Look, i lost as much as most of you in the stock market crash (read: millions). But i still have a brain. And i know where blame is due in this matter.
Truth be told, many of you Sanusi haters are driven by religious or ethnic bias.

Ibime:

You lot are jokers.
What was so complex about the loans given out by the failed banks?
Complex financial instruments ko, complex measurement instruments ni!
Structured products are structured over underlying assets, unlike in Nigeria where banks structure products over thin air and other intangibles such as "trust" and "personal relationship". 
CBN has just commissioned a contract with someone I know for work on a 30-year yield curve for Nigeria to help develop the corporate bond market. Naija companies have historically been unable to raise capital by issuing corporate bonds. Guaranty Trust bank has been the first bank to successfully issue corporate bonds just last month while the rest of yall sit on Nairaland raking dust about Northern agenda. I guess these forward looking measures by CBN are all part of retrogressive thinking by Sanusi in his pursuit of a "raw cash" economy.

I didn't refer to the loans given out by the banks as complex financial instruments. I simply stated that Sanusi has killed risk taking and complex financial instruments are by nature very risky.
However, I stated that massive projects were beginning to get backed by the banks- TINAPA, MMA2, many Oil & Gas projects, etc. Nigeria was headed to a place where we would've started using complex financial instruments to pool capital to fund massive infrastructure projetcs.

By complex financial instruments, I refer to derivatives and fixed income instruments such as options, warrants, swaps, commodity-based futures, auction rate securities, structured notes on assets and all the other financial jargons that have been created to enhance leverage.

Bonds are good, but it is boring and too simple and your expected income is in most cases specific. It only serves as a safety net.
Sanusi's risk averseness would naturally make him a lover of bonds. But in this era, bonds would never fund the huge financing gaps we have in power and transport infrastructure, housing et al.

biina:

Its always sad to see the Sanusi haters using misinformation and/or disinformation to try and win their arguments.

@papabrowne
[b]U claim to have more info than the rest of us. [/b]Could you then be so kind as to furnish the rest of us with your privileged data?
- What were the conditions the banks were in before the CBN intervention? did it differ from the claims made by the CBN that said banks were owing heavily in the Interbank market?
- What is the situation of things presently, and how bad have things gotten due to the CBN actions?
- What should have been the correct course of action for a non-sanusi CBN?

Again please provide facts and figures and not just your opinion.

Never claimed to have more info than anybody. The nature of technology these days has made data available to virtually anybody that wants it.
Simply visiting CBN's website & downloading(they've stopped it) the weekly Forex Dutch auction transactions by companies in all segments of the economy can tell U a million things about the Nigerian economy- that is if you know well enough how to utilize it. There are a million other ways to get data Biina, a million other ways!!

-The banks were in a pretty bad shape before the CBN intervention, however, there were no indications whatsoever that they were about to collapse.
- After Sanusi's intervention, the economy dipped sharply and stays as bad since then. Everybody , even those outside the sector know the negative impact of his action on their businesses. Credits have dried. 10,000 jobs have been lost. But most importantly, risk has been criminalised in a country where doing business is as risky as a bungee jump. Entrepreneurship is the victim.
-The correct course of action would have been a more calculated approach to clean the industry without negatively impacting on an already battered economy. But Sanusi brought his personal squabbles with CEO's to the forefront, and got everything wrong from the onset.

idiopathic:

-----------------------------------------------------------------------------------------------------------------------------------
Papabrowne,
I am sure you must be joking
Where are these complex financial instruments you are alluding to? Kindly give me a few examples.
I am not aware of any of these banks being involved in investment banking or derivative trading. The don't give out personal loans, and are almost invincible in the mortgage market. So,what are these risks you are referring to?
Except you want us to believe that giving unsecured billons to their cronies and and buying personal properties all over the world constitutes risk taking.

Please stop beating around the bush and blame the crooks (Akingbola, Ibru)  who wrecked the banks.

I mentioned categorically that the financial sector was previously evolving to a stage where we would've been able to use these complex financial instruments such as derivatives and fixed income assets  to pool huge capital that would then be used to fund massive infrastructural projects.
If you notice, I used the phrase  embryonic stage- to pinpoint the fact that we hadn't started using these instruments, however the culture was been brewed and it would have been only a matter of time before we started enjoying these facilities.
Unfortunately,Sanusi destroyed the potential for these kind of instruments in the name of risk averseness!

Nigeria has a shortfall of 16 million homes. To put it mildly, that would cost $300billion.
To get just 25000 MW of electricity, which in real terms is grossly inadequate when matched with South Africa's 40,000MW, We need somewhere in the region of $100 billion dollars.
To catch up with the rest of the developing world, we need roads and rail valued in hundreds of billions.
There are other areas to be funded like Healthcare, Education, Water, etc.

Government cannot afford these kind of figures no matter the price of Oil.
The only way to do it is by developing a robust financial sector that would utilize leverage albeit with measured risk.That was the direction Soludo was headed. Yes it is risky and you can get your fingers burned, but it is about the only way forward.

Sanusi came in and started preaching conservative banking. Talking about risk management without fitting it to our unique terrain. His direction wouldn't lead this country anywhere but downstairs. Good news is that his game is over. Jonathan, without question, knows better than allowing the aimless and directionless man keep on ruining the prospects for our development.

PapaBrowne:

I didn't refer to the loans given out by the banks as complex financial instruments. I simply stated that Sanusi has killed risk taking and complex financial instruments are by nature very risky.
However, I stated that massive projects were beginning to get backed by the banks- TINAPA, MMA2, many Oil & Gas projects, etc. Nigeria was headed to a place where we would've  started using complex financial instruments to pool capital to fund massive infrastructure projects.

