By Omoh Gabriel, Business Editor
ASABA—CENTRAL BANK Governor, Sanusi Lamido Sanusi, has said that “at the end of the current banking reforms exercise the nation would witness a “strong corporate governance, effective competition, quality services and efficient financial intermediation.”

He added that “provision of diverse financial products, improved financial flow to real sector and a strong and sustained customer confidence in banks” which were lacking at the moment would also become evident.

Sanusi who was speaking at the first Distinguished Lecture of the Sylvester Monye Foundation in Asaba, weekend, entitled “Consolidating the gains of the banking sector reforms” outlined the expected benefits the nation stood to derive from the ongoing banking sector reform.

He listed challenges facing the economy which the Federal Government must address through its fiscal policy if benefits of the CBN reforms would be realised.

Sanusi said: “It was the lack of corporate governance that plunged the nation into the current financial crisis which became very visible in the grave situation that the 10 rescued banks were in before the apex bank intervention.

The CBN governor noted that “effective competition in the industry” would benefit the economy as the banks that would emerge from the reforms would be stronger than before to deliver quality services to the banking public.

According to him, at the end of the reform, the banks are “expected to deliver to the Nigerian economy an efficient financial intermediation” through more access to loans and advances by both large, small and medium enterprises unlike the situation now where only strong corporate bodies are able to access loans from banks.

Sanusi said that Nigerians would benefit from the ongoing banking reforms through the “provision of diverse financial products” by the various banks to cater for segmented markets in the country.

He said that when the reform would have run its full course the economy would witness “improved financial flow to real sector” as against what obtains now where banks shy away from lending to agriculture, manufacturing and mining and when they do at very high and unsustainable interest rate. He added that “strong and sustained customer confidence in the system” would return to the sector when the reforms were completed.

However, Sanusi was quick to add that “economic growth has been robust”, but that “major challenges remained” to be resolved for the economy to deliver the dividend of democracy to the Nigerian people. He named such challenges as “generation of employment opportunities, the weak link between the major growth drivers, particularly agriculture and the manufacturing sector, hence, the manufacturing sector remains an insignificant contributor to growth.”

He said that there was the urgent need to address what he termed the “five binding constraints”which were “physical infrastructure constraints namely electricity and transport for which he said there was the need to deepen the deregulation process to attract private investors.”

Infrastructure development

The CBN governor also stressed the need to “review allocation of responsibility for infrastructure development among different levels of government,” adding that “regulatory interventions was required to develop all sectors of credit market, from micro-finance to larger corporations”.

Sanusi who said that it had become expedient for monetary authorities in the country to ensure the “acceleration of credit market reform such as dispute resolution mechanism, credit bureau regulation and leasing laws” to foster credit delivery in the economy, listed other challenges to be addressed to unleash the economic drivers in the country to include; “development of the public_private partnership framework, legal framework for rental markets; reducing the high lending interest rate stating that efforts in all these areas are being fast tracked”.

Sanusi also spoke of the need to have an investment-friendly environment in place through the simplification of the “approval process for new business development, capacity building in various areas of the economy; provision of adequate security for lives and property and tackling the issue of corruption”.

He stressed that to bridge the “existence of skill gap” in the country there was the need for the government to begin the process of “prioritizing technical and vocation education training; equipping enterprise and industrial clusters to develop capacities, replacement of import bans with tariffs deepening the ports reforms; growing banking system liquidity is still desirable”.

According to him: “Fiscal stimulus remains critical to support CBN actions to fast_tracking recovery process and there is urgent need to inject fresh funds into the banks affected by regulatory actions, ring_fencing/removal of ‘toxic assets’ and the establishing of asset management company, AMC.”

Sanusi, in response to questions said the apex bank would defend itself on allegations against the rescued banks, as the issues about their failure were facts.

He said the problems of the eight banks, whose management teams were sacked in 2009 for unethical practices were grave. While indicting the Central Bank of Nigeria, CBN, and Nigerian Stock Exchange, NSE, for failing in their regulatory roles, Sanusi said the present CBN management was prepared to testify in the cases against the banks in any court, adding, “we have enough facts on their activities.”

Recalling the banks’ irregular activities, Sanusi said that Afribank, in its last public offer to re_capitalise, “actually genuinely raised only 12 per cent of the funds while 88 per cent represented its re_circled funds,” adding: “It is in this country that Intercontinental Bank gave out N40 billion as loan to somebody from Delta, who used the state government’s shares in a company as collateral.’’

The apex bank’s boss said that he foresaw the rot in the banking sector but was dubbed “John the Baptist, who was crying in the wilderness.” His words:

“As a manager in a bank, I raised alarm over the rot in the system and imminent collapse of the banking sector, but I was called John the Baptist, who was crying in the wilderness for nothing.”