March 10, 2010
For Nigeria’s financial service and banking sector, 2009 was a tumultuous year that witnessed the revelations in the cooked account books of banks, the non-performing loans saga, the sack of bank chiefs by the current CBN governor Sanusi Lamido Sanusi, the mass sack of over 7000 staff by banks who are now thrown into our overflowing jobless market, and the failed political leadership. Surmounting these challenges in 2010 will require navigating between former CBN Governor Charles Chukwuma Soludo’s exuberance, over-confidence, and much-talked-about “solution” to the banking woes, and Sanusi Lamido Sanusi’s approach to the monetary policy management and sanitization exercise embarked to clean the mess he inherited from his predecessor.
In the past five years these two CBN governors – Soludo and Sanusi, have helped to shape and reshape the banking industry, either positively through robust reforms aimed at strengthening and sanitizing the banking sector, or negatively through negligence of duty, abuse of office and failed leadership. However, they have contributed immensely to the present stage of development in the banking sector.
As CBN governor, Soludo shook up the sector in 2006 by forcing a recapitalisation of banks and insurance companies, and made financial sector deregulation a reality. He made a few enemies; yet, his consolidation was a breath of fresh air. Nobody can take away the credit due to Soludo over the bank consolidation, even if like me, you had doubts about his motives - the cynic in me has always wondered if the consolidation were not principally to enable our politicians launder their sudden and unaccounted wealth.
Soludo’s reign as CBN governor ended with Nigerians divided on the outcome of the rot his successor in office is discovering and sanitizing. His exit as CBN helmsman has gathered more opprobrium, than the exit of any other public servant in the last ten years. Many opined that he compromised his position while in office, by not regulating the activities of the bank chiefs that’s why his successor has been discovering and sanitizing the shambles he left behind in CBN. It would be however unfair not to commend Soludo’s bank consolidation reforms, which pruned out the weak banks, and facilitated the merging of smaller banks into a bigger and stronger bank.
However, if Soludo is to be commended for the success of his consolidation by fiat, then his failure to regulate the banking sector should be condemned. It is very obvious for a long time that he was more concerned with the size of the banks than with good governance in the financial sector. Even the banking consolidation exercise carried out by Prof. Charles Soludo has come under fire from different quarters; his successor Sanusi Lamido has described the exercise as a “sham,” and that “many of the banks never raised the capital which they claimed they did.” Sanusi however said that “the bank consolidation helped to create bigger banks while it failed to overcome the fundamental weakness in corporate governance in many banks”.
Objectively Soludo’s acclaimed solution to the banking woes then, encouraged the unethical practices that Sanusi is now confronted with. These unethical practices by banks and their executives took place under the watchful eyes of Soludo. The CBN under Soludo was regulating the activities of the banks in a laissez-faire fashion, bank executives went on a borrowing galore to feed a rising ‘easy money’ culture. Today, banks are saddled with N9 trillion toxic debts. Margin loans given to mostly cronies and associates to purchase and speculate on the stocks of the same lender-banks drove a bullish Nigerian Stock Exchange to high heavens. Soludo’s CBN made matters worse by compromising its position as a regulator; was lenient with bank executives and never regulated their activities, exuberantly claimed that the Nigerian economy and banks were immune to the raging global financial crisis, when it was very clear that most of the banks were insolvent.
The bank executives loyal to Soludo detest any attempt to clean up the industry; and they attacked anyone who disapproved of Soludo’s braggadocio. Warnings that few of the nation’s banks were unhealthy fell on deaf ears. In June 2009, Sanusi took over and two months later, following a sector audit, sacked five bank executives whose banks had become serial borrowers of most of the N256.571 billion from the CBN in the previous two months. He accused banks of excessively high level of non-performing loans, poor corporate governance practices, lax credit administration processes, absence or non-adherence to the banks’ credit risk management practices, significant capital impairment, which were all clear evidence of corruption.
What Soludo treated as a liquidity crisis was indeed a solvency crisis; an explosive cocktail of undercapitalised ‘systemically important’ banks heavily concentrated in high risk areas, causing significant capital impairment. Soludo’s CBN also failed to prevent fraud and deception, or steer consumers away from risky investments they hardly understood, rather it encouraged and connived in the deception of the public.
