BY UDEME CLEMENT
The directive from the Central Bank of Nigeria (CBN), urging the rescued banks to recapitalise by September 30 or be handed over to Nigeria Deposit Insurance Corporation (NDIC) for liquidation is unsettling to the stakeholders of affected banks and depositors. Financial experts revealed that the economy could lose over N3.8trillion depositors and shareholders money, if the apex bank imposes liquidation sanction on the banks.
While shareholders of the rescued banks are asking for an extended period of 12 to 18 months to enable the banks recapitalise, the governor of CBN ,Sanusi Lamido, maintains that liquidation remains the last option for any of the banks that fails to recapitalise before the final deadline, even as the apex bank is strict on withdrawing its inter-bank guarantee by September 30.
Speaking with Sunday Business, Director General, West African Institute for Financial and Economic Management (WAIFEM), owned by central banks of Nigeria, Ghana, Liberia, Gambia and Sierra Leone, Prof Akpan Ekpo, said the bailed-out banks namely, Afribank Nigeria Plc, Bank PHB Plc, FinBank Plc, Intercontinental Bank Plc, Oceanic Bank International Plc, Spring Bank Plc and Union Bank of Nigeria Plc, should meet the CBN’s deadline on recapitalisation to enhance efficiency in the financial sector of the economy.
He said, “The banks must to be aggressive about recapitalisation without waiting for the apex bank to impose sanctions. The operators of these banks were told long time ago and they knew the banks are weak. So, they need to recapitalise to raise their capital base. The CBN is also acting based on the sluggishness of the banks. Recapitalisation does not mean they should raise their capital base on their own. They could recapitalise through merger and acquisition. The only thing is that we have few banks controlling the financial sector in Nigeria . So, merger and acquisition would further reduce the number of the banks, thereby making the industry less competitive”.
However, giving some insight into the CBN’s new cash withdrawal policy, which is also generating reactions from stakeholders, he said, “My view is that CBN should increase the amount of cash withdrawals by individual from N150.000 to N350.000 and corporate bodies from N1million to N2million. Within this one year, CBN would be receptive to opinions and consultations from stakeholders on the new policy. Also, CBN must ensure that banks operate with workable ATM machines and not what we see around without cash. It would encourage the use of cheques because in developed economies, people travel around with master cards and limited amount of cash”.
He added, “There is no cashless economy anywhere in the world. In United States of America ( USA ) and United Kingdom , they use currency notes and coins, but with limited amount not with huge sum in cash like what is common in Nigeria. My only worry is that our economy has large informal sector which constitutes about 58 per cent. Also, the rural areas of Nigeria remain un-banked. In such areas, you don’t see ATM machines because they operate mostly on cash basis, while the formal sector of the economy is just 48 per cent and some players within the formal sector still do not patronise banks”.
And, should the apex bank liquidate the bailed-out banks, it would have adverse effect on the financial sector and nation’s economy at large. For instance, statistics obtained from WAIFEM shows that the economy is growing at only seven per cent without creating jobs. This implies that Nigeria ’s economy is not optimising outputs.
Accordingly, aside from the efforts by CBN to reposition the financial sector for greater productivity, the economy needs holistic transformation in terms of infrastructure development in every sector. “President Goodluck Jonathan should begin to re-engineer, rekindle the economy to a level of sustained inclusive growth and development. This requires competent cabinet made up of seasoned, tested and competent technocrats, as well bureaucrats. If the criteria for getting effective cabinet is through federal character, it is no problem because it exists in all Nigerian tribes and ethnic groups across the nation”, Ekpo stressed.
He added: “Jonathan needs efficient cabinet to drive the machinery of government to fast track development process. Instead of seven-point agenda, the government should focus on major infrastructure development like power. If at the end of four years, there is constant supply of electricity, Jonathan would have left behind an enduring legacy. This is because the real sector is in comatose, small and medium enterprises (SMEs) are going under due to erratic power supply. The cost of doing business in Nigeria is very high due to epileptic power supply. Also, the interest rate charged by banks is related to the direct cost of providing diesel to generate power daily”.
Financial experts believe the Federal Government does not have to re-invent the wheel to re-structure the economy because all the studies had been done and these formed the road-map. Once power crisis is tackled, the issue of unemployment, especially among youths, would be solved. For instance, federal projects should create jobs for the citizens. There must be human capital development to enhance sustainable growth.
Ekpo advised government to fast track economic growth to realise its Vision 20: 2020 of being ranked among top 20 economies in the world. “The Vision 20: 2020 target is realisable. It is a kind of perspective planning for the country. The documents have been put together in blueprint and the president has accepted it. But there are certain conditions that Nigeria must meet for our economy to be among, top 20 in the world. We have four years plan to implement the vision and the first four years plan from 2010 to 2013, which is called first implementation plan, is ready. For instance, the manufacturing sector ought to contribute 18 per cent of GDP and the economy ought to grow at the rate of 10 per cent annually. Jonathan was part of the Vision 20:2020 project and he launched the document. Government needs to ensure that the entire country is linked by a functional rail system”.
Nigeria ’s economy in the last four years witnessed a sluggish growth looking at other socio-economic indicators like health, education, unemployment rate, life expectancy rate and infant mortality ratio. Government must adopt a developmental democratic framework to reduce poverty drastically in the next four years.