By complex financial instruments, I refer to derivatives and fixed income instruments such as options, warrants, swaps, commodity-based futures, auction rate securities, structured notes on assets and all the other financial jargons that have been created to enhance leverage.

Bonds are good, but it is boring and too simple and your expected income is in most cases specific. It only serves as a safety net.
Sanusi's risk averseness would naturally make him a lover of bonds. But in this era, bonds would never fund the huge financing gaps we have in power and transport infrastructure, housing et al.

Aren't same complex financial instrument the bane of the financial sector in developed countries?
Are you arguing that complex instruments make the system more profitable? That would be as silly as saying that the value of a company's shares affects its profitability (when its the other way round).
Complex instruments are the toys of finance managers as they essentially make risk assessments more difficult. Eventually when the market reconciles, members of the public end up having to pay for the excess of those in the financial sector. Still what has that got to do with the health of the banking sector.

PapaBrowne:

Never claimed to have more info than anybody. The nature of technology these days has made data available to virtually anybody that wants it.

Your claim is implicit when you make declarative statements like the economy is bleeding and stating that another poster has limited info.

Simply visiting CBN's website & downloading(they've stopped it) the weekly Forex Dutch auction transactions  by companies in all segments of the economy can tell U a million things about the Nigerian economy- that is if you know well enough how to utilize it. There are a million other ways to get data Biina, a million other ways!!

So the Forex market is your tool for evaluating the financial sector or do you think the CBN is responsible for the entire economy?

-The banks were in a pretty bad shape before the CBN intervention, however, there were no indications whatsoever that they were about to collapse.

So a bank that has a 1% CAR as opposed to the minimum 10% is not about to collapse?
The five banks who were perennial borrowers and/or on CBN liquidity support, owing 89% of the interbank debt to CBN, with over NGN250 Billion in guaranteed takings are not about to collapse?
Banks with liquidity ratio below regulatory requirements are not about to collapse?
Banks with over 40% of the loans being non performing are not about to collapse?
Please tell me what it will take for them to be "about to collapse" in your books'. Facts and figures please and not just ur opinion

- After Sanusi's intervention, the economy dipped sharply and stays as bad since then. Everybody , even those outside the sector know the negative impact of his action on their businesses. Credits have dried. 10,000 jobs have been lost. But most importantly, risk has been criminalised in a country where doing business is as risky as a bungee jump. Entrepreneurship is the victim.

Please provide facts and figure to support your claims of a permanent dip due to Sanusi's actions.
Also how has Sanusi stopped you from taking risks? or you do rather he leave in place executives that were cooking the books in the name of allowing risks?

-The correct course of action would have been a more calculated approach to clean the industry without negatively impacting on an already battered economy. But Sanusi brought his personal squabbles with CEO's to the forefront, and got everything wrong from the onset.

Please explain your more calculated approach and provide evidence of Sanusi's personal squabbles with the CEOs
- should he have left the corrupt CEOs in the office?
- Should he havel eft the banks to borrow more money in the interbank market when they have not been paying back on the ones they owe?
- should he have left the banks with their poor CAR and liquidity ratios?

BTW wonder what you will do if Sanusi remains in office till the end of his tenure?

PapaBrowne:

I mentioned categorically that the financial sector was previously evolving to a stage where we would've been able to use these complex financial instruments such a derivatives and fixed income assets  to pool huge capital that would then be used to fund massive infrastructural projects.
If you notice, I used the phrase  embryonic stage- to pinpoint the fact that we hadn't started using these instruments, however the culture was been brewed and it would have been only a matter of time before we started enjoying these facilities.
Unfortunately,Sanusi destroyed the potential for these kind of instruments in the name of risk averseness!

Nigeria has a shortfall of 16 million homes. To put it mildly, that would cost $300billion.
To get just 25000 MW of electricity, which in real terms is grossly inadequate when matched with South Africa's 40,000MW, We need somewhere in the region of $100 billion dollars.
To catch up with the rest of the developing world, we need roads and rail valued in hundreds of billions.
There are other areas to be funded like Healthcare, Education, Water, etc.

Government cannot afford these kind of figures no matter the price of Oil.
The only way to do it is by developing a robust financial sector that would utilize leverage albeit with measured risk.That was the direction Soludo was headed. Yes it is risky and you can get your fingers burned, but it is about the only way forward.

Sanusi came in and started preaching conservative banking. Talking about risk management without fitting it to our unique terrain. His direction wouldn't lead this country anywhere but downstairs. Good news is that his game is over. Jonathan, without question, knows better than allowing the aimless and directionless man keep on ruining the prospects for our development.

You sound like an Harrod-Dorma proponent, who thinks that money/capital is the only  factor for economic growth.  Sorry to disappoint you, but that argument only holds in developed countries, and trying same in Naija is like pumping water into a leaking tank = wasted effort. It was the same line of thought that led Soludo to increasing bank capitalization and the only thing we have to show for it is a handful of banks that we can not afford to fail. Soludo put the cart before the horse and worsened a bad situation. He creted the EDW, encouraging the troubled banks to keep on leeching on the system, when they would have been left to fail prior to the mergers.

The financial sector needed cleaning up and not to be encouraged to invest blindly. Sanusi is doing what is needed, while you, my friend, are talking about what you want. Using 'complex instruments' under poor corporate governance is a recipe for disaster. Risk taking is encouraged not discouraged, by transparency.

None of the bank's in the story you posted were affected by Sanusi's agbero tactics, yet you somehow posted them as proof. You see how far off point you are?

Sigh. . i post them as proof that sound banks attract capital
the banks passed the CBN audit. . simple for all to see. .
the EIB has told u they have confidence in the banks they have given loans to
meaning that they are satisfied with the corporate governance issues of the said banks(First bank,GTB,Stanbic IBTC)
Also if the head of the EIB passes a vote of confidence on Sanusis reforms
who are u.  .a  50yr old bush man who spends all his time on NAIRALAND,to say otherwise

Those banks would have been able to get loans anyday and anywhere.

