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Lamido Interview

by Business News Report

The reality is that I have no doubt in my mind that I do understand where those things are coming from. The final thing is loan to SMEs, this is not really a final issue. SMEs and the economy, and the economy have not grind to a halt, anyway. The country’s real GDP growth in the second quarter was 7.2 per cent, real GDP growth in the first quarter was five per cent, I don’t think in this world you will say that is an economy that has been grinded to an halt. We have delivered on reducing inflation, you saw the latest figures in September, we are down to 10.4 per cent, we would under 10 per cent by December. We have delivered on reduced interest rate, not significantly, but it has been moderated. We have delivered on exchange rate. Now, a company in the real sector requires finance, it requires power, infrastructure, security, all these are not there. The real sector was not killed because of lack of finance. The textile industry was killed by lack of power and the influx of cheap imports from China.
We can blame it on the tariff regime, starting from the days of Obasanjo. The government then was reducing VAT on beer, what are the government encouraging.
We should ask questions, does the tariff regime that we have protect domestic industries, have we made the progress we should make on power, which industries use. Can any manufacturing industry thrive in an environment where it would take many weeks to clear your raw materials in the ports.
Come into Nigerian ports, how many signatures does one need to clear ones goods, I hear over 70. Compared to our neighbouring countries, where you get your containers with five signatures. Actually, you can take your containersd to Cotonou, clear it, smuggle it into Nigeria, take it to Kano before the one that came to Apapa here has left.
It is not CBN’s problem, I am not making excuses because I am an economic adviser to government and I have to play my role.

If I ask banks to lend, how would they lend to a manufacture who would come back and default because he is spending too much money of diesel. Then I come back after one year, tell them to provide, sack the MD for booking bad loans, when I was the one that forced him into giving money to an industry that is not doing well.
We need to have fundamental growth and address that structural problems. The problem is structure and it is also easy because it is structured. It is easy and it is within our control.
We know that in 1999, Obasanjo said his administration would address power, infrastructure. This year’s budget in January, 80 per cent of the capital budget was power and infrastructure. How much of it has been spent — 20 per cent? If we had spent that money, next year, we would be talking about something else. I can assure if we do not, in January next year, we would be talking about the same thing that we talked about in January this year.
Talking about interest rate, even the manufacturers talk about interest rates, but truly, that is not my problem. If we are producing and selling we can service the debt even at high interest rate. But the availability of credit can not come if there is no business.
The absorptive capacity of the economy is what needs to be addressed. Once it is addressed you will find out that there is not enough liquidity or capital in the banking system to meet the requirements of these economy. We would be borrowing from abroad.

Do you investors lined up for these banks before you made the announcement. Because the major controversy had been that there is an underlying agenda, not necessarily Northern.?

