The Central Bank of Nigeria (CBN) said it will implement strict regulation and supervision on banks to ensure that they do not fail.
Governor of CBN, Lamido Sanusi said, â€œ The apex bank has a responsibility to ensure that depositors and investorsâ€™ funds are protected through adequate regulation. There is nothing like soft regulation and I donâ€™t believe in it .
A regulator like ours need to protect depositors and investorsâ€™ funds. As far as the banks get license from us they must be strictly regulated. So we donâ€™t want to go back to the bad situation we find ourselves. The banks, before the recent CBNâ€™s intervention were not adequately regulated that was one of the reasons why the managing directors of the troubled banks were busy buying jets and building estates without lending money to the real sector and Small and Medium Scale Enterprises( SMEs).
According to him, â€œ We will not allow banks to rate themselves nor rely on rating agencies to rate them because it is the information given to the rating agencies that are used to rate them. We will try as much as possible to use the information we have from our supervisory role to assess them. However, we would encourage credit bureau institutions to provide information on the credibility of NigeriansÂ that want credit from the banks.
â€œ Banks are established to play intermediation role. So if any person is able to meet the requirement for
loan disbursement the bank should be ready to give out such loan. Banks lend to people with the hope
that the borrower will repay as at when due. But because the troubled banks gave out loans to their friends, relative and some political class without meeting the requirement for loan disbursement they had crisis with liquidity and other problems.â€
On the recovery of debts from debtors of troubled banks by the Economic and Financial Crime Commission (EFCC), Sanusi said , â€œIt was proper. The EFCC is acting on the Act establishing it. In fact, the Banks invite the EFCC to recover the money from their debtors who had refused to comply with the terms of lending.
It is not the EFCC who go for the debtors, it is the banks that invite them at the first instance. So there is nothing wrong if the EFCC should enforce the recovery of debt. So far the Commission has recovered over N100 billion. Is this not an achievement?â€he asked.
Sanusi, while speaking on the opportunity for foreign investor owning banks in Nigeria, said, â€œ The economy is open for any investor to come in. At the moment, CBN is undergoing technical assessment of applications submitted to it. Foreign investors are encouraged to invest in banks but we are not looking for hot money. We are looking for investor who has the interest to invest in our economy for long term. They must possess the expertise for risk management, corporate governance and overall management.
â€œOne of major problems with the troubled banks was the level of exposure to the capital market. I hope when the Asset Management Company (AMC) takes off , the recapitalisation problem would be solved. We are expecting approval from the National Assembly as the AMC bill is still with them.
The yuletide has delayed the passage of the bill. Probably in the coming few weeks the bill will be approved. When the toxic asset is bought by the AMC, probably the banks will just require additional N300 or N400 billion to stabilise.
On the issue of high cost of funds, the CBN Governor said that power and other major infrastructure was the major cause.
According to him, â€œ There is no way cost of funds will be low when there is no major infrastructure in place. Banks opened many branches and they needed infrastructure to run them. The CBN has to work with the government to unlock these problems. But I donâ€™t see interest rate coming as low as less than 2 per cent as it is in western countries because of infrastructure deficiency. I see interest coming down to 15, 16 and 17 per cent respectively.
Sanusi lamented that the Small and Medium Scale Enterprises (SMEs) and real sector have not been taken care of by the government, saying â€œ Credit is not the major problem with the SMEs and real sector but that of infrastructure deficiency. So we are waiting for the government to address the macro economic indices the credit would be made available because banks are there to give out loans to institutions that has the capacity to repay loans.â€