• Monday, May 20, 2024
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Re: Strong, shaken, stressed



Reading your piece with the above caption, my take on your recommendation asking the Central Bank of Nigeria (CBN) to clear the air on the status of Nigerian Banks is one of mixed feelings. Mixed feelings because the CBN governor, Lamido Sanusi, granted an interview to the Financial Times two weeks ago, indicating that only 15 Nigerian banks out of 24 were healthy. In the same interview, he said he would encourage foreign banks to acquire these nine weak banks in order to bring in additional capital. That interview alone was good enough reason for depositors to make a run on the perceived weak banks. Obviously, Sanusi said what the Financial Times reporter wanted to hear, because he was praised for a departure from the Soludo protectionism.
However, it is important for Sanusi and his advisers to know that foreign banks will not come to Nigeria as the Red Cross or Crescent to bail out weak banks by “chasing bad money with their good money.” They will rather cherry-pick the good assets.
As should be obvious to the CBN management, most of our so-called big banks are not as big as regional branches of international mega-banks and cannot withstand a take-over bid from heavyweights like HSBC, BNP PARIBAS or the South African banks.
One thing Sanusi should not forget is the well-known habit of these foreign princes on white horses and shining armour to bail out and run at the first sign of trouble, just the way they called in their so-called cheap facilities to our banks during the current global banking crises. That action left the noses of a good number of those banks bloody. To think that Sanusi will open our underbelly to speculators only fuels the reigning disquiet in the Nigerian business community.

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The best thing for Sanusi to do is to quickly adopt the revered Fulani tradition of taking a week or two to cool down for a deep reflection, gather himself properly together, then fashion out a new, aggressive and feasible monetary policy that will take the Nigerian economy and the banking system to the next level.
Our banks hitherto were founded to support trade and that was a hang-over from the colonial era, whereby the colonies were merely trading outposts and were not designed nor destined to become competing nations to Britain or France or Italy. Our banks were not fashioned to support agriculture, processing of raw materials to finished goods, exportation of value-added products, industrial growth or building of global brands.
Nothing fundamental has changed from the banks set up to support UAC, Leventis, SCOA, raw material export, importation of finished products and payment of salaries.
Everyone competes to a get a portion of the proceeds from the raw materials extracting industry which0 has basically reduced to oil and gas. More than 95 percent of all economic activities can be situated in the value chain of Nigeria’s main raw material: crude oil and gas, which unfortunately is not a renewable but a depleting asset.
Efficiencies and modest gains that have been achieved in the banking sector must be pushed to the next level. Our banking sector, with all its current imperfections, is one made-in-Nigeria product that gives indigenous entrepreneurs hope to say we can do it.
Sanusi and his team should not overlook the advantages of further consolidation. Size counts in the new global economic order.
Preservation, protection and efficient deployment of national resources also counts. Rather than open our banking sector to speculators, Nigeria will be better off with forced mergers if necessary and consolidation should continue until we get to about 10 or less truly mega-banks.
Playing foreign exchange politics with dollars earned from crude oil sales, means absolutely nothing. It is rather a chasing of shadows for a non-producing economy. Sanusi should be a bulwark to Nigerian banks and ensure that no entity comes to gobble them up from South Africa or the Middle East until these National Assets are ready to play in the global village.