With Dr. Dele Sobowale

“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and income”.

John Maynard Keynes, 1883-1946, in THE GENERAL THEORY.

Let nobody be deceived that the discussion on the threatened liquidation of banks is over. On the contrary, it has merely been suspended in order to address and bring into the picture another measure recently announced by the Central Bank of Nigeria, CBN, which raises questions from economic to legal and social.

Unless revoked the Central Bank of Nigeria has announced that by middle 2012 restrictions will be placed on withdrawals from individual and corporate accounts; maximum of N150,000 per day for individuals and N1 million for companies.

On the face of it, Malam Suleiman, the Mairuwa, water supplier, and Chief Doctor, Sir, Solomon, the Business Mogul, who owns a conglomerate of firms, can only claim the same amount, even if lunch with five friends cost Suleiman N200 and Solomon almost N500,000.

The “one size fits all” approach underlying that policy takes us back to the same approach Professor Soludo adopted in fixing N25 billion for what we were told would be “Mega Banks”.

The underlying economic factors which led to the failure of the previous attempt at straight jacketing all depositors still exist to derail the latest initiative. To put it bluntly, it is the wrong financial war by the CBN, at the wrong time and for the wrong reasons; especially when it is coming on the heels of threatened liquidation of eight banks which constitute about one third of our banking network.

That particular policy recently announced has called attention to the Central Bank’s lack of what can be called the economic policy agenda. Globally, it is generally recognised that one of the primary functions of monetary policy, with which every Central Bank is charged, is maintenance of full employment.

Granted, full employment does not mean that every able-bodied adult, seeking work can find one. Until recently, four per cent unemployment has been the global standard allowing for new graduates, people moving between old jobs to new employment, etc.

But, even in the most advanced countries of the world , specifically, the PIGS (Portugal, Ireland, Greece and Spain) of Europe, experiencing over 10% unemployment leading to social and political upheavals, full employment is being redefined.

For Nigeria, no government and certainly no Central Bank governor has publicly helped in defining the meaning of full employment. Yet, it is a critical measure of performance of anyone occupying that exalted role.

Because neither Sanusi nor any of his most immediate predecessors had made reference to this critical measure of their performance, they have been left to take measures which are sometimes counter-productive to employment and productivity.

The Presidency and the National Assembly have been occupied by people who appear to be only interested in whether there is sufficient money to be spent at the moment. Elsewhere, governments which are daily threatened by labour unrest watch carefully as the level of unemployment rises. Greece is only the latest; others will follow in Europe.

Despite national ignorance about the economic, social and political fall-outs of rising unemployment, it behooves us to recognize that we now live in a world of internet, CNN and BBC News.

Uprisings anywhere become quickly imitated somewhere else. Only a self-delusive government will assume that what we observe in Greece cannot happen here.

That possibility alone should induce us to ask the governor of Central Bank to tell us what will be the impact of the newly announced policy of cash withdrawals on employment and productivity. It certainly will not be insignificant nor neutral.

The nation needs to be told what studies were undertaken, in Nigeria, not US or Germany or Brazil, to inform the decision for this particular change at this time.

Furthermore, we need to know, whether any discussions were held with several segments of the Nigerian economic society before the policy was “carved in stone” by the CBN.

Among the institutions and organizations, which might have made contributions, however disdained by the governor, are the following: Nigerian Institute of Social and Economic Research, NISER; Chartered Institute of Bankers of Nigeria, CIBN (the governor’s own “constituency”); the Chartered Institute of Accountants of Nigeria, ICAN, and its rival, ANAN; Nigerian Economic Summit Group, NESG; Institute of Directors, IoD; Nigerian Employers Consultative Association, NECA; Manufacturers Association of Nigeria, MAN; and, of course, the media (admittedly my own constituency). This is not an exhaustive list, but, it will do for now.

The question might arise: why should the governor of the Central Bank consult any or all these organizations? However, even the most casual glance at the least will reveal that it includes virtually all the people who hold the keys to making the policy work because they can individually and collectively ensure that a policy which hinders the achievement of their corporate and individual goals will never work.

To the best of my knowledge, the policy on cash withdrawals was never subjected to discussion by those stakeholder groups which could constitute its major stumbling blocks. Like the N25 billion hurdle imposed by the former CBN governor, the limits imposed were also declared without adequate consultations.

Just to remind ourselves, on the eve of Soludo’s declaration of N25 billion as the minimum share capital for a bank to operate after December 31, 2005, only two banks were comfortably over the target: First and Union Banks; each with share capitals of N35 billion as at December 2003.

Three had above N10 billion in paid up share capital, but the remaining 74 or so bankers were far from N10. Indeed, the average share capital of Nigerian banks in 2004 was about N3.8 billion. Thus in effect, the consolidation policy announced by Soludo amounted to asking banks to increase their share capital six times in eighteen months.

The enormity of the challenge imposed on the banks in 2004 could only be appreciated by reminding ourselves that First and Union banks, the first two in Nigeria, operating initially under the names Bank of British West Africa and Barclays Bank, had required over one hundred years to reach N35 billion each.

It is a remarkable demonstration the triumph of illusion over deep reason that the former CBN governor could have expected the banks to manage such quantum leaps in share capital in such a short time.

For a while, it appeared that “con-soludo-tion” will defy the economic laws of gravity which argued against it. In the end, it was Sanusi who removed the veil of secrecy behind which bankers were operating.

Then, as now, there were voices questioning the decision. Among them was Atedo Peterside of IBTC, who pointedly asked: why N25 billion, why not N15 billion or any other figure? By what scientific method was the N25 billion determined? Today we can start our examination of the new cash withdrawal policy by asking: why N150,000 and N1 million? Why not N50,000 or N250,000 for individuals and N1.5 million or N5 million for corporate bodies? And do the new limits apply to the public service including the Presidency and the National Assembly and NNPC?