Central Bank of Nigeria (CBN) Governor, Lamido Sanusi, has appeared before the federal lawmakers committee on banking to explain why five bank Managing Directors (MDs) were fired on August 14 and why the government had to prop up the banks with N400 billion stimulus packages from the treasury.
The high powered meeting was presided over by the House of Representatives Banking and Currency Committee, Chairman Hon. Ogbuefi Ozomgbachi (PDP, Enugu). The parliamentarians are suspending their holiday to hear Sanusi out, and he discussed other issues relating to the financial sector, according to the letter of invitation sent to him by the Committee Clerk, James Obotu. In August, 190 members of the Northern Representatives Caucus in the House described the bailout as illegal because it was not appropriated by the National Assembly (NASS).
Deputy Chairman of the House Committee on Drugs, Narcotics and Financial Crimes, Bassey Etim, asked the CBN to return the N400 billion to the treasury. The Committee supervises the EFCC. However, Sanusi reiterated on that the CBN has the legal backing to lend money to the banks without recourse to the NASS. After a meeting of the Monetary Policy Committee (MPC) in Abuja that what the CBN did was not a bailout but a liquidity support, and as a lender of last resort it had to do what it did in August to salvage the mercy situation.
On the bank bailout, Sanusi maintained his ground that: "We do not need an appropriation. Prior to what happened, the CBN was giving money to these same banks we are talking about. All we had to say was that, 'take this money for a longer term, don't bother about paying us now, focus on meeting your obligations to your creditors and depositors so you don't run into trouble, take this money as quasi capital, and pay back when you are strong.'
"We have put in money below the level of depositors and creditors with the objective of protecting depositors and creditors from any losses, so that we would save the balance sheets from further deterioration of non-performing loans.
"The principle objective of the (CBN, at this point in time, is not to sell the banks. I have said this severally, even at the London forum. We did not go to the UK (United Kingdom) to sell the banks; we did not go to the UK to meet investors.
"We went to the UK to meet correspondent banks and creditors to assure them of the safety and soundness our banks because it is their right to know.
"Our preference is for these institutions to have a core investor, local or foreign, that will run them professionally and put in place the governance structures and institutions that will ensure that we do not have a recurrence of the kind of things that we have in the past.
"I must also repeat that there is no law that stops any foreigner from owning any Nigerian bank, and we at the CBN will not preclude any bank from owning a Nigerian bank simply because it is foreign."
Sanusi said that the regulators (the CBN, Nigerian Deposit Insurance Corporation, and the Security and Exchange Commission) are devising "consolidated supervision" to close loopholes for insider abuse and other vices in banks - and would collaborate with foreign regulators in doing so.
Meanwhile economic experts and social commentator have been reacting to this development said CBN has a case to answer for not doing enough over the years to detect the gross sharp practices in the banking sector all these years. Taiwo Ayodeji and Desmond Odiase said inaction is an indictment on inspectors of the apex bank. They however dismissed insinuations that the step taken by CBN is a northern agenda.
Reacting Taiwo Ayodeji said: "…The CBN inspectorate unit has been grossly inefficient and they have acted contrary to their professional ethics of practice for CBN to have degenerated to this kind of level, they deserve to even answer queries from the Presidency and they suppose to set up a committee of inquiry into the inspectorate unit, whether something have not changed hands. Because what are they watching are you telling me that CBN inspectorate unit have not examined the books of those failed banks."
Desmond a social commentator on his own part said: The sanitization exercise was correct, but to say it was a northern agenda it was an excuse, it’s not true. Granted there was a newspaper publication in March that some five banks will be taken over, granted but the truth of the matter is that is their books in order, their books are not in order. I’m sure if their books were I order they wouldn’t have been in this shape. What of the other banks like First Bank and GTBank are they northern banks? Majority of the share are owned by Nigerians from the south .A lot of those bank executives gave out loans without collateral. I did not also ascribe to selective justice in the sense that dealing with a 25 banks, and 5 were being examined, while you were dealing with some banks others will have the window to keep their records in shape. "
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