I wish I had investors for these banks today. When we do these things, we first ask ourselves, what is the motive — Money? When I got a report saying that Intercontinental Bank had bad loans of N300 billion and Oceanic Bank has bad loans of N200 billion, let me ask you, if I had called Mrs. Ibru and Akingbola to my office, how much do you think they would have paid me. If I were to compromise myself for an institution, I will not be seen as been honest.
I have seen it in some reports that I have lined up some investors, I still do not understand where that is coming from. I still have not seen the names of these investors that I have lined up, what country they are from, where we have the meeting, at what time, did I know was going to be Governor of the CBN and planned this thing a long time ago? Who are these investors in the international financial market that operates like that, that work with the Governor of a Central bank to destroy a bank so that they can take over? Why?
It is an argument that I do not like to dragged into and I do not like defending myself. because any comment about my motives about my agenda, it is not an argument. If I had these institutions where are they. Then, after the announcement that I have these institutions and when they did not turn up, a new story came up that their governments have told them not to come. Which government, where, where were these stories coming from?
My decision not to respond, does not mean I do not care, It is because at the end of the day, I am a public officer and I have to be ready to take public attacks public smear campaign. And if that bothers me, I should not be a public officer. I will not allow something said about my person or allegations made about my motives or imputations that are unfounded to divert attention from the substantial matter on ground, because I am not the issue.
A financial institution has been run into the ground — true or false? Governor of the CBN, do I have a responsibility to act or not? Those are the issues. Do I have an agenda? There is no limit to what people can say. One advantage I have is that they know one can claim that I was bribed and nobody can claim that I was trying to extort money. Nobody can believe it. This is because I have built a reputation so long for those allegations not to stick. In all these things, nobody have ever talked about pecuniary motive. I have been in the industry for 25 years, nobody has come to say ‘this is an insider related loan that he gave. I know a company.’
People have been spending for the last couple of months to find out if I ever did any of these things. Giv me the names of the company — was it when I was in First Bank or UBA or Icon, any company that I lent money to that was my company or any loan that I took from any bank that I did not pay, or any money laundering act that I took part in. Show me and I will resign.
People can not question your integrity, they impune motives to you. Who are the institutions that I would destroy Nigerian banks for, why would I ?
People believe that I am a Northerner that is why I’m doing it. I am a Nigerian and I am proud, I’m a Northerner, I’m proud, I am from Kano and I am proud, I am a prince, I am proud.
I can not deny where I am from, because having been born to a father, like I say, is an event and I did not chose my parents, I did not chose where I came from, but I can chose how I act, I can chose what I do, it does not matter, whether you are Igbo, Yoruba or Hausa, you are either a bad man or a good man. You are actions are either right or wrong.
The question is, why are we running away from established acts that are wrong and spending time trying to build a story on speculations? So, why should I defend myself against a charge of having an agenda, when people are not defending themselves against the fact of having run down institutions — this has been established. If I have an agenda, it would unfold. at the end of these exercise, if these banks are owned by Mohammad Abubakar and Yusuf Sanni and some other sorts of funny names, you find all the people that they have been handed over through some subterfuge, and I do not know how that is going to happen, because I would need the Securities and Exchange Commission (SEC), I would need the Nigerian Stock Exchange (NSE), I would need all shareholders among others. In fact, I do not even know how that can be the subject of discussion in a serious environment. I have never defended myself for who I am. If it is a problem for any one that I am Nigerian, or that I am a Northerner or that I am a Muslim, well, too bad. It may be a problem for me too, as well, I do not care, but, well, too bad.
But I do not have the right as Governor of the CBN, and it would be a greater disregard for the people of Nigeria, for me to use a law made by the National Assembly and an office that is Federal, to serve a sectional or religious interest. I have never in my life done that.
I had people in thye North say the consolidation was against the North. Then you ask them, before consolidation, how many banks did we really have in the North? Out of the 89, let us start counting. Was it Bank of North that was owned by the state governments, was it Tropical Commercial Bank that was owned by Kano state government, out of the 89 that we have, how many was Northern banks. If we had 40 from the North and we ended up with only one or two from the North, then we could have said that it was an agenda against the North.
I can confess to you, I do not think that the North even had up to one over 24, in fact, they did not even have a bank, if you were to look at the banks that they have at all. I know for a fact that if Soludo had not given Bank of Northern forebearance, even Unity Bank would not exist.
