By Omoh Gabriel, Peter Egwuatu, Oscar Chimaobi, Mike Eboh Nigerians of various calling have reacted to the comment made by the National Security adviser that the CBN reform is damaging the economy. Mr. Adebayo Adeleke, National Chairman, Independent Shareholders Association of Nigeria (ISAN) speaking for his shareholders group said “The statement credited to Aliyu Gusau, national security adviser to the government , saying that the Central Bank of Nigeria (CBN)’s reforms has damaged the economy has clearly vindicated ISAN and some other shareholders of the troubled banks.
“When the reforms was instituted and the actions taken against the banks’ chief was executed we cried out that the way the actions were taken was not in the best interest of the overall economy. So, for the security adviser to the government to come out and make such statement shows that the presidency is not happy and comfortable with some of the reforms and actions of the CBN Governor, Mallam Sanusi Lamido Sanusi. In fact, those who supported the reforms initially were looking at the effect from myopic perspective. The reforms by the CBN has a multiplier effect and that is what we are seeing. Every sector is suffering from the effect, industry and commerce, agriculture, energy, aviation, private and public sectors respectively.
“So it is time for government, especially the presidency to intervene and call the CBN to order. The reforms will cause more damage if urgent steps are not taken. When banks refuse to lend then how can the economy as a whole move forward. What is the primary responsibility of banks in any country? As our banks have refused lending, the economy will soon be crippled. If it were in advanced economies, the CBN Governor would have resigned if the public and even the government comes out to declare vote of no confidence. It is a shame that the man is still there, he should resign.
Chief Lawson Omokhodion, former Managing Director of liquidated Liberty Bank said ‚ÄúI have no doubt whatsoever that many critics as led by the hard punching “Renaissance Professionals” are waiting for the big mistake that will doom Sanusi Lamido Sanusi as the Governor of the Central Bank of Nigeria (CBN). As a human being Sanusi will err but so far the Governor has taken remarkable steps to correct the monumental fraud visited on this country in the name of banking consolidation.
Sanusi’s arrival on the Nigerian central banking landscape is putting in place building blocks that were proposed to the CBN in 2004 by banking experts and professionals who saw the valley into which banking in Nigeria was headed under Charles Soludo.
“However, Governor Lamido Sanusi recently made two mistakes. The first was the implementation modalities on the 10-year limit he imposed on the tenure of Chief Executive Officers (CEOs) of commercial banks in Nigeria. There is nothing wrong with the 10-year limit as most professionals who were once CEOs of banks know fully well that their tenures were circumscribed as per term limits. It is mere self aggrandizement for a CEO to spend more than 10 years atop a banking institution and pretend to still be able to dream new ideas or make fundamental improvements. The fiduciary responsibility of bankers is supremely undermined whenever a CEO overstays his welcome in an institution and equates his personal interest with that of the bank because such an attitude predisposes them to abuse such institutions with reckless abandon. Evidence being adduced at the court hearings into the past happenings at Intercontinental Bank Plc and Oceanic Bank Plc are quite revealing.
But CBN plan to interview future Managing Directors of banks is uncalled for.
“The CBN action is excessive and amounts to share meddlesomeness in the duties of the Board of Directors whose principal duty is to exhaust all selection processes in the choice and selection of such CEOs. The CBN must back off and the puerile statement by Tunde Lemo, CBN Deputy Governor that in Malaysia any prospective CEO must be interviewed by the Malaysian Central Bank is a pipe dream. When Mr. Sanusi Lamido became MD/CEO of First Bank of Nigeria Plc was he interviewed by the CBN? When Tunde Lemo became MD/CEO of Wema Bank Plc was he interviewed by the CBN? When Ernest Ebi former CBN Deputy Governor and Dr. Shamsuddeen Usman also former CBN Deputy Governor (now Minister of National Planning) became MD/CEO of New Nigeria Bank and NAL Merchant Bank respectively, did CBN interview them?
“The CBN must not bite more than it can chew and it must not allow objective analysts impute other motives into its actions. The CBN should return to its established procedures for clearing CEOs and it must resist the temptations of quoting the experience of the monolithic Malaysia; whose experience in banking consolidation and NEEDS (national economic empowerment and development strategy) preparation were misread by Charles Soludo thereby leading him into his ultimate demise.
Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria (PSAN) on his part said “Sanusi has crippled the economy as nothing is working. The industry is not working, agriculture is down, commerce is down and even construction industry is not active because there is no money. The banking reform is not a good one, the ripple effects cannot be quantified. If the banks are not lending then why are they there for? This is an indictment on the part of the CBN. The reform is useless and has no economic justification.
“If the national security adviser (NSA), Aliyu Mohammed Gusau, can come out publicly to speak on critical issues in the polity, singling out the banking sector reforms, anti-corruption war and the legal system with unusual candour that gave an insight into possible areas of concern in the presidency then we should know that we are in danger.
“The banking sector is so critical that before any reforms should be instituted the implication for the economy ought to been considered and analysed. The CBN Governor and his cabinet were too hazy to have taken such action which has left us in this difficult situation. I really concur with Gusau when he said the the on-going CBN intervention seemed to have damaged economic activity in the banking sector to the detriment of the larger society. In fact , Sanusi should go and let people who are knowledgeable in economics to handle the monetary policies of our country. People who are experience and more knowledgeable should be there to strengthen the reform so that we can begin to have positive effect on the entire economy. Everybody is crying both rich and poor because nothing is moving.
The Chairman of the Institute of Directors, Abuja branch, Alhaji Ahmed Rufa’I Mohammed speaking in Abuja stressed the need for good corporate governance among public and private institutions for faster recovery of the national economy. Mohammed blamed the problems in the nation’s financial sector on “poor corporate governance and lack of ethics in the conduct of leaders of many of the financial institutions. Sadly, these are fellow directors.”
According to him, “The ideals of good corporate governance seem to be lacking in many facets of our endeavours. Although we constantly espouse these ideals almost on a daily basis, we nevertheless are reluctant to observe and practice these ethos in our public and private businesses.”
In an apparent response to recent criticism of its reforms by the National Security Adviser, the Central Bank of Nigeria (CBN) has explained that its intervention in the banking sector and other subsequent efforts to reform the sector had saved the national economy from total collapse. The NSA, Lt..-Gen. Aliyu Gusau (retd) had faulted the reforms implemented by the CBN in the banking sector. He said that there were concerns that the apex bank was selective in meting out punishment for unethical practices in the sector, as all the banks are guilty of the same practice.
Gusau also said that reforms initiated by the CBN in the banking sector had derailed other sectors of economy. According to the NSA, “On the banking sector, the travails of the sector reflect the double standards critics perceive in the administration of justice; what every bank seems to be doing, yet only a few banks were penalized. “The fragility of the economy further dictates that offenders be interdicted without damaging the sector. However, the on-going CBN intervention seemed to have damaged the economic activity in the banking sector to the detriment of the larger society,” he added.
However, speaking at a dinner organized by the Institute of Directors (IoD) on Wednesday, in Abuja, the Deputy Governor (Financial Sector Stability) in the CBN, Dr. Kingsley Moghalu, said the apex bank’s intervention was based out of concern for the national economy as well as restoring confidence in the financial system. He said, “The joint examination of banks with the Nigerian Deposit Insurance Corporation (NDIC) as of May 31, 2009, revealed credit concentrations and undue exposure to margin lending. The examination reports on the banks formed the basis for the recent regulatory and banking reforms by the CBN.”
Moghalu further noted that “weak risk management, serious liquidity shortages, sub-standard corporate governance, insolvency, among other serious problems were present at many of the banks.” He added that the objective of the intervention was to assist the institutions to stabilize and continue their normal business as going concerns.
“Had the capital and liquidity shortages persisted, the weak corporate governance that supported the abuse of the financial system continued unchecked, and the concentration of lending to weak business sectors continued unabated, the Nigerian financial sector would have been smothered and a systemic crisis of immense proportion would have ensued.
“Such an outcome would have resulted in the collapse of the entire financial system. Nigeria would have experienced the ultimate collapse of the economy as a whole, akin to the Asia and Argentine financial crisis of the late 1990s. Serious social crisis would have followed, which would have adversely impacted on the foundations of our society,” Moghalu argued. He explained that the CBN, beginning from October 2008, had provided financial support to the ailing banks by providing liquidity through the Expanded Discount Window (EDW). “However, the financial hemorrhage continued and the financial condition of the banks continued to deteriorate even as the EDW was abused,” he added.
The CBN Deputy Governor, who was represented by the Acting Director, Financial Policy and Regulation Department, Mr. Chris O. Chukwu, noted that bank’s intervention was derived from the regulatory powers conferred on it to restore the safety, soundness and stability of the financial sector.
