BY Udeme Clement
The banking reforms carried out by the Central Bank of Nigeria (CBN), led by Lamido Sanusi, took a new dimension recently with the declaration by the apex bank to buy over the toxic assets of the banks it took over and the directive to commercial banks depositors to upgrade their accounts, or risk suspension of such accounts.
While some individuals are commending CBN for its policy framework, many people are of the opinion that the reforms are damaging to the economy with strong multiplier-effects that virtually every sector of the economy is suffering its impact.
Speaking with Sunday Business, the President, National Union of Banks, Insurance and other Financial Institutions Employees (NUBIFIE), Comrade Ade Martins, said, “Sanusi’s reforms are impacting negatively on the banking sector because banks are also cutting cost in their operations. His policies are not addressing the real issues on ground.
The current reforms would not be effective to turn the sector around for greater growth until banks are categorised into three major areas with various capital base for operations. Until this is done, the reforms may not achieve their objective and would not have positive impact on the economy.”
He added, “the CBN’s governor has only succeeded in throwing many Nigerians into the labour market. So, you could see that the reforms instead of addressing the fundamental problems to stimulate economic growth and development are causing serious unemployment problem for the citizens who ought to benefit from the reforms.
For instance, look at what is happening in Union Bank. The managing director they put there has sacked many workers and went ahead to increase salary for people who are already earning big in the organisation. So, what is the essence of the reforms, if the workers who ought to benefit are suffering?
“Also government is talking about buying over the toxic assets of the banks taken over with a whopping sum of N600 billion of tax payers’ money. This policy is good if it would be implemented with all sincerity. But, again, looking at it critically, you would realise that the toxic assets policy has two dimensions, such as the merit and demerit.
For instance, if well implemented, it would favour the distressed banks by helping them to remain in business. But, it would affect the stable banks by reducing their capital base and it could also pave the way for litigation in the system. We are looking at a situation where government wants to use tax payers’ money to buy toxic assets instead of channelling such funds into infrastructure development to improve the economy and encourage massive investments in the various sectors. Buying toxic assets also implies putting more money in the hands of the capitalists.”
The CBN , also, last week, raised the Monetary Policy Rate (MPR) by 25 basis points, from 6.25 per cent to 6.50 percent, due to perceived inflation risk in the economy. Sanusi, who made the declaration at the just concluded meeting of the Monetary Policy Committee (MPC) in Abuja , stressed that the committee was committed to maintaining price stability by pursuing the current policy thrust of monetary tightening.
11 out of the 12 MPC members voted for further tightening of the monetary policy by raising the MPR and the cash reserve requirement ratio by 100 basis points from 1.00 per cent to 2.00 per cent with effect from February 1 to raise the liquidity ratio by 50 basis points from 25 per cent to 30 per cent with effect from March 1 respectively.
The CBN governor said, “the general outlook on growth is favourable and it is important to be vigilant on prices and financial market developments. The likelihood of improved oil output and rising oil prices in the international market would contribute to rapid growth to rebuild external reserves that is vital to sustain consumer and investor confidence in the economy.
The fundamental structural problem of the country as an import-dependent economy was largely responsible for the continuing depletion of the external reserves. The continuing decline in reserves was accounted for by the payment for JVC cash calls, amounting to US$6,867 million and $5,657 million in 2009, funding of the foreign exchange market to the tune of $24,835.65 million as against $25,070 million in 2009 in the case of WDAS”.
Meanwhile, Sunday Business gathered that the on-going upgrading of accounts in line with the directive of CBN is causing massive withdrawal of money from banks, as some customers are finding it difficult to meet the stringent conditions by some banks. Some depositors also engaged in last-minute rush to upgrade their bank accounts last week ahead of tomorrow’s deadline to do so.
The initial deadline was 31 December, 2010 but the CBN extended it till tomorrow, 31 January 2011 due to hitches experienced by some depositors. But up till last week, the hitches continued in some banks. The upgrading forms were not available in some banks branches to enable depositors do the upgrading. Also depositors were also not adequately briefed on the requirements like house documents being presented in lieu of utility bills, and means of identification. Some bankers who spoke on the condition of anonymity during a visit to the banks said that they were experiencing massive withdrawal as the deadline got closer.
A petty trader, Mrs. Roseline U. Charles, who spoke at one of banks in Lagos, said, “Today is the third time I came here to upgrade my account, but I did not succeed. The first time I came, they said they ran out of forms. The second time, they said I should go to my branch, which is very far from where am living now. When I eventually came to my branch, they were asking for international passport, driver’s licence or national identity card, which I do not have, so I decided to withdraw all my money to put in my business”.
Also speaking, a student of Lagos State University, Miss Helen (surname withheld), said, “I have account with Fidelity Bank, but I have decided to close that account because they are insisting on the current bill from Power Holding Company of Nigeria (PNCN). A journalist in Lagos said, “Well, I believe this is an opportunity for me to close my account with United Bank for Africa (UBA), because since I started banking with them, they have not added any interest to my money.”
On why they give such stringent conditions, an official of Oceanic Bank said on condition of anonymity, “we are only following the directives from CBN that customers should be able to provide driver’s licence or international passport to ensure authenticity in the exercise.
Alternatively, any customer who does not have such documents could get an introduction letter from us and give it to someone who has an account with any branch of Oceanic Bank to sign for him or her, and it would be acceptable.”