I had a meeting with Northern Senators and leaders and I told them that if Soludo had not given certain privilege to Bank of North, they would not have gotten Unity Bank. It is a lie, but I am a Northerner.
One thing about the financial market is that it is inherently unstable. Take the stock market as an example, if you are in commodity trading, we all know the simple rules of demand of supply. we have an external shock, once you have an equilibrium, it remains an equilibrium even if you have an external shock. As external shock increases demand, prices go up. When price goes up, quantity demanded goes down, quantity supply goes up, a new equilibrium is reached and it remains there until we have another external shock.
The problem with the financial market, is that when prices go up, you and I know that those shares, that the company is not going to increase the quantity of shares. So, when the price goes up, you think that it is going to continue going up, so you have the opposite effect.
The markets do not correct themselves and this has been a fundamental flaw of the efficient market. Price goes up, and there is mechanism that would take it back to equilibrium. You only hear people say you have a bull run. You know, bulls are cows, they have no brains. Everybody starts following, you know, it is like a herd mentality. It is totally irrational. Now, so long as that is the basis on which the financial market operates, there is an inherent instability.
This crisis is not unique to Nigeria, the United States have it. I do not think anybody is blaming anyone for the crisis. No one is blaming the banks’ MD for the crisis. In other parts of the world banks MD were locked in jail before this crisis. In every financial crisis, we have found out that banks’ MDs have gone to jail. In this present one, Madoff has gone, banks’ MD have not. You know why? They have learnt one lesson, that if you make a loss it is not a crime, if you pretend that you did not make a loss, you go to jail. They learnt that from previous crisis. So, the moment this crisis came up, everyday if you open the television, you will hear “HBOS have taken a written down of $11 billion. MD, I resign.” and many other resignation following losses, end of story.
If they had not learnt from previous crisis, they would have continued pretending, and the examiners would have come in and it is now accounting fraud and they go to jail.
Part of what we want to achieve with this, is to, at least, get people to a point where they begin to admit where they are wrong and have made losses and the fact that it is business, you make gain, sometimes you make losses. Some years you make a lot of profits, in other years you make a little profit, others you make losses, it is business and you should be able to just accept it.
We will continue to put in place and continue to improve. Now, I will make my own mistakes and up till the day I leave CBN, whether it is now, or in five years or ten years, everything I do will still be work in progress. which is why if you have noticed, I have not publicly criticised Soludo, it is totally unnecessary. He has served for five years, it is work in progress, if there is any thing I find that needs to be changed, I should just to change it, if I think it is good, I should just adopt it. There is no point, I’m in a class sitting for exams, whether Soludo had an ‘A’ or an ‘F’ has no impact on what result I get. If I spend my time talking about it was A or B or C that Soludo got, I will end up with an F in my own class
So, my priority is to build and all I can do is to hope that whoever comes after me would take the same attitude. That would say, what has Sanusi done that is good — build upon it, what has he done that needs correction Рcorrect it.
A bank that just does not have enough capital, if it has strong liquidity, it is not in a grave situation. I have said that. There was no basis no sacking the executives of Unity Bank. Do you know the Chairman of Unity Bank — it is Professor Mabogunje. Does his presence make it a Northern bank. Even the shareholders of Unity Bank, Rivers State is a major shareholder. I am not here to defend Unity, but there something also very interesting, if you look at the composition of the Board of the bank, Unity have the most national bank. Is that not true? It is the only bank where you take the directors — executive and non-executive, zone by zone, you can not put them in one pocket. These are substantial issues.
The banks that make up Unity were not owned by individuals, Bank of North was owned by the Northern region and by the government of the Northern States. Intercity Bank was owned by Babangida and his military friends. And you know the military what it is like, its friends are like all over Nigeria. So, it is not a Northern bank.
Concerning the polymer issue, I can add anything to what I have said about the issue. There is a story that says that there is an investigation being carried out on an Australian company, that they gave $10 million bribe in connection with the contract for printing polymer notes in Nigeria. None of the people mentioned so far, among the recipients of the bribe are Nigerian. Nobody has said that the bribe was given to somebody in CBN, it said it was given to some top government and political officials in Nigeria.
As far as I am concerned, at this level, I place them on the same level of accusation that the Governor of the CBN is pursuing a Northern agenda. When they begin to give names, when they trace the money to Nigeria or to a Nigerian, I would expect the EFCC to swing into action.
As I speak to you, to the best of my knowledge, not a single Nigerian has been named in the issue. Is it a true story, I do not know. I think that as they continue tracing the money, they would end up finding where it went.