It seems u know nothing about Banking 101. . .
If Oceanic and Intercontinental could get loans how come they didnt get it before now. . all through 2008, into mid 2009
why were they critically stuck on the EDW?

Everybank is only as good as the confidence they can attract
If everyone walks into a bank to withdraw money on the same day. . it means a run has been triggered
by the middle of last yr there was basically no confidence in any of these banks bailed out

with rumours flying around of toxic assets as much as $10billion
the banks were basically insolvent.  .

its u that needs your head examined if u think anybody on earth would have bailed out those banks except the feds

You have a big problem when it comes to critical thinking, you always want to drop names and pluck arguments from thin air; at the same time as being rude.

P.S.  .if u cant decipher my line of argument,maybe its cause u are a little bit slow. .ever considered that?

biina:

You sound like an Harrod-Dorma proponent, who thinks that money/capital is the only  factor for economic growth.  Sorry to disappoint you, but that argument only holds in developed countries, and trying same in Naija is like pumping water into a leaking tank = wasted effort. It was the same line of thought that led Soludo to increasing bank capitalization and the only thing we have to show for it is a handful of banks that we can not afford to fail. Soludo put the cart before the horse and worsened a bad situation. He creted the EDW, encouraging the troubled banks to keep on leeching on the system, when they would have been left to fail prior to the mergers.

The financial sector needed cleaning up and not to be encouraged to invest blindly. Sanusi is doing what is needed, while you, my friend, are talking about what you want. Using 'complex instruments' under poor corporate governance is a recipe for disaster. Risk taking is encouraged not discouraged, by transparency.

No I'm not a Harod dorma proponent. I am very much aware that other factors like Human Capital, Technology, entrepreneurship etc are required for economic growth. All those would fall into place as financial capital becomes available.

Neither am I saying the system didn't need a clean up. However, what Sanusi did is akin to using bleach on coloured clothes just to pull out a stain. Sad thing is that it would wash off both the stain and the color of the the cloth leaving the cloth useless and unwearable.
Thats exactly what has happened to our financial sector.

Biina, we can have this argument for the next 10 years and it is unlikely our positions would shift for the simple reason that our preferred future for the banking sector is probably in opposite directions. However, there is one thing we can easily agree on and that is the fact that Sanusi has done more to destroy the industry than he has done to build it.

PapaBrowne:

No I'm not a Harod dorma proponent. I am very much aware that other factors like Human Capital, Technology, entrepreneurship etc are required for economic growth. All those would fall into place as financial capital becomes available.

and you are not an HD guy?  where would those other factor fall from, the sky?
The Nigeria problem has not been a shortage of capital, and until it is, your capital argument remains fraulty.

Neither am I saying the system didn't need a clean up. However, what Sanusi did is akin to using bleach on coloured clothes just to pull out a stain. Sad thing is that it would wash off both the stain and the color of the the cloth leaving the cloth useless and unwearable.
Thats exactly what has happened to our financial sector.

Unwearable? so the sector has collapsed? I guess all the other banks will be declaring losses at the end of this year then.

Biina, we can have this argument for the next 10 years and it is unlikely our positions would shift for the simple reason that our preferred future for the banking sector is probably in opposite directions. However, there is one thing we can easily agree on and that is the fact that Sanusi has done more to destroy the industry than he has done to build it.

This you have gotten totally wrong. What Sanusi has done is in the best interest of the sector, and should have come several years earlier before all the consolidation jargon.
The only thing that makes this discussion pointless is your failure to back up your position with facts and figures.

Sanusi has done is in the best interest of the sector, and should have come several years earlier before all the consolidation jargon.

dont mean to get in between y'all street brawl. . .

but consolidation was the best thing to happen to Nigerias economy in well. . forever. . .
hope u dont expect me to explain cause its clear for all to see

paddy_lo:

dont mean to get in between y'all street brawl. . .

but consolidation was the best thing to happen to Nigerias economy in well. . forever. . .
hope u dont expect me to explain cause its clear for all to see

no need to explain, just answer the simple question of 'which problem(s) the increased capitalization i.e. consolidation of banks solved'?

no need to explain, just answer the simple question of 'which problem(s) the increased capitalization i.e. consolidation of banks solved'?

Good. . .

before bank consolidation u basically had 100 or so small banks that were rent seekers. .
they had no capacity to fund any real development of the Nigerian economy

these banks engaged in FOREX round tripping. . and other non productive activities
the market caps of all of them(those quoted at the time),was less than half of one major south African bank

the Nigerian stock exchange Market cap was about N200billion in 1999

by 2010(after 4yrs or so of consolidation),it has risen to N7.5 trillion(was N15trillion or so in 2008)
thats a more than 500% increase in just 10yrs

it means you have a bigger more liquid market
u can attract foreign fund managers
u create wealth for the masses
and it means that for the first time Nigeria licensed its first set of credit bureaus

am sure south africa has had credit bureaus for over 30yrs. . .
but u see my point
all these are directly tied to consolidation

but the most important thing is capital. .
a banks capital determines the amount of lending it can do
most of the banks were able to capitalize way above the N25billion minimum

some as much as N150billion. . .which is $1bn dollars
with a billion dollars in capital. . u can do up to $10billion in lending
depending on the leverage ratio used in the country

so now they financed roads,houses,dangote plant expansion,oil companies,GSM companies
credit to the real sector and mortgages and car loans,and so on soared

that is the beginning of a modern economy
(the only missing ingredient was the risk profile of borrowers,  . .ala credit bureau's)

i can go on if u want

paddy_lo:

Good. . .

