whoever
stirs the hornet nest that touch the political
interest of economic saboteurs-their sponsors.
The decision of the CBN to embark on series of reforms
aimed at enthroning corporate Governance and risk
management which were hitherto placed on the back
banner in the Nigerian banking industry, has generated
a lot of scorching debates, with commentators of
anecdotal points and some so called professionals
displaying emotions and sentiments on issues of
National importance, depending on which side of the
divide one belongs or which charlatanic school of
thought one subscribes to, but those who really hold
stake in the discourse are still silent, perhaps due
to the reason mentioned above . But is the CBN doing
it right and how far can the Governor go? These are
some of the questions on the lips of so many
Nigerians.
The CBN started the reforms with stress test that led
to the discovery of huge toxic assets in some Banks
and consequently saw to the expulsion of their CEOs.
The sum of N620 Billions was injected into those
affected Banks as bailout, an asset management company
was proposed to take over the non performing loans
portfolio, the tenure of Bank CEOs was fixed at ten
years, while prospective managing Directors, executive
and non-executive would henceforth have to face CBN
interview, in order to reinforce corporate governance
in the industry.
In its bid to discourage Deposit Money Banks(DMBs)
from keeping most of their money (close to N600
billion)with it (CBN), at the detriment need of the
economy, the Apex Bank reduced standing deposit
facility rate from 2% to 1% while maintaining the
standing lending facility rate at 8%. Also to drive
home his point on the need for infrastructural
facilities and to address the epileptic power supply,
the CBN governor came up with a provision of 500
Billion facilities for investment in debentures issued
by the Bank of Industries (BOI) for investment in
emergency power project dedicated to industrial
clusters. The bond is to be channeled through DMBs at
maximum interest rate of 1% with tenure of 10-15 years
at concessionary interest rate of not more than
7%.Lastly, the announcement by the Banking watchdog to
scrap the universal Banking model and that
shareholders will henceforth be encouraged to set up
holding companies under which the commercial and
non-banking subsidiaries would operate, was the most
recent decision of CBN, that continue to spark off
debates.
Critics of the banking reforms by Sanusi led CBN,
started with giving the whole exercise a religious and
regional interpretation, in the Nigerians` usual way
of attacking policies that do not favour them or their
political allies. They also argued that, the Governor
of the apex bank is unduly interfering with the
Banking system and eroding the progress so far made by
the universal banking model. They further criticized
the reforms on the claims that, the central objective
of the CBN is not banking regulation and reforms. The
core mandate of CBN as indicated by the CBN act of
2007 is what they called price stability. While others
questioned the CBN decision on the N500 billions
facility meant to finance power projects and
criticized the Governor for taking his reforms too
far.
But what the critics failed to understand or
deliberately ignored, is the fact that the success of
any monetary policy management depends largely on a
sound banking system or money market, as it was
rightly pointed out by Professor DN Dwivedi, who
wrote” in an economy with underdeveloped banking
system and capital market, monetary policy has a
little chance of being effective.” Therefore , with
poor corporate governance and liquidity crises in the
Nigerian Banking industry, how effective would
monetary policies be in addressing inflation,
unemployment, exchange rate volatility, and faltering
economic growth?. Even with fiscal responsibilities on
the part of authorities, the role of monetary policy
in achieving macro –economic objectives can not be
overemphasized, as the combination of both fiscal and
monetary policies are usually recommended for less
developed economy like ours. In fact, even in the
developed economies an appropriate combination of the
two policies is usually employed to achieve
predetermined macro-economic goals.
If at all monetary policy management is central to
macro economic objectives, then, while the Central
Bank is implementing programmes aimed at strengthening
and bolstering the money market institutions, it can
not be accused of neglecting its core mandate of price
stability, since the Banks are some of the mediums
through which policies of achieving the price
stability can be implemented and that may not be
successful where the industry is weak, as the recent
CBN stress test exposed.
On the argument that the apex Bank is unduly
interfering with the banking system by scraping the
universal banking model and eroding the success made
so far, the critics are only blind to the stark
realities in the industry, especially poor expertise,
limited skills in covering the entire grouped
business, and lack of specialization often exhibited
by some banks in tapping the opportunities in
non-banking business like mortgage, insurance, asset
management, stock broking etc. The advent of the model
has not really addressed those economic needs the
non-banking subsidiaries were originally created to
meet. The full audit of the Banks` book conducted by
the CBN further revealed how some of the non-banking
subsidiaries were used as conduit pipes by some
executives to commit all manner of irregularities. The
unbundling of universal banking model I believe will
pave way for specialization, efficiency and enable the
banks concentrate on core banking business which is
still not fully exploited, considering the number of
non- banking public.
Ordinarily one shouldn’t bother him self to respond to
critics, especially from some Nigerians as we are fond
of destructive not constructive critisms, that is, we
should learn to bring alternatives to programmes and
policies we believe are not good for us or the country
at large, not destructive criticism. But writing with
sentiments and emotions on the pages of news papers
will not in any way solve our problems rather it will
further divide the country along religious or ethnic
line, which is disastrous for generations to come. The
way and manner we respond to some government policies
must be stopped if at all we choose to see the light
at the end of the tunnel. If no Nigerian public
officer holder can be trusted, unless he or she comes
from a particular tribe or religion, then, are we
going to invite foreigners or our former colonial
masters to solve our problems? That we know is
impossible.
The reforms programme by the CBN shouldn’t be seen as
an agenda by one region, orchestrated to punish some
perceived political enemies, as its success or failure
will definitely affect the entire economy which has
been bleeding due to poor management by successive
administrations. The apex bank on its part should
continue to be more cautious in its regulatory and
supervisory roles. The intended move by the bank as
reported in some quarters to withdraw the injected
funds should be reviewed scrupulously, as doing that
prematurely may aggravate the liquidity crises in the
economy and lessen the bail out banks` capacity to
generate business that will either make them stay
deeply rooted in the business or become attractive
brides in the event of merger and acquisition.
Finaly, With the recent commendations of the CBN
programmes by intellectuals both within and outside
Nigeria; like Mr. Micheal Lafferly ,an international
financial expert and also world bank MD, Ngozi Ekonja
Iweala, the concern expressed by the CBN Governor on
the absence of intellect’s voice on economic issues,
would be assuaged, and also convince the fervent
detractors of the apex Bank` Banking reforms, that
their stand on most of the giant strides made by the
CBN are not shared by all, especially the unprejudiced
experts who respond to issue with full objectivity it
deserves.
Ibrahim Ribwan
Ayagi is a writer from the nrothern part of Nigeria.
He can be reached at
ayagiibrahim@yahoo.com
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