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THERE'S NOTHING WRONG WITH UNIVERSAL BANKING – VARSITY TEACHER

By NBF News

A visiting professor of Financial Economics and International Investment to the National Universities Commission (NUC), Prof Wilson Herbert, has said that the Niger Delta Development Commission (NDDC) has failed to address the emotional and structural imbalances in the region.

Herbert, who claimed to have written the NDDC policy document, said the 'document pre-empted the insurgence of militancy in the area because, by 1999, we did not have this strident militancy in the Niger Delta.'

He insisted that if the original NDDC policy had been faithfully implemented, 'the proclivity to militancy would have been attenuated.'

In this interview, Herbert also spoke on a number of other issues.

What's your take on the new banking reforms?
The current wave of reforms in the CBN seems to be going on a tortuous journey because there was no conceptual underpinning it ab initio. It's like some one woke up and say he would do this. In a society that is grounded in law, principles, precepts, respect for one another, you've got to appreciate the plurality of the society. And, therefore, before you come up with a policy that will drive the entire economy, it must be well grounded. If we begin to look at the current reforms, in their entirety, I am sure that you will agree that it has not been smooth sailing. These pronouncements should have emanated from a source document that would state the policy direction of CBN. You don't do things as the spirit directs. It is not that consolidation itself is bad. As a matter of fact, it's necessary because as global development evolves, every national economy has got to key into those developments in a way that will either respond to those emerging issues thrown up by those developments or to prepare themselves. The economy will prepare itself to take an active position to forestall future occurrence. To that extent, consolidation is warranted. I had made the point before that all fingers are not equal.

You cannot have a situation where you have N25 billion as a benchmark for banks unless you are saying that the N25billion is the minimum benchmark. It is the threshold level for entering into banking. If you realise, in every economy it's small and medium enterprises that drive the economy. Then you ask yourself, is banking is different from manufacturing. Is it different from other sectors? Therefore, does it mean that a small person, a small entrepreneur cannot enter into banking business? Of course, we know that all over the world, there are state banks that have decided to operate from their states. We have community-based banks. Therefore, the trajectory of policy development must be such that will accommodate these pluralistic interests, whether it's in banking, manufacturing or whatever.

To answer your question directly, it is necessary to undertake another round of consolidation, but the policy must be clear, as to what we intend to achieve, to avoid the situation where we throw away the baby with the birth water. There are clear issues about universal banking, but if I were to engage in that policy exercise, we can have universal banks that will cut out the insurance aspect of it and some of those things that bring about conflict of interest. In other words, universal banking means creating a financial supermarket whereby if you walk in, you get all the services you require. Now, whether all that will be under one umbrella, less than one building or affiliated buildings is another issue all together. Even if they don't have the service, they can call their associate to take care of it.

But as you know, everything that is practised elsewhere, once it comes to Nigeria, it disintegrates; it becomes something else. The way universal banking is practised in Europe and elsewhere, is not the way it is practised here. So, you find that everybody is now getting into the bandwagon of universal banking. If you disintegrate it, you take away those things that should not come under universal banking and you will still have banks that would function as universal banks. You can do this without necessarily penalising everybody. In other words, there are entrepreneurs who want to be investment bankers. There are those who want to be commercial bankers. There are those who want to join the two. Therefore, the regulator must look at these issues, with a view to eliminating potential conflict areas and allow those that would fall within the ambit of financial banking to operate. Those that would be regional banks should be regional banks. Those that want to be national banks should be national banks.

What do you make of the apparent policy somersault?

Part of the reason we have frequent somersaults is the issue of strong men and weak institutions. In Nigeria, the moment people have been given power, their power tends to over-ride the institutional power. With all due respect, I am inclined to disagree with the notion in certain quarters that universal banking is illegal. If you now say that you will disengage banks from universal banking, but you will license them if they want to do insurance you see the contradiction. Once a bank is engaging in an activity beyond its core mandate, it is veering into universal banking practice. Once a bank is venturing into its core banking practice of taking deposits and giving out loans, if it veers into some other services that are ancillary, however, these services might optimise its profitability, it is engaging in universal banking.

Universal banking, by definition, simply means agglomeration of services under one banking umbrella or pyramid of management. I think it will even be wrong for the CBN to, for instance, license banks to carry out insurance functions. It is NAICON that has the responsibility to give licence to any company to operate insurance and their demands are specific. That is why I say that what Nigerian banks are doing is wrong, in a way. But, as I said, you don't throw away the baby with the birth water. For example, I would not allow any bank to operate a micro finance bank. It is not their business. It is like crowding out small and medium enterprises. Those are some of the things the CBN should be looking out for. I also would look at the operations of banks.

A number of issues have been thrown under corporate governance and risk management. If you look at them strictly, they are things that regulation can take care of. If there is regulatory lacuna, you do not penalise operators; rather you look at yourself, your inability to control behaviour. Again, we are in a country where big people make statements and get away with it. If the CBN governor says that universal banking that has been practised over the years is illegal, it would mean that, to all intents and purposes, contracts entered into by these banks including when he was the chief executive of First Bank, and all those contracts are null and void. Then the penalisation of erring chief executives as a consequence of practising universal banking would be attenuated, we will begin to look at those things and unravel them and say well if people engaged in illegal activities, if there was a consequence of that, then, everybody bears the brunt.

As the brain behind the NDDC idea, will you say it is doing well?

The notion of Niger Delta Development Commission (NDDC) was to address the structural and emotional imbalances in the Niger Delta. If you have land and somebody is drilling oil from that land and is living an opulent life and you are living in misery, if you feel weak at the present time, as your children grow up and begin to see development, they would resist it. That document pre-empted that situation because by 1999 we did not have this strident militancy in the Niger Delta. If it had been faithfully implemented, the proclivity to militancy would have been attenuated. You will agree with me that till date, NDDC is not actually doing what it is supposed to do. It is not implementing the policies that will bring about change and development in the area. It is not sufficient to give handouts periodically to them.

You have to teach the people a trade. You have to constructively engage them. When you come from the creeks and you see what Abuja is like, you ask yourself where did all this money come from? I think that part of it is unfaithful implementation of the policy document circumscribed by lack of proper understanding of the dictates of the policy. If you really understand the rigours and rudiments of your portfolio, you will know how to follow it and know how to implement it.

Are you suggesting that there is policy failure in the implementation of NDDC document?

It is not just in NDDC. There is policy failure across the board. People who are put in positions of responsibility begin to develop what you call micro motive, micro objective, and micro agenda. Moreover, those micro motives are not only subterranean but they also end up sublimating the main issues. Corruption is not really our problem, if you look at it very well. We have elevated corruption, to a level where it has assembled us all in a hall, where we will discuss nothing but corruption. And yet that is not the real issue. If we had good leadership, not just at one layer, if we have good leadership across the board, wherever someone is keyed in as a leader, that person is performing the objectives of that organisation. Let me give you an example. If a person is appointed the Minister of the Federal Capital Territory and the person has not visited some of the major cities of the world or maybe he visited and didn't really care about what he saw there and come here and think that the objective of Abuja is to return to its master- plan of 1976, he would miss the point. Unless in that master-plan you had stated that by the year 2010 Abuja would have grown into 30 million people and then you have made provision for 30 million. Otherwise, to think that you will have to return Abuja to master-plan by pulling down people's buildings and all of that, it does not work. You see, that is part of our problem.