Firstly I asked for a problem definition, you instead gave me a run down of state of affairs before and after.

before bank consolidation u basically had 100 or so small banks that were rent seekers. .
they had no capacity to fund any real development of the Nigerian economy

So the funding of the GSM companies was not real development?

these banks engaged in FOREX round tripping. . and other non productive activities

and there is no more forex round tripping?  Why werent the banks guilty of sharp practices punished?

the market caps of all of them(those quoted at the time),was less than half of one major south African bank

and of what relevance is that? Have you considered the size and productivity of the SA economy.

the Nigerian stock exchange Market cap was about N200billion in 1999

and this is the fault of the banks or the Nigerian economy?

by 2010(after 4yrs or so of consolidation),it has risen to N7.5 trillion(was N15trillion or so in 2008)
thats a more than 500% increase in just 10yrs

That would happen if you raise the minimum capitalization of the banking sector by over 1000%

it means you have a bigger more liquid market

was there evidence of illiquidity in the market? or why would these be a positive thing. xcess liquidity is bad and increases inflation.

u can attract foreign fund managers

To do what, invest in a non-profitable venture?

u create wealth for the masses

So the standard of living of the average Nigerian has improved? So you have electricity, good roads, pipe borne water etc now?

and it means that for the first time Nigeria licensed its first set of credit bureaus

totally uncorrelated

am sure south africa has had credit bureaus for over 30yrs. . .
but u see my point

There are a lot of countries without credit bureaus

all these are directly tied to consolidation

No

but the most important thing is capital. .
a banks capital determines the amount of borrowing it can do
most of the banks were able to capitalize way above the N25billion minimum

some as much as N150billion. . .which is $1bn dollars
with a billion dollars in capital. . u can do up to $10billion in lending
depending on the leverage ratio used in the country

Capitalization level does not imply profitability, else why did some major banks in the US become distressed. No matter how much money a bank has available to lend, it is worthless if there are no profitable ventures to invest it in.

so now they financed roads,houses,dangote plant expansion,oil companies,GSM companies
credit to the real sector and mortgages and car loans,and so on soared

All it did is make the banks more aggressive in their lending, or did you think they were not giving out loans before the consolidation. Still that does not make the companies they are lending to profitable and has only pressurized the banks to take unwarranted risks.

that is the beginning of a modern economy
(the only missing ingredient was the risk profile of borrowers,  . .ala credit bureau's)

No a modern economy is built on a goodt industrial sector, educational system and social amenities

i can go on if u want

All you have said does not explain why a bank should require NGN 25 Billion minimum capitalization. The question was what was the problem that the increased minimum capitalization solved and not pro and cons of increasing a banks capital base? Tell what the problem was with a bank having just NGN 10 Billion in capitalization or even the existing NGN 2.5 Billion. Remebr prior to the increased minimum, banks like FBN had more than NGN 25 Billion in capitalization.

All you have said does not explain why a bank should require NGN 25 Billion minimum capitalization. The question was what was the problem that the increased minimum capitalization solved and not pro and cons of increasing a banks capital base? Tell what the problem was with a bank having just NGN 10 Billion in capitalization or even the existing NGN 2.5 Billion. Remebr prior to the increased minimum, banks like FBN had more than NGN 25 Billion in capitalization.

u are beating around the bush on this one. . .
i have told u a small bank cannot fund big ticket items

do u know how much a power plant or oil rig costs?
how do u expect to fund it if u dont have the capital

or u expect our banks to just be engaged in opening savings accounts?and thats it?,common

and there is no more forex round tripping?

banks those days depended on it for survival. . trust me there is no bank in the u.s that depends on trading in the black market for survival
u should be happy those days are gone

and of what relevance is that? Have you considered the size and productivity of the SA economy.

banks drive growth,u cant go anywhere without big banks to lend to improve infrastructure
because our banks were small our economy was small. . not the other way around
now our banks are bigger,we have a bigger economy and catching up on south Africa fast

and this is the fault of the banks or the Nigerian economy?

see my point above. . .

So the funding of the GSM companies was not real development?

it was of course,but in those initial stages it took a consortium of banks
nowadays one bank can fund such loans easy

That would happen if you raise the minimum capitalization of the banking sector by over 1000%

which is a good thing,why would u want to be stuck in the dark ages
every country wants its stock market to grow exponentially i dont see your point here

was there evidence of illiquidity in the market? or why would these be a positive thing. xcess liquidity is bad and increases inflation.

of course there was illiquidity in the markets then,stock trades were sometimes completed in 2weeks
instead of 2days,N200billion is just $1.5billion or thereabouts
i am talking of liquidity in the stock exchange,not the economy

To do what, invest in a non-profitable venture?

to invest in the countrys economy,let them decide if its profitable or not
what exactly is your aim here to keep Nigeria in the dark ages

how do u think asian countrys like indonesia,malaysia and thailand emerged if not through FDIs

So the standard of living of the average Nigerian has improved? So you have electricity, good roads, pipe borne water etc now?

you have quadrupled GDP/capita in 10yrs from around $300 to about $1,400
u have the largest telecomms market in Africa
as for the things u mention,if the Govt deregulates those sectors u will get them

totally uncorrelated

no its not,the capitalization led directly to the issuance of credit and other financial products
because the banks could now afford to invest in new technologies

There are a lot of countries without credit bureaus

there is no developing ,developed or emerging market without a credit bureau
u find one

Capitalization level does not imply profitability, else why did some major banks in the US become distressed. No matter how much money a bank has available to lend, it is worthless if there are no profitable ventures to invest it in.

u keep harping on no profitable ventures? Nigerias business environment is known as one of the most profitable in the world so i dont get where u are coming from

