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CBN must be fair to succeed

By  Chief Lawson Omokhodion
I have no doubt whatsoever that many critics, as led by the hard punching “Renaissance Professionals”, are waiting for the big mistake that will doom Sanusi Lamido Sanusi as the Governor of the Central Bank of Nigeria (CBN).

sanusi

As a human being, Sanusi will err but, so far, the Governor has taken remarkable steps to correct the monumental fraud visited on this country in the name of banking consolidation by the failed former CBN Governor, Charles Chukwuma Soludo, an indigenous professor of Economics.

Sanusi’s arrival on the Nigerian central banking landscape is putting in place building blocks that were proposed to the CBN in 2004 by banking experts and professionals who saw the valley into which banking in Nigeria was headed under Charles Soludo.

The failure of Charles Soludo as Governor of CBN has been replicated in his failed bid as a candidate for the Anambra State Governorship elections.
The popular saying is really true that evil will continue to thrive only when good people refuse to act.
However, Governor Lamido Sanusi recently made two mistakes.

The first was the implementation modalities on the 10-year limit he imposed on the tenure of Chief Executive Officers (CEOs) of commercial banks in Nigeria.
There is nothing wrong with the 10-year limit as most professionals who were once CEOs of banks know fully well that their tenures were circumscribed as per term limits.

It is mere self aggrandizement for a CEO to spend more than 10 years atop a banking institution and pretend to still be able to dream new ideas or make fundamental improvements.

The fiduciary responsi-bility of bankers is supremely undermined whenever a CEO overstays his welcome in an institution and equates his personal interest with that of the bank because such an attitude predisposes them to abuse such institutions with reckless abandon.

Evidence being adduced at the court hearings into the past happenings at Intercontinental Bank Plc and Oceanic Bank Plc are quite revealing.
What the CBN is doing wrong is that the tenure directive is not being fairly implemented across the board.

Shola Akinfemiwa became MD/CEO of Skye Bank only in 2006 and Skye Bank cannot be taken as the same as Prudent Bank where he was once CEO, even though Prudent became the leader of the consortium that formed the new Skye Bank.

Shola ought to do his 10 years without hindrance, except he is found wanting on other scores.
Tony Elumelu at 46years of age cannot be said to be tired and has only spent about 6 years as GMD/CEO of UBA Plc; a bank he only started to head following its acquisition by the former Standard Trust of Nigeria (STB).

There is now way the CBN can equate the vision of running UBA with that of STB and, besides having acquired UBA, a new entity emerged.
Tony Elumelu ought to have been allowed to serve his 10-year tenure in UBA except Tony had done more than 10 years in defunct STB or he is found wanting on other scores.

Many professionals believe that Jim Ovia of Zenith Bank has done well and spending 20 years as MD/CEO of Zenith was pushing it too far and so he should give way.

Following the tenure limitation directive by the CBN, UBA, Zenith and Skye Banks consulted with their boards and in what was a salute to management succession planning, these banks announced the CEOs who would succeed them come August 1, 2010.
They then forwarded their names to CBN for confirmation.

What CBN had always done in the past was to send such names for security checks, examine the career history and qualifications of the candidates and administer on them a questionnaire that totally obtains very detailed personal and family information on these candidates.

Thereafter, the CBN would either approve or dis-approve of such appoint-ment; an explanation would always be given if the candidate was not approved.
However, several weeks after the three banks made known their CEOs-in-waiting and their names sent to CBN, the CBN announced that it would henceforth interview candidates before they become MD/CEOs of banks in Nigeria.

The CBN’s action is excessive and amounts to share meddlesomeness in the duties of the Board of Directors whose principal duty is to exhaust all selection processes in the choice and selection of such CEOs.

The CBN must back off and the puerile statement by Tunde Lemo, CBN Deputy Governor that, in Malaysia, any prospective CEO must be interviewed by the Malaysian Central Bank is a pipe dream.

When Mr. Sanusi Lamido became MD/CEO of First Bank of Nigeria Plc, was he interviewed by the CBN?
When Tunde Lemo became MD/CEO of Wema Bank Plc, was he interviewed by the CBN?

When Ernest Ebi, former CBN Deputy Governor, and Dr. Shamsuddeen Usman, also former CBN Deputy Governor (now Minister of National Planning), became MD/CEO of New Nigeria Bank and NAL Merchant Bank respectively, did CBN interview them?

The CBN must not bite more than it can chew and it must not allow objective analysts impute other motives into its actions.
The CBN should return to its established procedures for clearing CEOs and it must resist the temptations of quoting the experience of the monolithic Malaysia; whose experience in banking consolidation and NEEDS (national economic empowerment and develop-ment strategy) preparation were misread by Charles Soludo, thereby leading him into his ultimate demise.

The many new initiatives by the CBN must be commended.
The proposed new provisioning policy which classifies the various types of bank loans into 11 categories with quite generous and accommo-dating provisioning requirements is a good beginning.

But, it should be simple enough for easy interpretation and application and it must reduce the degree of discretion in their interpretation.
I have always told many doubting colleagues that Governor Lamido Sanusi has not done anything strange in its application of existing CBN policies.
The Governor merely asked the banks to do the right things and make provisions for their bad and doubtful debt.

When the banks did, many of them crumbled because no system in the world can allow unbridled greed and avarice to overwhelm its financial services industry and if it does it must suffer axphyxiation sooner than later with the usual extremely calamitous consequences.

The recategorisation of banks into the various new groupings by the CBN with varying capital requirements is a step in the right direction because national and regional banks with capital bases of even 30 per cent of the proposed new capital bases will do tremendous good for the Nigerian economy.

The weighted average of the shareholders’ funds of all Nigerian banks in 2004 was in the neighbourhood of N4 billion and they performed their financial intermediation duties creditably well devoid of the massive fraud that became the Soluda era consolidation banking.

As has been demonstrably proven capital alone cannot make a bank because its management, earnings stream, liquidity position, asset quality and profitability must combine to enable judgment to be pronounced on such an institution.

Therefore, CBN should consider the need to establish lower and reachable capital requirements, devoid of the usual games and tricks that categorized banking consolidation, for the newly recategorised banking groupings.

Furthermore, the CBN must be more circumspect when approving off-shore branches for banks to avoid a situation where four years down the line these branches are closed by the regulator.

It is instructive to note that defunct banks like National Bank, New Nigeria Bank and ACB once maintained off-shore branches.
There is no doubt that as soon as the restructuring programme embarked upon by Governor Lamido Sanusi is concluded credit flow will be much more easily accessible to industry; and the cowboys who became the dominant factor in the economy subsequent to banking consolidation, would have to look elsewhere for the ubiquitous quick and fat gains that are lacking in any economic justification.
Banking is a serious business, it has fundamentals and Governor Lamido Sanusi understands this terrain.

Chief Omokhodion, ex-MD/CEO, Liberty Bank Plc, is Chairman/CEO Ritsoil Limited.


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Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.