• Thursday, May 23, 2024
businessday logo

BusinessDay

and from Soludo to Sanusi

Lamido Sanusi

Donald

The appointment of Sanusi as the Governor of CBN has once more exposed some unfortunate features of political governance in Nigeria. In the first instance, the whole world has seen the tardiness with which our president handles very sensitive economy-threatening national issues. The fact that the Nations Central Bank had no governor for 5 whole days[29/5/09-2/6/09] in this meltdown era-even though Nigerian economy has melted down for over 20 years- speaks volumes of the way we run our country. That 5-day vacuum was avoidable and did incalculable harm to the image and economic interest of Nigeria. Soludo was appointed at least one month up-front! Secondly, the ‘Kanorisation’ of national financial management and acute nothernisation of the ‘commanding heights’ of the economy, cannot be ignored. Appointments should actually be based on merit but in a complex environment that constitutionalised the quota system and even established a Federal Commission to enforce that provision, having what appears to be sectional dominance of the economy and polity is far from ideal. This development quickly reminds people that the North has deftly moved from being one of the three regions[33%] to being 3 of the 6 geo-political zones[50%] of Nigeria. Finally, even though these are based on newspaper reports, we noted how such serious appointments were being made on the basis of the views of the emirate councils, governors forum, chambers of commerce and party youth wings and legislative caucuses! But I must note that none of these developments has anything to do with Sanusi as a person or impairs his ability to do the job.

Sanusi is coming on board under troika of circumstances that has thrown up a complex web of challenges for him and the institution that he now heads. The first is that his predecessor has upped the ante in most compartments of the game and there is thus the need to maintain the momentum. Secondly, there were unprecedented growths and developments in the sector and thus there is need for consolidation and stock taking. Finally, the meltdown that was made in the USA with an unflinching support from the UK has complicated matters both locally and globally.

Read Also: The Sanusis and Soludo were superior managers of Nigeria’s exchange rate

Specific challenges that have emerged include disinfecting and insuring our bank against harmful toxins; transparency, reporting issues and the question of bank health, high interest rate and the widening gap between deposit and lending rate; and the arbitrage opportunities in the forex market. There are post-melt down local and global challenges especially the lessons: banks that are too big to fail, too big tosave and even too big to dismember; risky innovations, limits of deregulation and the need for stricter regulation, contagion tendencies, threat to US/dollar dominance, excessive executive compensation especially in an environment where nobody knows what our bankers earn and where our CEOs treat their PLC banks as private estates. Of course there are the dangers of riotous consumer credit culture. There are the challenges arising from two types of over-diversification. Rapid internationalization especially in the West African sub-region: cost-benefit questions, cross-fertilisation of operational and systemic virus, laws under which the banks are regulated and the issue of coordinated regulation. Secondly, there is over-diversification across products and industries: insurance, capital markets, mortgage, properties- which again raises the question of cost-benefit analysis in addition to, competence, complex and at times incestuous financial relationships and the regulation/inspection regime. Other issues include the vexatious ATM/e-banking frauds in a situation in which banks are forcing customers into the ATM mode, excessive charges and rip-offs, the change of guards at WEMA & SPRING banks and the return of Savannah bank well as the challenge of coordination of regulatory efforts, which is imperative in an environment in which banks have become all things to all men.
Sanusi is already facing these challenges. He has promised to beam more searchlight on the toxic assets through a specific-purpose audit and coordinated disclosure, encourage market-propelled consolidation,-including foreign take over if need be- revert quickly to market forces and work more closely with the MOF as he doesn’t intend to overstretch the concept of CBN autonomy. Already, circulars are flying around-exposure to energy sector, TRANSCORP & Virgin Nigeria, and Commercial Papers/ Bankers Acceptances outstanding; BTA/PTA purchases and dishonouring of drafts amongst others.
It is obvious that given Sanusi’s operational bias and some of the challenges enumerated earlier, risk management will receive an undue dose of attention under his tenure. While that is understandable, it is important to stress in the very beginning that Central Banking goes beyond risk management; indeed, it goes beyond banking. Luckily, he appreciates that when he averred that his 2-point agenda are financial stability and economic development. It is also expected that he should soon make a formal presentation of his agenda[2, 7, or 2020 points!]. The interview with Financial Times will not do. He had mentioned the issue of communication strategy and there is need for him to work on that early in the day. A comprehensive statement of direction will make clear what people will expect and clear all doubts. For instance, the simple statement that ‘we might end up with 15 banks’ is already being misinterpreted to mean that only 15 banks are standing on two legs! Incidentally, this 15 was mentioned in 2006 or thereabout.
I welcome Sanusi to the CBN hot seat. As the transition progresses from a Professor of Economics who is not a banker to an Islamic Scholar who is a banker and risk expert, one thing is obvious; bankers must seat up and the banks must put their houses in order. On a lighter mood, Soludo took over from Sanusi from FBN and handed over to another Sanusi from the same FBN!