No a modern economy is built on a goodt industrial sector, educational system and social amenities

not true u can look to cuba for an example
modern economies are built on how sophisticated your financial sector is
from switzerland,to the uk,to hongkong,to newyork and brazil
its the same thing,stock markets drive access to capital
u have an idea,u form a company,u go to the market and u get funds to start-up your company
if your idea sells u become a millionaire,with other ppl that invested in you. . .simple

paddy_lo:

Sigh. . i post them as proof that sound banks attract capital
the banks passed the CBN audit. . simple for all to see. .
the EIB has told u they have confidence in the banks they have given loans to
meaning that they are satisfied with the corporate governance issues of the said banks(First bank,GTB,Stanbic IBTC)
Also if the head of the EIB passes a vote of confidence on Sanusis reforms
who are u. .a 50yr old bush man who spends all his time on NAIRALAND,to say otherwise

It seems u know nothing about Banking 101. . .
If Oceanic and Intercontinental could get loans how come they didnt get it before now. . all through 2008, into mid 2009
why were they critically stuck on the EDW?

. . .I am laughing soooo hard here!

You gave First bank,GTB,Stanbic IBTC as the banks that got European loans, as examples that prove that Sanusi's agbero policies were working. I caimly pointed it out to you that [b]none [/b]of the banks mentioned were affected by Sanusi's "saving grace", that infact they have always been strong enough to get loans every and anywhere.
Because you were caught you're now trying to bend the truth by mentioning Oceanic and Intercontinental as somehow getting loans in 2010. Olodo!
Are Oceanic and Intercontinental the new names for First bank,GTB,Stanbic IBTC? Olodo! Charlie, you see why I said you just pluck arguments from thin air?
You are actually taking time out to argue with yourself. Damn!

On the other hand, you're claiming that First bank,GTB,Stanbic IBTC are credit worthy to European banks simply because they passed Sanusi's so called audit? You're funny. You have no clue, but you just must say something, just to expose the fungi between your ears. Nkita ara!

paddy_lo: with rumours flying around of toxic assets as much as $10billion

You think we are in mama risika's buka? I don't do rumours and I'm seriously done arguing with a part-time ratcatcher and palmy seller. Olodo!

www.nairaland.com/attachments/229503_ROFLMAODog_gif3fa44b12f55ba64fc785c3a5794ba92e

paddy_lo:

u are beating around the bush on this one. . .
i have told u a small bank cannot fund big ticket items

do u know how much a power plant or oil rig costs?
how do u expect to fund it if u dont have the capital

so a bank that cannot fund big project cannot survive? shouldnt  banks be left to determine where they want to invest and be profitable ? why the forced growth? This is the main question you should answer. The rest below are irrelevant to the original question I asked of 'what problem was solved by the consolidation'. Something having pros does not make it a solution to a problem unless that problem existed prior to it and disappeared after.
For example, prior to consolidation, was there a p[roject that the financial sector couldnt fund and were forced to source foreign investments?

or u expect our banks to just be engaged in opening savings accounts?and thats it?,commonbanks those days depended on it for survival. . trust me there is no bank in the u.s that depends on trading in the black market for survival
u should be happy those days are gone

Prior to Sanusi, Banks were still round tripping heavily, and even after sanusi, I doubt they have stopped and most likely just become more cautious. round tripping will stop when the mallam stops selling forex on the road side.

banks drive growth,u cant go anywhere without big banks to lend to improve infrastructure
because our banks were small our economy was small. . not the other way around
now our banks are bigger,we have a bigger economy and catching up on south Africa fast
see my point above. . .

Should have guessed that you are another HD proponent. so its the bank that grows the economy. That logic has failed in every developing economy that it has been tried in. Its is the argument behind SAP and all the foreign borrowing, and we all know how successful that was.

it was of course,but in those initial stages it took a consortium of banks
nowadays one bank can fund such loans easywhich is a good thing,why would u want to be stuck in the dark ages

Whether individually or by consortium, deals were getting funded, and you still have consortium funding even in the US and UK. Even till today we still have consortium funding in Nigeria.

every country wants its stock market to grow exponentially i dont see your point here
of course there was illiquidity in the markets then,stock trades were sometimes completed in 2weeks
instead of 2days,N200billion is just $1.5billion or thereabouts

the rate of completion of stock trades is because of computerization and not liquidity, and liquidity in the stock exchange is not the yard stick for measuring financial health. Exponential growth in the stock market is not a measure of true growth, as they often reflect market inconsistencies and not necessarily the value of the underlying corporate asset. A fine example is the dotcom bubble of recent past.

i am talking of liquidity in the stock exchange,not the economyto invest in the countrys economy,let them decide if its profitable or not
what exactly is your aim here to keep Nigeria in the dark ages

Investor decide where to invest on profitability and not the size of the banks in the economy.

how do u think asian countrys like indonesia,malaysia and thailand emerged if not through FDIs

You can go and study the industrialization process, and will find out that capital injection is the last stage, and not the first.

you have quadrupled GDP/capita in 10yrs from around $300 to about $1,400

per capita (PPP) went from $1078.353 in 1999 to $1795.5 in 2005 ($700 increses) and $2199.076 (additional $400 increase)  in 2009 with the bulk being was pre-consolidation

u have the largest telecomms market in Africa

That's primarily a function of p[population and not the size of your banks.

as for the things u mention,if the Govt deregulates those sectors u will get them

so why make it seem like consolidation had solved this problems or which wealth were you referring to being created for the masses.

no its not,the capitalization led directly to the issuance of credit and other financial products
because the banks could now afford to invest in new technologies there is no developing ,developed or emerging market without a credit bureau
u find one

Countries without CBs: France, China, Japan, Malaysia etc
Like I said its uncorrelated. CBs essentially help centralize consumer credit information and does not change the criteria banks use for lending

u keep harping on no profitable ventures? Nigerias business environment is known as one of the most profitable in the world so i dont get where u are coming from

So how come we are still heavily dependent on importation and our primary export remains crude oil? Shouldnt business be sprouting up here and there and the standard of living rising.

not true u can look to cuba for an example
modern economies are built on how sophisticated your financial sector is
from switzerland,to the uk,to hongkong,to newyork and brazil
its the same thing,stock markets drive access to capital
u have an idea,u form a company,u go to the market and u get funds to start-up your company
if your idea sells u become a millionaire,with other ppl that invested in you. . .simple

There is a difference in what an economy is built on and what characterizes it.

