Sunday, 2 June 2013

Sanusi: Four Years of Banking Reforms

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CBN Governor, Sanusi Lamido Sanusi
Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi will be four years on the saddle on Tuesday. Although he has expressed his desire not to seek re-appointment at the end of his four –year tenure in June next year, economic watchers say he has already made an appreciable impact on the job, reports Festus Akanbi

 Again, honour came the way of Central Bank of Nigeria Governor Sanusi Lamido Sanusi last week when he bagged the Central Bank Governor of the Year award, by the African Banker Awards.

 While presenting the award, which Sanusi has won three times in a row, the African Banker Awards said the CBN governor was picked for the prestigious honour in recognition of his outstanding work in sustaining banking reforms. The award coincided with the third year anniversary of the apex bank governor who effectively took over from his predecessor, Prof Chukwuma Soludo, on June 4, 2009.
Coming at the period of a global financial turmoil, Sanusi’s priority was centred on the need to shield the Nigerian financial sector from further “attacks”. He felt the best way to go about it was to purge the sector of the virus of corruption and unethical practices.

Probing the Banks
Silently but with a determined gusto, a forensic probe panel team was constituted, comprising CBN investigators and their counterparts from the Nigeria Deposit Insurance Corporation (NDIC).

 The probe confirmed Sanusi’s fears that some of the banks were clinically at the verge of collapse as a result of a combination of opaque financial system, the burden of non-performing loans and gross abuse of position by some of the bank chiefs. In one fell swoop, managing directors of some of the affected banks were removed while some tested hands in the industry were appointed to take over from them.

 The dismissal of the hitherto powerful chief executives of seven banks and the bail-out of the affected financial institutions were seen by many as critical interventions in the sector, which saved hundreds of depositors’ funds from going down the drain. The move readily conferred on Sanusi the toga of a reformer both within and outside the shores of the country.

 The banks that failed the joint stress test included Union Bank Plc, Intercontinental Bank, Oceanic Bank International Plc, Afribank Plc, Bank PHB, FinBank, Spring Bank and Equitorial Trust Bank Limited.

 By the way, only a few months earlier, Soludo, whose tenure witnessed a major reform of the banking sector that saw the number of banks reduced from 89 to 24 with the 25-fold jacked up in banks capital base, had assured the whole world that the Nigerian banking sector was safe and secure.

The Banks Rescued
Apart from his stride in exposing the rot in the financial sector, his singular devotion to combating inflation, using monetary policy instrument, had received worldwide acclaim. Sanusi’s fiercely independent view on issues beyond the purview of the central bank, including politics, has, however, earned him the reputation of an opposition within the government and endeared him to those who view this as a refreshing difference from the known position of people in government.
In August 2009, the Sanusi led CBN to “rescue” the eight banks adjudged to have failed the stress test.

 The affected banks were given a 2011 deadline to secure new investors. However, when it became obvious that a number of them could not meet the September 30 deadline for the banks to get new buyers, CBN withdrew the licences of the three banks, which were bridged by Asset Management Corporation of Nigeria (AMCON). The banks included Afribank, Bank PHB and Spring Bank and in their ruins emerged Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited.
Today, AMCON is at the verge of selling the banks, a development, which is seen as a plus for the administration of Sanusi, whose rescue operation had saved the banks from total collapse.

 The intervention, which involved the injection of N400 billion by the CBN and the dismissal of their chief executives, was to “send a strong signal that such recklessness on the part of bank executives will no longer be tolerated.” Sixteen senior bank officials faced charges that included fraud, lending to fake companies, giving loans to companies they had personal interests in and conspiring with stockbrokers to boost share prices. In September 2009, he predicted that 15 of the then 24 Nigerian banks might survive reform in the banking sector. In a wide-ranging interview with the Financial Times in December 2009, Sanusi defended the extensive reforms that he had initiated since taking office, dubbed by some as the “Sanusi tsunami.

 He noted that there was no choice but to attack the many powerful and interrelated vested interests, who were exploiting the financial system. He expressed his appreciation of support from the Presidency, the Economic and Financial Crimes Commission, the Finance minister and others.
At a February 2010 conference on banking in Nigeria, Sanusi spoke of his blueprint for reforming Nigeria’s financial system. He said it was built around four pillars of enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that the financial sector contributes to the real economy.

