CBN and banks’ nationalisation TUESDAY, 12 JULY 2011 00:00 EDITOR OPINION - EDITORIAL
IF reports in the media are anything to go by, the Central Bank of Nigeria (CBN) may nationalise the eight banks it injected billions of naira of taxpayers’ money into two years ago, if as at September 30 (about 10 weeks away), the banks are not verifiably and fully recapitalised by their prospective new owners.
According to the CBN Deputy Governor in charge of the Financial Sector Stability Division, at a forum in Pretoria, South Africa, this nationalisation option will resolve the CBN anxiety over issues of governance, illiquidity and outright criminal conduct that necessitated its intervention.
It is curious that a matter of great concern to Nigerians, banks, depositors and the national economy is disseminated from afar. Also noteworthy is that the CBN has not denied the report, suggesting that it is true. The plan, however, is flawed.
In the last few weeks, the CBN has issued several announcements regarding approvals of memoranda of understanding for preferred bidders for some of the embattled banks. Similarly, statements were made on disputes within the bank entities over the fitness of so-called suitors and their claims to either deep resources or excellent records of accomplishment in banking. It is also public knowledge that there is a plethora of civil suits filed by individual shareholders or groups pending in courts.
If the statement from Pretoria is a CBN directive, it may amount to a measure to override the process of the courts and the sanctity of the law. The country could, by fiat of the CBN, demolish the concept of private property and investment in Nigeria.
We believe that the CBN has not held adequate consultations in good faith regarding the state of affairs in the banking sector, nor does it convey, by the bellicose nature of statements issuing from her officials, an appreciation of her important role in averting an impending disaster. The CBN is searching for market-making relevance without enough substance. Why would it announce a liquidation deadline in the middle of mergers and acquisition negotiations that have subsequently suffered fissures? And now, it trumps with a nationalisation alternative.
We believe that whatever merit or lack of it in the arguments of the shareholders and the CBN regarding supervision, management, intervention and funding of the banks are best left to the laws of Nigeria, through the courts’ authority.
Aside from the unfortunate developments in respect of the eight banks, there is a horde of CBN directives on such diverse matters as cash withdrawal penalties, location of ATMs, nationwide accounts renumbering and a revised non-interest banking being ruefully described as Islamic banking. The singular syndrome joining all these is needless controversy in passing the message and its implementation. Inevitably, another impression of being brash, and grandstanding tags these initiatives.
Banking in Nigeria has had a glorious past as an instrument of economic development, particularly of the small and big traders, or on big projects. It has also been highly regulated. In 20 years or so, the banking sector has gone through a number of business models namely: indigenisation, privatisation, recapitalisation, consolidation, intervention, and will appear poised towards reverse indigenisation (suitably referred to as foreignisation), liquidation, nationalisation and conceivably, not excluding intimidation option!
Non-resolution of the lingering banking crisis portends more turmoil for the country than Nigeria can afford. Quantitative reports of losses from capital market erosion added to economic multiplier rate of liquidating or even dispossession of shareholders are undesirable scenarios for a polity struggling with economic transformation and in arrears of social development.
Adversarial media statements tend to erase further the core value of the banks. And given the loss of fundamental values based on CBN’s own valuation already, the price for these investments are watered down. Yet a sale is mandatory, and a deadline looming. Such a shotgun approach by either party is definitely unhelpful to the economy and to all Nigerians, not only concerned shareholders.
Fear is a legitimate concern in the industry. An approach to resolving the banking crisis that regretfully shows faint, but malignant signs of scare mongering, or manipulating the anxiety of people as shareholders, pensioners, depositors, etc is not good. What is good for the rest of the world ought to be available in Nigeria. We need sober judgement in tackling the banking crisis. We ought also to do away with the derogatory propensity to fish for options, and circulate them in other jurisdictions.
Sadly, the National Assembly that rightly has to provide funds, and oversight for the suggested nationalisation, is so hamstrung by its self-inflicted image as to hardly or sufficiently discharge its duties promptly.
Besides the negative import of making far-reaching policy announcements abroad, such major issue ought to emanate from a more authoritative source in the Central Bank.
Central Banking is about institutional rather than combative behaviour. It is the duty of the CBN to manage the country’s financial situation at all times, and to make this stable, not to stigmatise the country or increase its risk weekly. The CBN must put out herself as institutionally responsive to the challenges of both human and technology deficits in the banking sector.