Sanusi incompetent to manage CBN

His Royal Majesty Timtiniko Enodien is the monarch of Eket, Akwa Ibom State. The monarch feels so bad about what goes on in the banking sector, especially the way the Central Bank of Nigeria (CBN) battles commercial banks and still threatens to do more.

Enodien is not just the ordinary observer of the development. He is a knowledgeable citizen in banking with a PhD in Public Finance, two previous degrees in Economics from universities of reputation in Europe and USA. He worked and retired as Permanent Secretary in the presidency and Federal Ministry of Finance. During his working years, he represented government interests as director in several banks. Therefore, he is at home with banking and its policies.

He feels livid with the way the CBN Governor, Sanusi Lamido Sanusi manages the nation’s economy and is sure if the man is allowed to continue his way, the nation is economically doomed.

The old economist does not think Sanusi should be watched helplessly. It is either the president and finance ministry call him to order or he ruins the banking sector and ultimately the economy as he told Saturday Sun in his palace at Eket.

The question of how best the CBN can manage or correct itself on its present policies on commercial banks is a large one. But it could be broken down with time as our discussion progresses. The bottomline is that the CBN through its activities has been killing the banks and that is not proper. I begin to wonder whether the management of the apex bank actually knows what they are doing. Because the first thing to learn about banking is that bank is the most sensitive establishment or business outfit in the sense that you only need a rumour – real or imaginary to kill the bank totally. It is as easy as that and a good management of the apex bank will go by the rules. And the rule is that a bank is considered insolvent or inadequate if it doesn’t meet the depositors’ liability. Customers come to the bank and drop their money on trust that whenever they need it no stories would be told about it.

Therefore, if there is any problem in the banking sector, the CBN should rather manage it wisely instead of making a public show of it, otherwise you are invariably killing what you should protect. Listing a number of banks and declaring them insolvent before the public is in fact killing them before their real death. Assuming something was wrong, there are ways to handle it. There is what is called liquidity ratio in banking – the ration of cash and other easily realizable assets are mostly held by the CBN. Whenever there is imbalance in this or when it is not favourable, it is the duty of the CBN to find ways of correcting the anomaly and putting the bank back on track.

That intervention is intended to prevent the affected bank from going under. For instance, we heard of rescue measures by government in several economies during the meltdown. But meltdown is just somebody’s invention or coinage. It simply means a recession – a situation where there is less and reduced economic activity. Consequently, there is not enough money to buy goods and services and a backlash of further dull and slower economic activity as people lose their jobs. It leads to job loss, which swells the unemployment ratio that possesses the spending power that keeps the economy going.

That is why I wonder whenever I read that the CBN governor boasts that there are still more banks to go under his hammer whether he understands the implications of his actions. No good central bank does that or speaks that way as if to scare people, even foreign investors, or cause stampede in the economy. If things get so bad, the CBN investigates, looks at the liquidity ratio and looks at the books and calls the involved banks to order.

Banks survive on confidence. For instance, there is the N100 note. The value is nothing as a piece of paper. The real value is that confidence by the owner of a commodity who you give it in exchange for his goods who collects it because he knows the plantain seller, for instance, will not reject it in exchange for plantain. Any time he understands that the confidence of the seller of what he wants over the N100 he has is destroyed by any economic force or reason or policy of state, the N100 possesses no value at all. It actually turns to a piece of worthless paper. That is exactly the same with banks. When the confidence is destroyed, then nothing is left for the economy to survive on and that is exactly what the present CBN Governor, Sanusi Lamido Sanusi is doing.

So, I keep wondering where we are going in a nation that talks about Vision 20: 20-20. I can assure you that with the CBN style of killing the banks it will not be real. In fact we have to heal the banks CBN governor killed before we talk of recovery, which will take so long. I say it many times over that the sector has been killed because the confidence has been thoroughly shaken. I still wonder and ask other Nigerians whether this CBN governor is solving the problem of the banks or helping in killing them.
I didn’t know of any such haste or policy change in the CBN management before Sanusi came in.

For instance, we heard of investigation of the banks before or after the announcement of sack of bank managing directors, yet certain things as we hear make us question that investigation and its outcome. But I know that the rule is after a team is sent out for investigation, you sit down with it and see the findings before taking action. Now the developments in the CBN try to show us there must have been procedures not properly followed or hastily executed.

Even when you find out from a proper investigation that something went wrong or that your investigations are accurate, you have no need blowing the outcome open to the public. You first of all sit down with the directors of the bank/s and reason with them on the best way to tackle the problem. If for instance the liquidity is poor and needs to be shored up or there are other problems, the CBN agrees with the directors on how to correct the anomaly. It will be the duty of the apex bank to give the affected bank limited time to comply and since they know the consequences of non-compliance, there are under obligation to do just that and find way of healing the bank. But if at last there is no common ground on finding solution to this problem, nothing in the books say the CBN should take over the banks or sit down somewhere and announce the sack or removal of the director or head of the banks. All these measures are set in place not to encourage unethical practices in the sector, but to guard against steps that could cause chaos and engender more damage to the economy by blowing it open that Bank A, K, or P is down and out.

Okay, there is the bank board of directors, and I ask in these drama we have witnessed, were they properly and adequately involvement before the action was taken. The board is answerable to the shareholders and that order should be respected and allowed. But for one man to go ahead and adopt all the powers as if the management of the CBN is one man’s business is unheard of. It can never happen in any enlightened and orderly society. So, the whole thing smacks of, I am sorry to say, ignorance. And the way banking system is run elsewhere I don’t think these managers of our CBN would have been allowed to continue with actions that would send us and our economy so many years backwards.

