By Providence Obuh
The Deputy Governor of the Central Bank of Nigeria (CBN), Dr. Kingsley Chinedu Moghalu has said that the apex bank would have failed the fiancail system and country in general if  it had not acted decisively and in a timely fashion to stabilize and reform Nigeria’s banking system.

According to Moghalu, the major cause of the global banking crisis was as a result of the rise of financial instruments as profit making ends in themselves as opposed to the original role of finance as an agent of intermediation with the real economy.

He said as part of the global redesign, banking reforms in the Nigerian financial system by the CBN was aimed at improving the quality of banks and ensure financial stability in the system.

Moghalu who spoke at the Association of Corporate Affairs Managers of Banks (ACAMB) annual lecture titled “ The challenges facing banks globally, how Nigerian stakeholders should respond” said some critics continue to assert that the ongoing reforms resulted in credit being withdrawn from the real sector, thereby threatening the economy.

“Apart from the established case of rational expectations, a closer look at the sectoral breakdown of total loans of N8.955trillion as at December 2009 shows: Before the CBN intervention, most of the credit that was available was not accessible because of the exorbitant lending rates, and most lending went into speculative bubbles in the capital market, some went into the huge non-performing loans with which we are now saddled, while the rest went to blue chip multinational corporations”

Morghalu noted that the objective of the reform which was to reposition the Nigerian banking system for sustainable growth,  and finance the development of the real economy rather than asset bubbles has been achieved because confidence and trust has clearly been restored by the CBN intervention .

“Banking reforms by CBN was a clean up of the damage done to the economy in the name of banking”.
He advised that the recovery of the capital market and a return of bank shares to fair value will be achieved, if shareholders can cooperate with the board of Directors and the Centra Bank of Nigeria to restore the value of the shareholders’ equity through the work of AMCON and the process of new strategic partnership, recapitalisation, mergers and acquisition.

“Freely available information on the performance of the stock market since Jan 2008 clearly
shows that the Nigerian Stock Market Index (NSI) was on the decline long before the current
CBN Governor was appointed in June 2009. A closer look shows that the stock market has in fact stabilized since June 2009.”
He stressed that the passage and signing of the AMCON Act has only contributed to the reform  process, with investors increasingly taking positions in the shares of the rescued banks.

According to him, the CBN banking reform has achieved immensely in the abolition of  the universal banking that was created in 2001, and urged that there should be slit between core banking from non-core banking,

He said, “AMCON which is one of the achievement will stimulate the recovery of the financial system and ultimately the wider economy through return of confidence to the capital market”.

In the same vein, the Editor, the Banker Magazine London, Mr. Brian Caplen said banks get into trouble because they lack sufficient capital to deal with situation and that they lend to poor capital and to wrong people.

According to Brian, confidence which is crucial to banks are lost. To this extent, he therefore advised that to return onfidence, banks should be careful with what they do.