People keep defending Sanusi - intervention!, intervention!!, intervention!!!

Intervening what He inherited a booming banking system, instead of making it better, for where. Same mentality that has kept us down in this country - make his predecessor look very bad.

Instead of building on what he got, he decides to pull it down - and point fingers at Soludo. Goodluck should warn this guy cos he is very aware that rumours and bad policies hurts our economy badly.

Countries without CBs: France, China, Japan, Malaysia etc

CHINA
A draft regulation, issued to solicit public opinions on Monday, bans[size=16pt]credit bureaus[/size] in China from collecting personal information such as appearance, genetic data, finger prints, blood type and disease history.

The draft regulation on credit reference was revealed by the State Council Legislative Affairs Office at its official website here.

[size=16pt]Credit bureaus[/size] are also forbidden to collect information about a person's ethnic identity, family, religious belief and political affiliation, according to the draft.

They can collect financial data such as a person's income, deposit, property and taxation only if the person approves it in a written document and is well informed about the possible effects, the draft rules said.

They also need the person's approval to provide his or her information to their clients.

[size=16pt]Credit bureaus[/size] can collect financial data about corporations and organizations but need their approval to provide the data to their clients.

However, the Credit Reference Center [/b]run by the People's Bank of China, the central bank, is exempt of the restrictions.

[b]The center, a non-profitable organization founded in 2003, is in charge of developing and operating a nationwide credit data base.

Banks are required to report credit data of their clients to the center, according to the draft.

The center can also collect information about individuals, corporations and organizations from companies and organizations.

The government, law enforcement departments and other legal administrative organizations can use the credit data at the center in line with laws, according to the draft rules.

Under the draft rules, a credit bureau can do three sorts of business in China, providing credit reports, credit scoring and credit rating.

To set up a credit bureau, a minimum of 5 million yuan (733,000 U.S. dollars) will be needed as the registered capital. But for a credit bureau that provides credit reports of individuals or companies, the amount will increase to 50 million yuan (7.33 million dollars).

Banks are banned from providing information for credit bureaus without a qualification granted by the credit reference regulator, the People's Bank of China.

The rules aim to regulate the credit reference business in China, said a statement from the office.

The public can log on to the website or write to the office to submit their opinions.
http://english1.cri.cn/6909/2009/10/13/1721s521977.htm

FRANCE
In fact, there are no credit-reporting agencies in France. [size=16pt]Instead, the Banque de France manages a list of those who default on their loans. Once the bill is paid, the name is removed from the list, and even if the bill is not paid, the debtors' names are removed after five years[/size]. Further, the list is industry-specific, so credit card companies only have access to names held in the banking and financial databases.
http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/world.html

MALAYSIA
[size=16pt]Role of the Credit Bureau
The Credit Bureau was established under the Central Bank of Malaysia Act 1958 and has been in operation since 1982. The Credit Bureau collects credit information on borrowers from financial institutions and the information were then used by financial institutions to help them make informed lending decisions in a more timely manner[/size]. The Credit Bureau is managed by Bank Negara Malaysia.
http://www.bankinginfo.com.my/_system/media/downloadables/credit_bureau.pdf

JAPAN
There are three major credit information bureaus in Japan which store respectively a lot of personal credit informations and provide them to their member credit institutions.

Such bureaus are as follows;

the Association's Personal Credit Information Center
Japan Credit Information Reference Center Corp. (JICC)
Credit Information Center Corp. (CIC)
These three bureaus started the shared credit information system named CRIN in March 1987, under the initiative of their respective umbrella organizations such as Japanese Bankers Association, the Federation of Credit Bureaus of Japan and the Japan Consumer Credit Industry Association.

Each bureau's organization, kinds of information registered, number of information stored, outline of CRIN system and privacy-protection measures are shown in following Appendices.
http://www.zenginkyo.or.jp/en/personal_credit/appendix/appendix_01/index.html

@biina
point is there is no advanced economy in the world,without a credit reporting and monitoring system
u know that
as for your other points, its late over here,and i will counter them 2morrow.  , cheers

@Beaf
it appears u have finally gone mad. . . . . .

My take on this is that without confidence in the numbers provided by the banks (not cooking the books) and overall transparency (credit bureaus verifications, who is the actual bank's client). We can talk about complex financial transactions and risks, but any house built on sand or without good foundation will fall.

People or corporation will not invest in any project without the reasonability that they'll get a return on their investment and be able to recoup their Principal and risks can be priced accordingly.
When I do business with Nigerian banks, I use EXIM bank for guaranty, which is expensive, However, when I do business with South American countries, I normally don't use EXIM banks and thus, less expensive, I use OAS,
If the Banks are cooking the books, what about their borrowers, who is verifying?
I think restoring confidence in the financial sector is the first priority, with all these meltdowns, all US banks were asked to perform stress tests.

Sanusi's time is up!!


FG Demands CBN’s Blueprint on Bank Reforms
•Sanusi: Stakes in rescued banks to be sold by May
By Emele Onu, 02.12.2010


The Federal Government has asked the Central Bank of Nigeria (CBN) to furnish it with the blueprint on the banking reforms to allow assessment of the direction of its policies and also ensure that they are in line with government’s long-term economic programme.