In view of the revelations of the gargantuan fraud in the banking sector. The tenure of Soludo as CBN helmsman should be probed, and all those that were involved in the wreckage of the vital sector of the economy should to be brought to book instead of allowing them to walk as free men. Soludo’s failed attempt to seek immunity in the wake of the bizarre rape of the banking sector and the Nigerian economy should be condemned. The nation must start punishing people who wreck institutions and put the lives and interests of the generality of Nigerians in danger while furthering their own personal interests.
I believe that every Nigerian has the right to aspire to any office in the land, given all other requirements but i do not believe that public service should be a reward for failure. When such failure leads to mass privation, I have every reason to demand that such a Nigerian should not only be probed but censored for his role. The Nigerian banking sector provides a ready instance where a critical sector was led to become a slush fund for those close to the former central bank governor, hence the ruination of the sector and the present decimation of the life savings of Nigerians and the mass purge now going on in the banking sector, we have our reasons to warn that the nation stands to give an official stamp to such reckless official acts if nothing is done to unravel all the culprits of the banking scandal that left millions of Nigerians robbed of their savings.
However, what was Soludo’s solution to the banking industry? Is it to allow bank chiefs free hand to ruin peoples money at their disposal? Is it its claim that the Nigerian economy and banks were immune to the raging global financial crisis, when it was evident that the global crises have affected the banks and economy? Is it to change the currency from plain paper to polymer? This was later discovered to be a big scam involving top CBN officials and Securency. However the polymer scandal has been swept under the carpet. I have tried hard to analyse Soludo’s input to CBN after his consolidation exercise but to no avail. Instead its tenure has caused great problems to the economy: what is the fate of the sacked bank workers? These are bread winners in their various homes. What is the fate of the small and large scale industries? Many of them have sacked their workers, because they no longer have the financial strength to meet up.
Sanusi’s sanitization should be encouraged and supported to flush out those who ruined the economy, and build public confidence in the banking sector. Those claiming his sanitization is part of a northern agenda, should desist from such line of thought. We mustn’t encourage failure; Soludo’s solution has failed, while Sanusi’s sanitization of the banking industry is trying to put the banks back on track, which should be supported.
Com. Ikenna Osuwa
[email protected]
In the past five years these two CBN governors – Soludo and Sanusi, have helped to shape and reshape the banking industry, either positively through robust reforms aimed at strengthening and sanitizing the banking sector, or negatively through negligence of duty, abuse of office and failed leadership. However, they have contributed immensely to the present stage of development in the banking sector.
As CBN governor, Soludo shook up the sector in 2006 by forcing a recapitalisation of banks and insurance companies, and made financial sector deregulation a reality. He made a few enemies; yet, his consolidation was a breath of fresh air. Nobody can take away the credit due to Soludo over the bank consolidation, even if like me, you had doubts about his motives - the cynic in me has always wondered if the consolidation were not principally to enable our politicians launder their sudden and unaccounted wealth.
Soludo’s reign as CBN governor ended with Nigerians divided on the outcome of the rot his successor in office is discovering and sanitizing. His exit as CBN helmsman has gathered more opprobrium, than the exit of any other public servant in the last ten years. Many opined that he compromised his position while in office, by not regulating the activities of the bank chiefs that’s why his successor has been discovering and sanitizing the shambles he left behind in CBN. It would be however unfair not to commend Soludo’s bank consolidation reforms, which pruned out the weak banks, and facilitated the merging of smaller banks into a bigger and stronger bank.
However, if Soludo is to be commended for the success of his consolidation by fiat, then his failure to regulate the banking sector should be condemned. It is very obvious for a long time that he was more concerned with the size of the banks than with good governance in the financial sector. Even the banking consolidation exercise carried out by Prof. Charles Soludo has come under fire from different quarters; his successor Sanusi Lamido has described the exercise as a “sham,” and that “many of the banks never raised the capital which they claimed they did.” Sanusi however said that “the bank consolidation helped to create bigger banks while it failed to overcome the fundamental weakness in corporate governance in many banks”.