Banks Return to Profitability
The emphasis, which Sanusi had placed on transparency and risk management, is already imparting positively on the financial performance of the banks. Apart from the sharp fall in the ratio of non-performing loans, which reflected in the latest financial figures churned out by the banks, the robustness of Sanusi’s policy also manifested in profit margins of virtually all the banks in their 2012 operations. But the banks are yet to be on a cruising level, according to the International Monetary Fund.

 Another area where Sanusi excelled is in the aspect of electronic banking. He launched a cashless policy, which seeks to discourage customers from crowding the banking halls. The pilot scheme took off in Lagos in 2012 with the determination to spread the policy to other parts of the country this year. The policy placed a ceiling on amount of cash that can be withdrawn from banks.

Interventions in Critical Sectors
Realising the difficulty of some critical sectors of the economy in accessing credits from banks, the CBN under Sanusi made some interventions in the affected sectors. One of such was the aviation sector fund, which enabled private airlines to improve their operations in a number of ways. The apex bank also took a shot at the agricultural sector where it encouraged money deposit banks to grant loans to farmers.

In recognition of the growing demand for Islamic banking, the CBN under Sanusi also launched an Islamic banking system. Apart from new banks, which obtained licence for Islamic mode of banking, some conventional banks also have Islamic banking window.

 The evolution of a microfinance banking institution is also to the credit of Sanusi’s administration in CBN. According to Sanusi, the need to fashion out a structure for the informal sector and the small and medium enterprises was motivated by the glaring difficulty of the SMEs in accessing funding from conventional banks. The microfinance banks have undergone various forms of modifications.

Currency Revaluation
In 2012, the CBN made efforts to revalue the nation’s currency in view of the perceived gaps in the cash system. It sought to introduce N5, 000 notes, while attempts were also made to change some small denominations into coins. But an overwhelming opposition from the National Assembly and a section of the public forced the apex bank to drop the policy after the pronouncement from the presidency that Nigeria was not ready for it for now.

Inflation Watch
In terms of economy monitoring, the CBN could be given a pass mark as a regime of tight monetary policy upheld by the bank since December 2011 is reflecting both in the improvement in inflation figures and accretion of foreign reserves. With the foreign reserves put at well over $48 billionand the inflation hovering at 9.1, the economy is obviously experiencing a growth trajectory. At the last Monetary Policy Committee meeting, members voted for a 12 percent MPR and a Cash Reserve Ratio of 12. The CBN governor has threatened to further jerk up the CRR in view of the anticipated flurry of spending by politicians in the build-up to 2015.

 The Sanusi-led CBN has also fought for its’ independence. Sanusi’s argument is that the apex bank needs to be free to save it from running into bureaucratic bottlenecks, which is the bane of many government organisations.

The Man Lamido Sanusi
Lamido Sanusi was appointed Governor of the Central Bank of Nigeria on June 3, 2009. He is a career banker, whose sterling qualities have attracted the attention of the renowned global financial intelligence magazine, The Banker, published by the Financial Times. The magazine has conferred on Sanusi three awards. He has been recognised with the global award for Central Bank Governor of the Year, as well as for Central Bank Governor of the Year for Africa. The TIME magazine also listed Sanusi in its TIMES 100 list of most influential people of 2011.
Sanusi was born on July 31, 1961. His father was a permanent secretary in the Ministry of Foreign Affairs in the 1960s, and his grandfather was Emir of Kano and Islamic Scholar, Alhaji Muhammadu Sanusi, which makes him a blueblood. Sanusi graduated from King’s College Lagos in 1977 and studied at Ahmadu Bello University (ABU), Zaria earning a B Sc in Economics in 1981. He then taught economics at ABU from 1983 to 1985. He also obtained a degree in Islamic law from International University of Africa, Khartoum.
In 1985, Sanusi joined Icon Limited (Merchant Bankers), a subsidiary of Morgan Guaranty Trust Bank of New York, and Baring Brothers of London. He moved to the United Bank for Africa in 1997 in the Credit and Risk Management Division, rising to the position of a General Manager. In September 2005, he joined the board of First Bank of Nigeria as an Executive Director in charge of Risk and Management Control, and was appointed Group Managing Director (CEO) in January 2009.
He was also the Chairman, Kakawa Discount House and sat on the Board of FBN Bank (UK) Limited.

 Sanusi is recognised in the banking industry for his contribution towards developing a risk management culture in the Nigerian banking sector.

 He has, however, indicated his readiness to quit at the end of his tenure next year, saying his job as apex bank governor is already done.
Source: ThisDayLive

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