By Michael Eboh
LAGOS â€”The Central Bank of Nigeria, CBN, has affirmed its preparedness to reduce the influence of individuals with large stakes in banks in the country, as it announced, yesterday, that it was set to ensure that no individual or group owned more than five per cent equity stake in the banks.
Speaking during the Nigerian-South African Chamber of Commerceâ€™s, NSACC monthly business forum in Lagos, the Governor of the CBN, Mr. Lamido Sanusi, represented by Dr. Kingsley Moghalu, Deputy Governor, Financial System Stability said the CBN will soon undertake a review of the structure of banks in the country, and it was likely going to enforce a limit for shareholdings in the banks.
He said: â€œAs part of the on going reforms in the banking sector, and in our drive to ensure sanity in the nationâ€™s financial system, we will soon be undertaking a review of the structure of the banks, and it is very likely that we are going to ensure that no one holds more than five per cent stake in any bank in Nigeria.
â€œThis is the practice in other countries, it is only in Nigeria that you see an individual owning more than 30 per cent of a bank. In a few cases, owning above five per cent might be allowed in some countries, but in these countries, everything is in place, that is, in terms of regulations, structure among others.â€
Speaking in the same vein, Dr. Konyinsola Ajayi, Managing Partner, Olaniwun Ajayi and Company also called on the CBN to extend the tenure limits for banksâ€™ chief executive officers, CEO, to non-executive directors, ED, of banks, especially as majority of them have lost focus and have failed in the discharge of their duties and responsibilities to shareholders.
He noted that majority of the Non-EDs have stayed for more than twenty years in these institutions and have failed to check the excesses of the chief executives, leading to the problems witnessed in most of the banks sanctioned by the CBN, last year.
To this end, Sanusi stated that the CBN was working towards ensuring that Board members understood what their roles were in the banks and that they had the independence to perform these roles.
He noted that the reform in the banking sector was comprehensive and would address a number of issues in the economy, such as financing of the real sector, especially Small and Medium Scale Enterprises (SMEs).
He said: â€œEmpirical study has shown a correlation between financial sector performance and economic growth. The Nigerian financial system is dominated by the banking sector which accounts for over 90 per cent of the financial assets and about 60 per cent market capitalization of NSE. Therefore, performance of the banking sector is a major determinant of the growth of the private sector.
â€œThe banking sector is also the key driver of the economy as much of financing for private enterprise is typically provided by the banking sector. Consequently, a strong banking system will: Ensure financial stability as well as general macroeconomic stability in terms of stable exchange rate, stable interest rate and low and stable inflation rate.
â€œIt will address volatility in the financial markets and thus ensure more stable and predictable business environment that allows for planning and investment, serve as channel for transmission of monetary policy as well as impact on the real economy through credit creation. Enhance efficient payment system which is required to fast track economic activities, restore confidence in the banking system as well as in the capital market.â€
Speaking further, Sanusi noted that the fundamental challenge confronting the effective development of SMEs through proper regulatory and supervisory framework is high number of players in the sector.
Speaking further, he disclosed that the Federal Government will be setting up an SME Development Council which will be headed by the Vice President, Dr. Goodluck Jonathan and the introduction of a development financing policy to help fast track the countryâ€™s economic development programme.