By Omoh Gabriel, Business Editor, Peter Egwuatu, Oscarline Chimaobi & Michael Eboh
LAGOSâ€”NOT a few Nigerians have reacted to comments by the National Security Adviser, Lieutenant-General Aliyu Gusau (rtd), that the Central Bank of Nigeria, CBN’s, reforms were damaging the economy.
National Chairman, Independent Shareholders Association of Nigeria, ISAN, Mr. Adebayo Adeleke told Vanguard: â€œThe statement credited to Aliyu Gusau, National Security Adviser to the government, that CBNâ€™s reforms have damaged the economy has clearly vindicated ISAN and some other shareholders of the troubled banks.
â€œWhen the reforms were instituted and the actions taken against the banksâ€™ chiefs were executed, we cried out that the actions were not in the best interest of the economy. For NSA to make such statement, it shows that the Presidency is not happy and comfortable with some of the reforms and actions of the CBN Governor, Malam Lamido Sanusi. In fact, those who supported the reforms initially were looking at the effect from a myopic perspective.
CBN reforms have a multiplier-effect and that is what we are seeing. Every sector is suffering from the effect; industry and commerce, agriculture, energy, aviation, private and public sectors.
â€œIt is time for the Presidency to intervene and call CBN to order. The reforms will cause more damage if urgent steps are not taken. When banks refuse to lend, how can the economy as a whole move forward? What is the primary responsibility of banks in any country? As our banks have refused lending, the economy will soon be crippled. If it were in advanced economies, the CBN governor would have resigned if the public and even the government came out to declare a vote of no confidence in him. It is a shame that the man is still there, he should resign.”
But, Chief Lawson Omokhodion, ex-Managing Director ofÂ the liquidated Liberty Bank, argued: â€œI have no doubt whatsoever that many critics as led by the hard-punching â€œRenaissance Professionalsâ€ are waiting for the big mistake that will doom Lamido Sanusi as the governor of CBN. 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.
“Sanusiâ€™s arrival on the Nigerian central banking landscape is putting in place the building blocks that were proposed to CBN in 2004 by banking experts and professionals who saw the valley into which banking in Nigeria was headed under then governor, Professor Charles Soludo.”
Omokhodion on Sanusi’sÂ mistakes
Omokhodion added: â€œHowever, 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. 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-aggrandisement 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 responsibility 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.
”CBN’s plan to interview future managing directors of banks is uncalled for. CBN’s action is excessive and amounts to sheer 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. CBN must back-off and the puerile statement by Mr. 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. Lamido became MD/CEO of First Bank of Nigeria Plc, was he interviewed by CBN? When Mr. Tunde Lemo became MD/CEO of Wema Bank Plc, was he interviewed by CBN? When Mr. Ernest Ebi, ex-CBN Deputy Governor and Dr. Shamsudeen 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?
â€œCBN must not bite more than it can chew and it must not allow objective analysts impute other motives into its actions. 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 National Economic Empowerment and Development Strategy, NEEDS, preparation were misread by Prof. Soludo, thereby leading him into his ultimate demise.”
Shareholders flay banking reforms
The Chairman, Progressive Shareholders Association of Nigeria, PSAN, Mr. Boniface Okezie, on his part said: â€œSanusi has crippled the economy as nothing is working. The industry is not working, agriculture is down, commerce is down and even construction industry is not active because there is no money. The banking reform is not a good one, the ripple effects cannot be quantified. If the banks are not lending, then, what are they there for? This is an indictment on the part of CBN. The reforms are useless and have no economic justification.
â€œIf the National Security Adviser can come outÂ publicly to speak on critical issues in the polity, singling out the banking sector reforms, anti-corruption war and the legal system with unusual candour that gave an insight into possible areas of concern in the Presidency, then we should know that we are in danger. The banking sector is so critical that before any reforms should be instituted, the implication for the economy ought to been considered and analysed.
”CBN Governor and his cabinet were too hasty to have taken such action which has left us in this difficult situation. I really concur with Gusau when he said the on-going CBN intervention seemed to have damaged economic activity in the banking sector to the detriment of the larger society.
In fact, Sanusi should go and let people who are knowledgeable in economics to handle the monetary policies of our country. People who are experienced and more knowledgeable should be there to strengthen the reform so that we can begin to have positive effect on the entire economy. Everybody is crying – the rich and the poor because nothing is moving.”
Need for experts to drive CBN reforms
Relatedly, the Chairman, Institute of Directors, IoD, Abuja Branch, Alhaji Ahmed Rufaâ€™I Mohammed, stressed the need for good corporate governance among public and private institutions for faster recovery of the national economy.
Mohammed who blamed problems in the nationâ€™s financial sector on â€œpoor corporate governance and lack of ethics in the conduct of leaders of many of the financial institutions. Sadly, these are fellow directors,â€ said: â€œThe ideals of good corporate governance seem to be lacking in many facets of our endeavours. Although we constantly espouse these ideals almost on a daily basis, we nevertheless are reluctant to observe and practice these ethos in our public and private businesses.â€
In an apparent response to recent attacks on its reforms by Gusau, the apex bank has explained that its intervention in the banking sector and other subsequent efforts to reform the sector had saved the national economy from total collapse.
Speaking at a dinner organised by IoD last Wednesday, in Abuja, CBN Deputy Governor, Financial Sector Stability, Dr. Kingsley Moghalu, said the apex bankâ€™s intervention was based on concern for the national economy as well as restoring confidence in the financial system.
CBN justifies reforms
He said: â€œThe joint examination of banks with the Nigerian Deposits Insurance Corporation, NDIC, as of 31 May, 2009, revealed credit concentrations and undue exposure to margin lending. The examination reports on the banks formed the basis for the recent regulatory and banking reforms by CBN.â€
Moghalu further noted that â€œweak risk management, serious liquidity shortages, sub-standard corporate governance, insolvency, among other serious problems were present at many of the banks,â€ adding that the objective of the intervention was to assist the institutions to stabilise and continue their normal business as going concerns.
He said: â€œHad the capital and liquidity shortages persisted, the weak corporate governance that supported the abuse of the financial system continued unchecked, and the concentration of lending to weak business sectors continued unabated, the Nigerian financial sector would have been smothered and a systemic crisis of immense proportion would have ensued.
â€œSuch an outcome would have resulted in the collapse of the entire financial system. Nigeria would have experienced the ultimate collapse of the economy as a whole, akin to the Asia and Argentine financial crisis of the late 1990s. Serious social crisis would have followed, which would have impacted on the foundations of our society.”
Moghalu explained that beginning from October 2008, CBN had offered financial support to the ailing banks by providing liquidity through the Expanded Discount Window, EDW, adding, however, that the “financial hemorrhage continued and the financial condition of the banks continued to deteriorate even as EDW was abused.”
The CBN Deputy Governor, who was represented by the Acting Director, Financial Policy and Regulation Department, Mr. Chris O. Chukwu, noted that the bankâ€™s intervention was derived from the regulatory powers conferred on it to restore the safety, soundness and stability of the financial sector.