I have to tell you honestly that with this CBN style of banking sector management, nobody should continue to think of the actualization of the Vision 20: 20-20 dream.

Yes, there could be mismanagement of the bank by the management, but in what sense? Is it in unsecured loan? If that is the problem, then the board of the bank is still to be involved in finding ways of tackling the problem. An MD has limits in grant of loans, and every loan has accepted collateral to secure it. If a manager flouts the rule, the board has the power to discipline him, find a way of securing or recovering the loan or other reasonable steps that may be necessary. But blowing it out of proportion does not in any way solve the problem.

If the management went wrong by staffing the bank with unqualified manpower, that is another problem still left for the board to handle and there is a way out it. But there is never a time the solution will be someone sitting somewhere in Abuja and talking as if he has the ultimate and monopoly power of knowing everything about banking.

I was once a director representing the Federal Government in quite some banks, and sometimes, we jokingly discuss that most times when banking examiners come it is for the sake of formality. And if it is the same class of people I used to know who are after personal interest in their examination, I can’t imagine them being so patriotic to deliver a report of the real situation or state of the banks. I knew them as people who wrote a lot of irrelevances maybe because the people involved refused to play ball.
I feel so bad about this attitude of the CBN governor and to some extent about the Federal Ministry of Finance, because if the office knew what should be done the governor should be called to order before he does worse damage as he is boasting about taking on more banks. He has actually done so much damage that will take us generations to heal, what is the need watching him do more to bring total ruin to the economy beyond remedy.

What super humans are they in the Central Bank to take over and take charge of these banks and they are still bragging to do more. The boards of the banks are not there for nothing.
Even at my level then in the Ministry of Finance I used to advise the CBN governor on policies one felt was not too good. Sometimes he might visit me in my office or ask that I see him in his own office for a discussion on that. Nothing says the CBN governor knows all and should act as if he is the only one with knowledge of what should be done and at last expose the economy to serious problems instead of solving existing ones.

As a matter of fact, if the banks would tell you the truth, since the CBN started this destruction, deposits must have plunged drastically, and I am sure the culture of saving money under the pillow at home must have taken a rise because the depositor doesn’t trust the bank any more. Our meltdown, which others are already recovering from, is just commencing. I tell you that the CBN governor has caused our own local recession, which nobody knows when we will get out of it because he is still unrelenting in his ways and nobody wants to call him to order. We are certainly heading towards such crisis unless someone stops them. What is certain is that since the CBN governor has been allowed to continue the way he carries on, we are surely heading for worst times.

It looks to me like the CBN governor is probably knowledgeable in micro banking, bookkeeping, bank management and a good relationship in dealing with the customer. But the knowledge of the real banking, economic and monetary policies, which I will call macro banking is actually what you need to manage the CBN. It is a different case altogether because it is more of banking, monetary and economic policymaking and the effective combination of all.

However, I would not suggest to his employer to remove him, but if I had the power to do that myself or were his employer, I would not keep him.

And after doing this much damage, he still boasts and announces that many more banks will still go. If what we read about him is true, that means the CBN Governor does not mean well for the economy or does not know what to do or how to manage the economy of a nation with his position.
As I said earlier, there is recession – a time for downturn when activities slow down and production develops a negative trend. The major thing governments in other places do is to embark on projects that help to pump money back into the system and create jobs like real estate development.

Real estate or building projects is always the best option because it creates a lot of jobs, involves so many others sectors of the economy in procurement of items needed and creates assets that don’t depreciate in value easily. The materials they require from those sectors get them back on their feet. They don’t just dump money in banks as a way of fighting recession like we saw the CBN governor do after going against banks. I am even surprised that the Federal Government is not asking the governor questions on the reckless release of money to the involved banks.

I even ask if the banks the CBN is accusing were as reckless in issuing loans like the CBN has been in releasing money to them. What collateral has the CBN from the banks they are dumping money in to secure the liquidity? Because to retain these large sums of money in these same banks accused of non-prudent management is a question the CBN has not answered. At last we will find out that the problem will be worse than the one the accused banks created. The banks may have taken collateral for loans which are inadequate, but the CBN has ignored a basic rule of ensuring the banks have adequate facility to secure the money them pump into them to sustain the cash ratio balance.

To sustain my argument that the CBN investigation of the banks were grossly inadequate, I want to recall to you that few days after the CBN announced a bailout of N420b to the first five banks it moved against, these same banks said they didn’t need them because there were liquid enough. That goes to say that it is only in Nigeria what CBN is doing would be allowed to continue without a check. The FG in my view would have asked independent examiners to look at the books of the banks instead of allowing the CBN to run this type of show thereby making them the accuser, the jury and the judge.

The Federal Government for purposes of balance should not just accept everything they say as gospel truth.

My final word on this is that if the CBN is allowed to continue the way it does, I don’t see any light at the end of the tunnel for the commercial banks to retain their boldness, enjoy the confidence of the customer and play its vital role in the economy. That is why I keep saying that the federal government should put its feet down and save the situation from the hands of the CBN. The FG cannot save this economy without correcting this present inadequacy in the central bank. CBN is definitely not helping the economy or moving in the direction to do so. But if someone thinks otherwise and we decide to fold our arms and watch, we will see the doom very soon.
Sun News