Objectively Soludo’s acclaimed solution to the banking woes then, encouraged the unethical practices that Sanusi is now confronted with. These unethical practices by banks and their executives took place under the watchful eyes of Soludo. The CBN under Soludo was regulating the activities of the banks in a laissez-faire fashion, bank executives went on a borrowing galore to feed a rising ‘easy money’ culture. Today, banks are saddled with N9 trillion toxic debts. Margin loans given to mostly cronies and associates to purchase and speculate on the stocks of the same lender-banks drove a bullish Nigerian Stock Exchange to high heavens. Soludo’s CBN made matters worse by compromising its position as a regulator; was lenient with bank executives and never regulated their activities, exuberantly claimed that the Nigerian economy and banks were immune to the raging global financial crisis, when it was very clear that most of the banks were insolvent.
The bank executives loyal to Soludo detest any attempt to clean up the industry; and they attacked anyone who disapproved of Soludo’s braggadocio. Warnings that few of the nation’s banks were unhealthy fell on deaf ears. In June 2009, Sanusi took over and two months later, following a sector audit, sacked five bank executives whose banks had become serial borrowers of most of the N256.571 billion from the CBN in the previous two months. He accused banks of excessively high level of non-performing loans, poor corporate governance practices, lax credit administration processes, absence or non-adherence to the banks’ credit risk management practices, significant capital impairment, which were all clear evidence of corruption.
What Soludo treated as a liquidity crisis was indeed a solvency crisis; an explosive cocktail of undercapitalised ‘systemically important’ banks heavily concentrated in high risk areas, causing significant capital impairment. Soludo’s CBN also failed to prevent fraud and deception, or steer consumers away from risky investments they hardly understood, rather it encouraged and connived in the deception of the public.
In view of the revelations of the gargantuan fraud in the banking sector. The tenure of Soludo as CBN helmsman should be probed, and all those that were involved in the wreckage of the vital sector of the economy should to be brought to book instead of allowing them to walk as free men. Soludo’s failed attempt to seek immunity in the wake of the bizarre rape of the banking sector and the Nigerian economy should be condemned. The nation must start punishing people who wreck institutions and put the lives and interests of the generality of Nigerians in danger while furthering their own personal interests.
I believe that every Nigerian has the right to aspire to any office in the land, given all other requirements but i do not believe that public service should be a reward for failure. When such failure leads to mass privation, I have every reason to demand that such a Nigerian should not only be probed but censored for his role. The Nigerian banking sector provides a ready instance where a critical sector was led to become a slush fund for those close to the former central bank governor, hence the ruination of the sector and the present decimation of the life savings of Nigerians and the mass purge now going on in the banking sector, we have our reasons to warn that the nation stands to give an official stamp to such reckless official acts if nothing is done to unravel all the culprits of the banking scandal that left millions of Nigerians robbed of their savings.
However, what was Soludo’s solution to the banking industry? Is it to allow bank chiefs free hand to ruin peoples money at their disposal? Is it its claim that the Nigerian economy and banks were immune to the raging global financial crisis, when it was evident that the global crises have affected the banks and economy? Is it to change the currency from plain paper to polymer? This was later discovered to be a big scam involving top CBN officials and Securency. However the polymer scandal has been swept under the carpet. I have tried hard to analyse Soludo’s input to CBN after his consolidation exercise but to no avail. Instead its tenure has caused great problems to the economy: what is the fate of the sacked bank workers? These are bread winners in their various homes. What is the fate of the small and large scale industries? Many of them have sacked their workers, because they no longer have the financial strength to meet up.
Sanusi’s sanitization should be encouraged and supported to flush out those who ruined the economy, and build public confidence in the banking sector. Those claiming his sanitization is part of a northern agenda, should desist from such line of thought. We mustn’t encourage failure; Soludo’s solution has failed, while Sanusi’s sanitization of the banking industry is trying to put the banks back on track, which should be supported.
Com. Ikenna Osuwa
[email protected]
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