By Babajide Komolafe
Regulatory failure on the part of the Central Bank of Nigeria (CBN) marred the banking consolidation exercise in 2006 and partly caused the recent banking crisis says Institute of Chartered Accountants of Nigeria  (ICAN)

“The increase in the minimum paid up capital of banks to N25 billion which was largely through consolidation was well intended as it was designed to ensure a diversified, strong and reliable banking sector but was marred by the failure of the CBN to regulate capital injection as some of the banks used a substantial part of depositors funds to increase their capital,” the Institute said in a communiqué issued at the end of its eastern district annual accountants’ conference in Enugu

“Also the CBN’s inability to enforce prudent rules, the unfavourable macro_economic environment for banks and businesses, and the incoherent process of reforms and confidence_building all contributed to the failure of the reforms”, The Institute stated further

The theme of the conference was “Banking Reforms and Re_invigorating the Nigerian Economy.” The current banking reforms and the failures in the banking industry have necessitated the overhauling of the entire financial system in order to enable it act as a catalyst for re_invigorating the nation’s economy. The conference theme was therefore chosen to meet that objective.

Participants at the conference agreed that,  “The current banking reforms which involved the removal from office of the management of some  banks, the injection of N620 billion into the sector, the AMCOM Act and the limiting of the tenure of chief executives of the banks are all attempts to redress the inadequacies of previous reforms. However, the new reforms are yet to address the issue of universal banking, the implications of cross_border expansion and the work of the rating agencies to ensure transparency.

There is also the need to change the focus of the reforms/intermediation in the financial sector from institutions to products. The CBN should further concentrate on such areas as the intensification of rules on bank liquidity, supervision and monitoring capital adequacy requirements.

“The participants agreed on the crucial role modern agriculture has played in providing food security and employment in many developed and developing economies of the world and expressed regret at the neglect of this vital area of the economy by successive administrations in the country. It is their view that the country’s dependence on subsistence agriculture instead of commercial and mechanized farming has largely contributed to the food insecurity in the country.

“Whereas Nigeria is blessed with human and natural resources to be a world leader in agriculture, lack of political will and commitment have robbed the country of the opportunity to enhance the country’s economic and human development. As agriculture is the highest employer of labour and given the ever_ growing population of the country, there is the need to intensify the development of this vital sector of the economy by creating the enabling environment for the establishment of food processing and storage industries which will not only ensure food security but will also create employment.

“The participants agreed that the Government should improve on the area of providing the necessary enabling environment by making it possible for genuine farmers to obtain credit facilities for agriculture, improve the road and rail transport system and education as lack of knowledge on the part of the farmers is a very significant limiting factor in agricultural development. The Government should also equip our agricultural institutions to enable them produce the relevant manpower needed for successful agricultural development and provision of agric extension services to the farmers.

“The participants were of the view that the nation should follow the example of other nations like Brazil who are mandating the use of ethanol in an effort to reduce emissions of green house gases. There is the growing fear that rising oil prices and mounting concern about global warming may have stocked demand for bio_fuel and Nigeria should emulate Brazil, the biggest producers of ethanol and major promoters of agro businesses in growing maize and sugar cane for production of ethanol. The country should therefore be part of this emerging development as governments around the world are mandating the use of ethanol in an effort to reduce emissions of green house gases.

“The participants identified that in recent times Micro Financing has gained recognition as a strategy for rapid economic transformation especially in poverty reduction among a large and diverse group. The micro and small business operators increasingly turn to micro finance institutions for financial services and in response to this increasing demand have continued to emerge and develop across developing countries.

“The participants observed that the operations of micro finance banks are bedeviled by inadequate capital base, dearth of the right type of entrepreneurs in the industry, sub_optimally efficient governance arrangements, inadequate stock of human resources with the orientation for micro finance and inadequate infrastructure.

To achieve their objectives, the MFBs must have appropriate policy and regulatory framework as is the case with commercial banks; build the capacity of their personnel for efficient business risk management and mobilization of funds as well as in loan recovery.
“Nigeria should key into the International Financial Reporting Standards (IFRS) in order to participate effectively in the provision of global accounting services. IFRS are a set of global accounting standards for the preparation of public financial statements.