The Minister of Finance, Mr Remi Babalola, who disclosed this in Lagos yesterday, said: “We want a blueprint of the reforms to know where the CBN is headed and more importantly be sure that actions are not just taken ‘as the spirit directs’.”

The minister said the government was fully in support of the CBN reforms in line with its strategic focus on the growth and development of the economy but added that government was trying to back the CBN to the extent that its (CBN’s) actions do not jeopardise the confidence level in the economy.

Meanwhile, the CBN Governor, Mallam Sanusi Lamido Sanusi, said yesterday that the CBN might conclude the sale of stakes in some of the country’s rescued lenders by April or May this year, according to a Bloomberg report.
“Some transactions could be concluded by April or May. It is not a shot-gun marriage. These things happen as they come,” he said.

The central bank wants to complete the process by the end of the year at the latest, Sanusi said.
Sanusi, had, in his keynote address at a conference in Lagos, presented for the first time the total package of the banking sector reform programme.

He said the reforms are encapsulated in four pillars: the enhancement of the quality of banking; guarantee of financial stability; ensuring healthy financial sector evolution as well as ensuring that the financial sector contributes to the economy.
The CBN, said Sanusi, would next month as part of the reforms programme issue fresh guidelines on margin lending and other rules that would strengthen supervision.

Babalola disclosed that the Federal Government had in the past abandoned some crucial decisions to the CBN in the name of protecting its autonomy, adding that the situation contributed to the crisis in the sector. He said the government would “now be more involved”.

Beside its plans for the banking system, the minister said the capital market would be completely overhauled within the next few months to make it function better.

The CBN governor said in addition to the changes introduced in the banks by the reforms, the apex bank is improving its structure, systems and processes to enable it drive the transformations anticipated in the new era.

Sanusi disclosed that CBN had entered a relationship with some foreign institutions for the development of its personnel, adding that it had also put in place a system that ensures that disclosures, as required for banks exist at the apex bank.
The governor reiterated the plan to segment the banks along market, geographical and specialist lines, with different levels of capitalisation.

He said the regulator would also ensure regular meetings of the Financial Sector Regulator Committee which he noted had not met for three years, adding that the CBN might regulate proprietary trading in a bid to avoid a repeat of last year's banking crisis.
According to the governor, the Federal Government would continue to give its support to the apex bank. He debunked rumours that the Acting President, Dr. Goodluck Jonathan, had ordered a review of the CBN Act or BOFIA.

Sanusi noted that regulatory lapses had allowed liquidity to flow into capital markets at the expense of the real economy, which he said divorced the banking sector from contributing to the economy.
To correct the trend, he said, the CBN would pursue a robust monetary policy with the aims of stable foreign exchange rates, single-digit inflation and low interest rates.

The CBN is working with the Ministry of Finance, relevant Federal Government agencies, the state governors as well as the banks to ensure enabling operating environment for the real sector and that banks actually lend that rector, Sanusi said.
The central bank needs to champion direction of economic policy, he added.

Sanusi further disclosed that the central bank was working with the finance ministry on developing the use of market instruments to hedge against oil price volatility.
On the recapitalisation of the banks, the governor said two interested investors were interviewed last Wednesday, adding that the CBN had received expressions of interest for all of the banks rescued in last year's bailout.

On the proposed assets management company, Sanusi expressed optimism that the legislation would be passed by the end of this month, adding that the monetary authority would meet with the legislative arm to ensure the quick passage.

He said the company would need N1 trillion to buy up all the bad loans in the system, adding that AMC is key to making the banks attractive to the new investors.

The governor said the CBN was pushing for the presidential approval for tax relief aimed at helping the development of the fledgling corporate bond market, which would enable banks to raise cheaper long-term funds and engage in longer-term lending.
The acting Managing Director of the Nigerian Deposit Insurance Corporation (NDIC), Mr Umaru Ibrahim, said the corporation was also strengthening its systems to cope with the challenges of supervision.


He said the body was considering reviewing the insurance coverage of deposits upwards, stressing that there had been requests to review it to N10 million for universal banks and N5 million for microfinance institutions.

PapaBrowne: “We want a blueprint of the reforms to know where the CBN is headed and more importantly be sure that actions are not just taken ‘as the spirit directs’.”

The "spirit" always direct marabouts like Sanusi.
All we have had from that man is off the cuff destructive energies. Nobody really knows his direction or where our monetary are meant to end up. We hear he is cleaning up the place. All well and good, but to what structure ((aside from islamic banking which has never been debated to any depth)?

They better sack him before it is late.

Jonathan also needs to urgently wipe out any lingering military decrees, such as the ones Sanusi was able to use for his agbero work.

In January, when the then Minister of Labour (now AG), Ade Kayode, speaking on behalf of Goodlucks acting Government issued directives to all banks that they must stop downsizing immediately, it was obvious that Goodluck would intervene on the current CBN reforms.

Hence I wont be surprised to see a reversion of Sanusi's anti-PDP, anti-cabal policies.


Let the dice roll.

sanusi is our heroe. after tafa balogun.

I am no longer interested in all this technical brouhaha.
Soludos consolidation brought about a vibrant banking sector never seen before in Nigerias history.
For the first time even Sanusi attested to the fact on BBC that the banking sector overtook the Federal government as the primary financier to the private sector.
This was as a result I think of the consolidation exercise.
While many would say that this was cosmetic and that the banking sector had huge underlying problems.

I am still waiting to see the effects of Sanusi's reforms by way of activity in the wider economy.
While I must add that it is too soon to judge, but this must be the desired end effects or else Sanusis reforms will be seen as one of the darkest episodes in Nigerias economic history.
Somewhat like Babangidas SAP programme.

wrong thread

Hehe Biina!
U are using Covey's manuals wrongly!!
Two things
1)The analogy is totally wrong.
2)If the analogy is right, then it actually indicts Sanusi's faulty actions.