Allowing these banks to be acquired by foreign banks, would it not pose security risks for the country?

My own preference I have said is that I would prefer a strong Nigerian institution that would acquire these banks. In the event of a foreign bank coming in, I would prefer a bank that is willing to share ownership with Nigerians, not a bank that want 100 per cent, I would prefer that have already shown interest and commitment prior to now, to one that is just trying to come in now, if its possible, if they are more than one foreign banks, I would like to see diversification, to ensure that they are not coming from one geographical region, these are the broad guidelines that are given.
I have made it very clear that we want an institution, we are not looking for money, because we can raise the money. People can raise money from various means, like through money laundering — people who have stolen money and have gone to hide it and now want to use it to buy shares, money can be raised by anybody.
What we want are people who are not just bringing in money alone, but people who are bringing in government, structure and the ability to run the bank and to manage it. So, I have not said I do not care.
The biggest banks in Nigeria will for a very long time, certainly, remain in the hands of Nigerians.
All this noise about foreign acquisition that are being made by people, how many foreign banks have the money today to acquire a Nigerian banks? The world is experiencing an economic meltdown.
If I am in a position where I want to attract certain institutions, why would I want to close a door before it is opened. Open it up, let us see how many people are interested in these banks. At that spot where you think you are spoilt for choice, then you can start allocating. There is no need, then, announcing upfront that you do not want foreigners. What would happen, if foreigners don’t come and there is no capital in Nigeria, are you willing to have the government nationalise these banks?
The minister of finance said if money did not come in, we will have to convert our money to shares, they now said the minister said that it want to nationalise the banks.
We have issued guideline on how things should be and we are going to allow these banks talk to their advisers.
However, we have a very good idea on how we want the industry to look like. We are not going to allow a bank, for instance, to be more than 20 per cent of the market. And I need to say this upfront, so, if a First Bank or a United Bank Africa or Zenith Bank want to acquire Union Bank, we will not agree. We can not have a bank at 25 or 30 per cent of the market. We have an idea of what kind of institutions we want to come in, we have an idea of what kind of structures we want to see put in place, we also think we need a healthy mix of local and foreign banks.
At the end of the day, we think all of these things will begin to unfold, but these things are clearly thought out and the national interest is paramount.

What is the CBN doing to protecting depositors, to ensure that their money is safe in these banks. Also, to restore the confidence of the people in these banks and to prevent a run on these banks.

