BOFIA Act: Reps move to forestall banking crisis

In its bid to forestall another financial crisis in the country, the leadership of the House of Representatives on Friday resolved to embark on the review of the Banks and other Financial Institutions Act (BOFIA).

Jones Onyereri, Chairman, House Committee on Banking and Currency who gave the hint during a media chat in Abuja, while responding to the state of health of Nigerian banks, raised alarm on the unprecedented hike in non-performing loans (NPL).

Onyereri who expressed concern over the inherent insider abuse across the financial sector of the Nigerian economy, emphasised the need for proactive steps towards curtailing the excesses of bank officials and shareholders.

“I cannot say that the banks are healthy but the truth also means that the non-performing loans are higher than what we ahve ever witnessed in the banking sector because I need to let everybody know that.

“In 2009 we had banking crisis due to high levels of non-performing loans, it is also worrisome that at this point in time even after intervention, we still have the non-performing loans and that is why as a committee we have taken upon it upon ourselves – the Speaker I believe will be signing on our amendment on Banks and other Financial Institutions Act (BOFIA) today which will come up as first reading in the House.

“I believe that will change everything in the banking sector, because it doesn’t make sense when you have insider abuse because that is the crux of why we have this high level of non-performing loans in banks and we need to put a stop to that.

“When the amendment is fully passed, I am not sure anybody in the banking sector – be you a Director or Executive Director whatever, even an MD will have cause to borrow a kobo from any bank without paying back and there is a limit to which you can borrow from the bank you are also part of, that’s what we are willing to do,” he stressed.

While responding to question on the rationale behind the high cost of doing business in the country, Onyereri who blamed the fiscal and monetary regulators for heightening the socio-economic woes and business activities across the country, called for the establishment of Financial Service Commission that will provide harmonise ths Nigeria’s fiscal and monetary policies.

“If you talk about the interest rate, seriously corruption is not our problem, our problem in Nigeria is high interest rate. That is our problem.

“I have said it to the regulating authorities when you have a high MPR which is the benchmark upon which interest rates are introduced in the banking sector and then the government goes borrowing domestically at very high rates, it introduces an artificial benchmark.

“For instance if the treasury bill goes for 18 percent, what you saying in fact is that the benchmark starts from 18 percent because the banks will now be compelled to add their cost of funds, and by the time you add all those things, you will be having up to 20 or 30 percent.

“If in the fiscal responsibility Act that contractors are allowed a leverage to make a 30 percent profit and then you borrow money at 30 percent what that means that from the first day you assign any contract it was billed to fail.

“Because the person ultimately is expected to make profit, a retain on investment, the person may give a 100 percent profit margin. If a 100 percent margin contract is placed where will the government execute that.

“That is why they collect money and run away with money, so we need to sit back and tell ourselves the truth. In all other climes what adds to GDP is SMEs. Nigerians are intelligent and creative. The point is, is there any credit accessibility, what is the cost of funds? No body is borrowing, nobody is working. That Is why we are in a recession. Because recession is purely lack of production.

“That’s why I frowned at the fiscal regulatory authorities for not converging at a point to fix this. But the truth of the matter is that as we have also said it, for the umpteenth time, that there is need for us to set up a Financial Service Commission.

“What the commission will do is to ensure that the monetary and fiscal authorities converge and sit regularly to decide on what we are going to do. The fiscal authority on one hand will be talking about economic growth, while the monetary authority on the other hand is talking about inflation.

“We don’t need any rocket scientist to tell us that the only way to bring down inflation is to produce. It’s all about the law of demand and supply, it’s about productivity, so the truth of the matter is that they need to sit down, so that they work it out on how they can get us out of the economic crisis,” Onyereri urged.

 

KEHINDE AKINTOLA, Abuja