Isn’t it strange that after seven months, the reforms introduced
by the Central Bank Governor, Sanusi Lamido Sanusi, into the
Nigerian banking sector can be adjudged as a floating particle?
A strange object in the sky with no clear direction, tossed here
and there by every gust of wind! That is exactly the imagery painted
by his employer, the Federal Government of Nigeria, after what
can be described as careful examination of his performance.
Background
Sanusi, a risk management expert, was hired by President Umaru
Musa Yar'Adua on June 3, 2009, shortly after his nomination was
ratified by the Senate. He replaced Chukwuma Soludo, a professor
of Economics, whose major achievement in office was the consolidation
of the banking sector. Before the Bobshell, let’s take a quick snapshot of
his views during his screening at the National Assembly and compared
them with his performance.
“What we need do is to build on corporate governance and the risk
management system with individual banks, disclosure requirement;
ensure that banks actually recognize their losses”
Views
On risk management: "Risk management is ultimately about asking
yourself when the terms are good, what could go wrong ? When the
capital market was going up and banks were lending to the capital market,
somebody should have asked: what happens if the market crashes?
Will these banks survive? The risk managers in the banks did not ask those
questions; the regulators didn't ask those questions.
On consolidation: "I think it is a true statement that a good bank requires a lot
of capital. But having said that, consolidation was not and should never have
been seen as an end in itself because while it is true that a good bank needs
a lot of capital, it is not true that every bank that has capital is a good bank.
How you use that capital, how you manage it, whether that capital is placed
in the hands of fit and proper persons who should be trusted with people's
money are the critical questions that should always be asked. What we need
to do is take consolidation as a foundation; now, build on the other things that
were actually set up in the first two-point agenda - the corporate governance
and the risk management system with individual banks, disclosure requirement;
ensure that banks actually recognize their losses. When people talk about stock
market and confidence, we all know that there is N1 trillion out there. That number
has to show up as non-performing loans; if they are not showing up, people do not
trust the numbers. We need to ask: where are those non-performing loans and we
need to enforce provision and if banks need more capital, then we should recapitalise
those banks. But the solution is not to pretend that they are there and they are strong.
I think the system as a whole is non-capitalised. I think the liquidity in the system as a
whole is good, but I think there will be a few weak points in that system.There are a few
banks that are weak spots and we need to help those banks correct the problems;
otherwise the system will not regain the confidence."
On lending to Small and Medium Scale Enterprises: "It is always extremely
important to remember that the financial system is a transmission mechanism for
monetary policy to the real sector. It does not provide other access.
The constant theme was that if you cannot show that your economic policies
have improved the wellbeing of the majority of the people, you cannot claim that you
have succeeded. I think it was valid in 2005; it is valid today and it will be valid
tomorrow.”
On Soludo: “In terms of the overall direction and the overall policies,
I think he has done a very good job. Whether I will succeed as much as him,
we have to wait for the next five years to judge.”
Scorecard
On August 14,2009, he sacked the Managing Directors(MDs) of five banks:
Erastus Akingbola of Intercontinental Bank, Cecilia Ibru of Oceanic Bank,
Okey Nwosu of Finbank, Sebastian Adigwe of Afribank and Barth Ebong
of Union Bank. Offence? Their banks failed stress test. He arrested and
is currently prosecuting them; he published list of bank debtors, injected N420 billion
as bailout funds and appointed new management teams for the banks.
On October 2, 2009, the Managing Directors of three other banks kissed
the dust for same offence. They are Francis Atuche of Bank PHB;
Charles Ojo of Spring Bank and Mr Ike Oraekwuotu of ETB. He also
announced new management teams and injection of N200 billion.
He ordered Wema and Unity Bank to recapitalize by next June and
prescribed 10-year tenure for bank MDs.
Ripples
Sack gale in banks. Banks’ refusal to lend to businesses led to fuel
scarcity, shut down of companies’ , cash crunch in the economy
and worsening of the unemployment rate in the country.
We want a blueprint of the reforms to be sure that its actions are not just taken ‘as the spirit directs ’
Verdict
Because his policies were adjudged to have failed so far to improve
the wellbeing of the majority of the people, the Federal Government
asked the Central Bank to furnish it with the blueprint on the banking
reforms to allow assessment of the direction of its policies and also
ensure that they are in line with government’s long-term economic programme.
Disclosing this, the Minister of State for Finance, Mr Remi Babalola, said that
Sanusi’s employer wants “ a blueprint of the reforms to know where the CBN
is headed and more importantly to be sure that its actions are not just taken
‘as the spirit directs’.”The minister said the government was fully in support
of the CBN reforms in line with its strategic focus on the growth and development
of the economy but added that government was trying to back the CBN to the
extent that its actions do not jeopardise the confidence level in the economy.
Babalola stated that the Federal Government had in the past abandoned some
crucial decisions to the CBN in the name of protecting its autonomy, noting
that the situation contributed to the crisis in the sector, adding that the government
would “now be more involved”. Does this mean that the man, Sanusi,
has no clear road map on his mission at CBN? Or does it mean that his
blueprint for the sector is just a fly leaf? Sanusi, over to you.