To us in CBN, when we talk about protecting depositors, we mean when you need your money, you are able to get it, that is what it means to us, that you do not lose your money.
Take Intercontinental Bank, for example, earlier in the year, the banks total assets were in excess of N1 trillion, by May/ June, the bank has lost over 30 per cent of its balance sheet, it was already down to about N600 billion. The bulk of the loss on the balance, stems from a lot of liabilities and complete run down of liquid asset. The cash was gone, the figures were gone to pay up liabilities. If you were to look at the pace at which the banks were losing their balance sheet before we intervened and compare the rate, you will see a significant slow down and a complete turnaround and stabilisation.
You can not take this action and expect it to stop the day you are leaving. The reality, is that we have taken down the management of eight banks, yet you still do not have any complain of a single person who went to the bank to get their money and they could not get it. Give us credit for that, it has never been done anywhere in the world, never.
The ten banks that we have announced, we have come out and we have shown the world that you can come out and speak the truth about a problem. We have matured as a country. The second audit we did, not an eyelid batted, because people have seen that we had brought down the management of five banks and the banks did not collapse, people did not lose their money. If we should announce next time that we are doing such things, we should expect no reaction, because the market have matured. People are not children, people deserved to be told the realities on ground, You don’t tell people they are no problems, you tell them they are problems, we have seen the problems, we have handled it and we are in control, that is what they want to know.
Now, is this in the long time, sustainable, I have said this in previous presentation — it is not. This is because, there is a limit you can keep a bank in limbo, I know that, as a risk manager. There is a limit to how long people will continue waiting and asking what is the next step with the banks. If after six months they see nothing, they are going to conclude that the banks are going to be handed over to the NDIC. So we have to move quickly in sending signals as to where the next stage is. If the shareholders are talking to other banks, we have to ensure that is clear to all that shareholders of this banks are talking to shareholders of another bank, people understand that there is something happening. If it is capital injection from abroad, let people know.
So our duty now, is to make sure that we move them to the next stage. But, today, I can assure you that the banks are doing well — Oeanic Bank, for instance recorded positive clearing, in spite of every thing. Intercontinental was losing a lot on a monthly basis, that has slowed down, no gap it is still losing a little bit, but not much any more. The liquidity position in almost all the banks have approved significantly. The customers have come to the realisation that they are not going to lose their money. The Managing Directors that have appointed are very strong people, especially in those first five banks where we have real issues. An example is Cyril Chukwuma of BankPHB, he is solid. These are people that are known, I, on my part, I talk to the ministers, the Governors, the NNPC, none of them have told me, so far, that they are going to move their account. I also talk to my friends. These managing directors have been in the industry for a very long time, and can call on a company’s treasurer and can tell them that they are the ones in charge of these banks and can assure them that they money is safe. We picked these people to protect these banks. It was not an arbitrary thing. Every one of them was selected, included in the consideration, is their relationship with the previous chief executives. We are not looking for people who will go their and do witch hunting. We want people who are also acceptable to their environment.

How would you address the controversy surrounding the convertibility of the bail out funds to shares in these banks.

I don’t know what the controversy is about the issue. A convertible loan, by definition is convertible into something. Before we did this intervention, the banks had CBN’s money, but this money was short term — three months, one year and they are expected to pay back. What we then did was to give them long term facilities. at the time you are making that intervention, you want to make sure that you do not foreclose options. When Northern Rock has a problem, the Bank of England put in money — gave them a loan, shortly after that, the Chancellor of the Ex-Chequer nationalises the bank, what happened is that it simply converted the loan into equity and paid off the loan to the Bank of England.
The legal document underlying the injection of fund has to provide us with that flexibility, which is not different from what the minister of finance said. In the event that money did not come in, despite our best effort, having determined that these banks need capital, that capital have to come from the government. And the only way that capital will have to come from the government is through the conversion of that instrument. One must remember that the Banking and Other Financial Institutions Act (BOFIA) gives the CBN Governor powers that come into effect even where BOFIA conflicts with CAMA.And in the exercise in that powers, I must exercise those powers in a manner that ensure that my ability and flexibility to act in the interest of that institution is constrained at any point in time.
If I put in a loan and I do not give the government, at least the option of converting when it is time to convert, someone can challenge me legally and say that there was nothing in that loan that says it could be converted to equity or to preference shares or to a debenture. So, I have to give myself the option of converting into any security that the Governor defines. But I have not yet converted it, so what is the controversy. I say it is convertible, but I have not converted. When I convert, then the controversy can arise, so let us leave that controversy for another day.

I know this is the last question, but there is one question that have not been asked, I thought it would be asked, I think I have to answer that too, because people have kept saying to me about the issue of communication. I think I have been too much in the press, and it is not that I have not spoken enough.

The second thing is that, I have been asked is there was not a more subtle or more gentle way or different way of doing this. August 14 had to be done the way it was done, if it was going to be done at all.
There is no way a bank MD is going to sit down, when you give him notice that you are going to remove him, without getting an injunction. It is not possible. It is human nature. It is for that reason it has to be with the element of surprise and the element of shock.

In the next few weeks, a trial is gong to begin. When the charges are filed, there would be a lot of news. I’m not interested, it is in the purview of the lawyers and the EFCC. They are the ones that will inform people on what the allegations are, what are the defenses and what the justifications are for the God knows how long the trial will last.

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