Soludo met a decrepit system and built it from scratch. The Banking sector was not in a rapid growth stage. Infact it was dead. All our 89 banks combined were smaller than the 4th largest bank in South Africa. Soludo created the boom! He layed the golden eggs.

Enter Sanusi! Fine he probably met a breaking down and  rusted Sick Goose. Question is, while investing heavily in downtime and maintenance, are you supposed to destroy all the existing machinery, just because you want to make a point that your predecessor and his workers overused the goose? Sanusi broke the house down to the foundation just so he could fix a few bricks!


Anyways, the same Covey's Seven Habits explains how distorted perception affects our view on issues. Remember the story he tells about a Lecturer who presents the same picture differently to 2 different sets of students in a classroom. . . . . . . . .and how the two sets had  2 different ideas about the picture. . . .
Yes! Same goes for your views on Soludo and Sanusi. You disliked Soludo long before Sanusi came on board,hence whoever replaced Soludo would have been OK by you. Your support for Sanusi is mainly based on your dislike for Soludo.
If not, you tell me what Sanusi is about(economically) that gives you confinndence in him?

PapaBrowne:

Hehe Biina!
U are using Covey's manuals wrongly!!
Two things
1)The analogy is totally wrong.
2)If the analogy is right, then it actually indicts Sanusi's faulty actions.

make up your mind. The analogy is either wrong or right. In this case it is right, in that all people saw was the increased in size of the banking sector and not the underlying problems, and when Sanusi tried to clear things up, he is being painted as the bad guy.

Soludo met a decrepit system and built it from scratch. The Banking sector was not in a rapid growth stage. Infact it was dead. All our 89 banks combined were smaller than the 4th largest bank in South Africa. Soludo created the boom! He layed the golden eggs.

Soludo did not meet a decrepit system i.e. about to fail. The sector was quite healthy when soludo took over. Instead, what he met was a banking sector that was small i.e. under-capitalized in his view. He forcefully increased capitalization of the banks with out any regards to the negative consequences.

I am always amused when people justify the exercise by comparing the size of our banks to one in SA, even though they do not serve the same local market. Even the US has a substantial fraction of her banks that are capitalized under $100 million (less than Nigeria's minimum). The banks people use for comparison grew because of the size of their associated economy and not vice versa. I simply felt it was an unwarranted risk to force the growth.  While it would be nice to have big banks, the more important criterion was to have a healthy and transparent banking sector, and not the cesspit of poor corporate governance we had e.g. in the early 2000s, FBN had to write off a N4 Billion non-performing loan owed by an ex-chairman.

Soludo was not the first to increase the capitalization of the banks, and he wont be the last. It has never solved the problem of the sector. Like the introduction of higher denomination currency, it is tantamount to pumping water into a liquid tank.

Enter Sanusi! Fine he probably met a breaking down and  rusted Sick Goose. Question is, while investing heavily in downtime and maintenance, are you supposed to destroy all the existing machinery, just because you want to make a point that your predecessor and his workers overused the goose? Sanusi broke the house down to the foundation just so he could fix a few bricks!

That Sanusi met a breaking down system, means that Soludo left a breaking down system. Since Soludo met a healthy system and left a breaking system, we can conclude that Soludo ruined the system or that the system was ruined under his watch.

Sanusi has not destroyed anything that Soludo did e.g. the increased capitalization and EDW are still in place. All he has done is cleaned up the mess Solduo swept under the carpet with the EDW and tried to take steps to protect future re-occurrences. I have not read any comment attributed directly to Sanusi criticizing Soludo or his policies . If he has done so, no matter how justifiable, it is in bad taste.

The fear and distrust affecting the sector is less a result of Sanusi's actions, but from the fear and doom being spread by his opposition.

Anyways, the same Covey's Seven Habits explains how distorted perception affects our view on issues. Remember the story he tells about a Lecturer who presents the same picture differently to 2 different sets of students in a classroom. . . . . . . . .and how the two sets had  2 different ideas about the picture. . . .
Yes! Same goes for your views on Soludo and Sanusi. You disliked Soludo long before Sanusi came on board,hence whoever replaced Soludo would have been OK by you. Your support for Sanusi is mainly based on your dislike for Soludo.
If not, you tell me what Sanusi is about(economically) that gives you confinndence in him?

I do not dislike Soludo, just felt he was the wrong man for the job at the time. It was a simple case of us putting the cart before the horse. My fears were confirmed by the failure of the CBN in its supervisory role during tenure. Soludo did not have the required background to police the sector and it would be unfair to criticize him for it like if he was corrupt (but that cannot be said for some of his predecessors who often turned a blind eye).

Its ironic how people call Sanusi a bull in a China shop, when in truth Soludo was probably worse. Prior to Soludo' appointment in mid 2004, the banks were to increase capitalization to N2.5B, but on his appointment. he unilaterally decided to increase it 10x to N25B and gave them only an additional 12months. He also instituted a de facto consolidation of the banks. At the meeting with the Bank executives, he simply read his statement and refused to entertain questions from the executives. He was accused of being arrogant and dictatorial in his approach. There was also his announced intention to withdraw public funds from some banks, an act that the saw the stock market collapse that weekend.

My approval of Sanusi is simply because he is doing what I feel the sector needs. The sectors need to be cleaned up and he is doing just that. I doubt Sanusi will clean up the entire sector (as I expect him to have his own pals who will go untouched e.g. the huasa dominated forex black market and associated round tripping) but I hope the next guy that comes after him cleans up whatever he leaves behind.

Nigeria would have been much better off, if we had sanusi before soludo.