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The voice of Jacob, the hand of Esau (2)

By Douglas Anele

BUT then, why should a bank give out billions of naira in unsecured loans? Why should top bank officials abuse their privileged positions by using tricks to approve huge loans to themselves and their cronies without adequate security backing?

The total amount of these toxic loans is so large that it raises the question as to why Sanusi’s predecessor, Charles Soludo, did not act to nip the situation in the bud. Now, if the former CBN governor was aware of the problem but was prevented by “powerful forces” from taking necessary action, he could have at least resigned his position after presenting his case to Nigerians. On the other hand, if he knew and decided to do nothing, then he lacks one of the essential qualities of a good leader, namely, courage to do the right thing at the right time.

It is difficult to believe that a brilliant economist like Soludo was unaware of the abuses in banks: but assuming that he did not know, then he is not as competent as most people presumed.
I am not a seer, but I suspect that he was aware of what was going on, but due to personal reasons failed to do what ought to be done to stem abuses in the banking system.

After all, as a former governor of CBN, the blame for the failures of the apex bank during his tenure, especially in the area of post–consolidation regulation of banks, rests squarely on his shoulders. Soludo cannot eat his cake and have it in his hand at the same time: he just cannot enjoy the accolades of successful consolidation of banks and escape blame for the flaws in the process.

On the issue of northernization, it is possible to make out a case for the allegation if all the former MDs were replaced with northerners and the head offices of the banks concerned relocated to the North. Also, the CBN governor, in order to preserve the interest of his fellow northerners, should have reserved the bulk of the shares belonging to these institutions for them! None of these has happened.

On the basis of what Sanusi has done so far, there is nothing to show that the northernization argument has any substance at all. The new managing directors are not from the north; as yet there is no evidence of northernization of equity holdings in the affected banks. Nevertheless, the ruling northern elite are partly to blame for the suspicion of vicious northern agenda in Sanusi’s rescue mission. In some of his choices for official positions (in the ministries of petroleum and finance, for example) President Umaru Musa Yar’Adua has demonstrated poor judgment and lack of sensitively to the imperatives of geopolitical equity and federal character.

This was exactly the case during the regimes of Muhammadu Buhari, Ibrahim Babangida, Sani Abacha and Abdulsalam Abubukar. This time around, however, proponents of the northernization argument are wrong, because I cannot see how the Central Bank can northernize banks that do not belong to the federal government by changing its management and ownership structures to favour any geopolitical zone.

The unraveling of the “monkey businesses” in Nigerian banks is not an isolated case. It is the manifestation of the fundamental anomaly in capitalism, namely, the glorification of profits. In the United States and other countries seriously affected by the economic meltdown which originated from weaknesses in the financial services and mortgage sectors, the regulators of the system failed to discharge their responsibilities creditably.

As Sanusi argued, “they did not regulate hedge funds, they did not look at sub prime loans, they did not look at a number of the exotic products that were in the market”. It is clear that since capitalism is the dominant economic ideology in the world at present, there was a general failure of regulation globally.
When economists, in their obsession with mathematical models, analyze the current global economic situation, they concentrate mainly on economic indicators such as growth rate, share price index, gross domestic products, etc.

For banks, figures representing profit and loss account, balance sheet portfolios, interest and lending rates and so on. are usually presented as representations of the state of affairs in the banking sector. The major flaw in all these highfalutin economic technicalities is the non-inclusion of the unpredictable dimension of human behavior as one of the most important factors that determine economic reality.

Because of the frenetic pace at which economic transactions are carried out these days, the so-called experts easily forget to include in their economic projections and models the human element around which the wheels of economic activities revolve. Not all economists are guilty of this fundamental error. However, economists need to consult philosophers to grasp the essential qualities of man as a homo-economicus.

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