By Omoh Gabriel
Sanusi Lamido Sanusi, Governor of CBN at the 1st Distinguished Lecture of the Sylvester Monye Foundation at Asaba on Friday titled Consolidating the gains of the banking sector reforms out lined the expected benefits the nation stand to derive from the ongoing banking sector reform. He also stated the challenges facing the economy that the federal government through its fiscal policy must address to compliment the CBN reform if the benefits would be realised. He said at the end of the reform the nation will see ‚Äúa strong corporate governance in banks‚Äù which at the moment is lacking. It was the lack of corporate governance that plunge the nation into the current financial crisis which became very visible in the crave situation that the ten rescued banks were in before the apex bank intervention. He further said that ‚Äúeffective competition in the Industry‚Äù will benefit the economy as the banks that will emerge from the reforms will be stronger than before to deliver quality services to the banking public. The banks at the end of the reform are ‚Äúexpected to deliver to the Nigerian economy an efficient financial intermediation‚Äù through more access to loans and advances by both large, small and medium enterprises unlike the situation now where only strong corporate bodies are able to access loans from banks. He stated that Nigerians will benefit from the ongoing banking reforms through the ‚Äúprovision of diverse financial products‚Äù by the various banks to cater for segmented markets in the country.According to him when the reform would have run its full course the economy will witness ‚Äúimproved financial flow to real sector‚Äù as against what obtains now where banks shy away from lending to agriculture, manufacturing and mining and when they do at very high and unsustainable interest rate. He also said that ‚Äústrong and sustained customer confidence in the system‚Äù will return to the sector when the reforms are completed.
However, Sanusi was quick to add that ‚Äúeconomic growth has been robust‚Äù, but that ‚Äúmajor challenges remained‚Äù to be resolved for the economy to deliver the dividend of democracy to the Nigerian people. He named such challenges as ‚Äúgeneration of employment opportunities, the weak link between the major growth drivers, particularly agriculture and the manufacturing sector, hence, the manufacturing sector remains an insignificant contributor to growth‚Äù.
He said that there was the urgent need to address what he termed the ‚ÄúFIVE binding constraints‚Äù
which are ‚Äúphysical infrastructure constraints namely electricity and transport for which he said there the need to deepen the deregulation process to attract private investors‚Äù. He also stressed the need to ‚Äúreview allocation of responsibility for infrastructure development among different levels of government and that ‚Äúregulatory interventions was required to develop all sectors of credit market, from micro-finance to larger corporations‚Äù.
Continuing Sanusi said that it has become expedient for monetary authorities in the country to ensure the ‚Äúacceleration of credit market reform such as dispute resolution mechanism, credit bureau regulation and leasing laws‚Äù to foster credit delivery in the economy. Other challenges he said should be addressed to unleash the economic drivers in the country include; ‚Äúdevelopment of the public-private partnership framework, legal framework for rental markets; reducing the high lending interest rate stating that efforts in all these areas are being fast tracked‚Äù.
The CBN governor also spoke of the need to have an investment friendly environment in place through the simplification of the ‚Äúapproval process for new business development, capacity building in various areas of the economy; provision of adequate security for lives and property and tackling the issue of corruption‚Äù.
Continuing he said in order to bridge the ‚Äúexistence of skill gap‚Äù in the country there is the need for the government to begin the process of ‚Äúprioritizing technical and vocation education training; equipping enterprise and industrial clusters to develop capacities, replacement of import bans with tariffs deepening the ports reforms; growing banking system liquidity is still desirable‚Äù.
According to Sanusi ‚ÄúFiscal stimulus remains critical to support CBN actions to fast-tracking recovery process and there is urgent need to inject fresh funds into the banks affected by regulatory actions, Ring-fencing/removal of ‚Äòtoxic assets‚Äô and the establishing of asset management company (‚ÄúAMC‚Äù) stressing that the CBN realizing the limitation of monetary policy has said that there is need to strike an appropriate balance between monetary and other policies as there is a limit to what monetary policy can do to deliver economic growth He stated that there is need for complementary reforms in other areas of the economy as other complimentary policies must be in place.
He said ‚ÄúIt must be stressed that in as much as the CBN is committed to rapid economic development of the country by ensuring the existence of a sound financial it is obvious that no much can be achieved without a conducive business environment. To this end provision of adequate infrastructure remains key‚Äù.
Sanusi, in response to questions said the apex bank will defend itself on allegations against the rescued banks, as the issues about their failure are facts.
He said that the problems of the eight banks, whose management teams were sacked in 2009 for unethical practices were grave. He indicted the Central Bank of Nigeria (CBN) and Nigerian Stock Exchange (NSE) for failing in their regulatory roles. He said that the present CBN management was prepared to testify in the cases against the banks in any court, adding, “we have enough facts on their activities”.
Recalling the banks‚Äô irregular activities, Sanusi said that Afribank, in its last public offer to re-capitalise, “actually genuinely raised only 12 per cent of the funds while 88 per cent represented its re-circled funds”.
“It is in this country that Intercontinental Bank gave out N40 billion as loan to somebody from Delta, who used the state government‚Äôs shares in a company as collateral.” he said.
The apex bank‚Äôs boss said that he foresaw the rot in the banking sector but was dubbed “John the Baptist, who was crying in the wilderness‚Äù.
His said, “As a manager in a bank, I raised alarm over the rot in the system and imminent collapse of the banking sector, but I was called John the Baptist, who was crying in the wilderness for nothing.
“They called me a prophet of doom and even doubted my mental stability as I was the only person, who was seeing something wrong in the system whereas the banks were doing well.”
He said events in the sector had vindicated his prompting and called on all Nigerians, especially investors, to keep faith with the financial industry and support the revamping of the economy.