DÉJÀ VU AWARD FOR CBN GOVERNOR?

By Les Leba
The International media has in the last two decades or so sustained a tradition, which may best be described as 'Nigeria bashing'.  In this vein, they have always been eager to amplify any aberration and indeed, grievously distort any misdeed by Nigerian citizens anywhere in the world.

Nigerians have consequently been associated in international consciousness with negative attributes that continue to haunt the Nigerian tourist as well as those in the diaspora.  We will save Nigerians the discomfort of listing some of the negative attributes with which we have been closely associated by international media!

Nigerians are, therefore, quick and eager to celebrate any recognition of positive achievement or excellence by a fellow countryman since such favourable media are spitefully rare.

Thus, the World's Central Bank Governor of the Year and African Central Bank Governor of the Year awards in January this year to Malam Sanusi Lamido Sanusi may have come as a surprise.  'The Banker' a publication of the respected Financial Times of London, which gave these awards, noted, in a release signed by the country representative of the renowned magazine, that, in the last 18 months that Malam Sanusi has been in office, he has 'salvaged a crumbling financial sector, taken on Nigeria's powerful and corrupt bank managers and initiated reforms that have put Africa's most promising market back on the map for investors'.

The import of this award to our Central Bank Governor, the exalted office, which has the responsibility for appropriate monetary policies for the resuscitation of our comatose economy and the generation of mass employment, is that Lamido Sanusi's policies are on the right track and very soon, the depressing state of poverty in the land would be redressed and more Nigerians should enjoy life more abundant!

After all, these are the raison d'être of the office of any Central Bank universally!  Indeed, any other achievement which does not encourage investment in the real sector and moderate inflation with an appropriate exchange rate mechanism so that general social welfare can be enhanced may rightly be regarded as misguided and anti people!

But why should 'The Banker', a global finance intelligence magazine, published by the respectable Financial Times of London, give such notable award to a Central Bank Governor, whose policies do not seem to fit the above bill?  After all, it is true that in spite of Sanusi's best efforts, commercial lending rate to the generality of the real sector continues to exceed 20%; levels which are suicidal for real sector medium and long term borrowing and are consequently anti_investment and anti_employment rates!!

Indeed, the selective sectoral bailouts with controlled interest rates around 7% are certainly not market based and stringent collateral requirements have largely deterred access to the relatively paltry bailout packages!  Thus, any expected growth from such economic revival policies can at best be superficial.  Besides, unbridled inflation still persists at well over 10% and remains much higher for the average family food basket; meanwhile, Sanusi's lauded rescue of the banks has shown no sign of bringing down lending rates or slowing down the rate of inflation, and the meager incomes of majority of Nigerians will inevitably command less purchasing values as the year progresses.

Furthermore, the real sector has complained incessantly that government's borrowings should be significantly reduced so that banks can readily serve the real sector for us to reap the attendant potential positive benefits.  In contrast, CBN's and the Debt Management Office's (read as Debt Creating Office) almost N200bn monthly borrowings from the financial market are more likely to follow an upward trajectory in view of government's need for increasing deficit financing!

It seems odd that 'The Banker', a financial intelligence magazine is oblivious of these contradictions!  Yes, Nigerian banks may have been saved, but at whose expense?  In the wake of the revelation of the sordid truth of the ugly underbelly of erstwhile widely touted banking success in Nigeria, CBN under Sanusi pumped over N600bn into commercial bank coffers, but this was apparently a drop in the ocean; the cash reserve ratio of banks was reduced to a precariously low level of 2% and an extended window was opened by CBN to enable banks meet their temporary obligations, but not surprisingly, the expected dividends to the real sector remained elusive; EFCC also recovered over N500bn to improve liquidity in banks and the recently established AMCON may eventually provide additional liquidity of over N1000bn for non performing loans to further featherbed commercial banks; all to no avail, as the squeeze on real sector lending appears unyielding; so, question is,  what are the banks doing with all the additional funds garnered from Sanusi's lauded resuscitation efforts?

Well, observers note that in spite of the inherent paradox of this system, government generally goes back to borrow much of the funds from banks under the guise of liquidity management and the setting of bench marks for long term borrowing in the domestic financial markets.

Lately, the authorities have claimed that the funds are borrowed back from the banks with the attendant high cost to cover federal budget deficits; well, analysts wonder why any rational person will borrow for such purpose at such high costs when they own idle reserves that attract little or no interests!

In spite of 'The Banker' magazine's expectations that Nigerian banks are now safe, the above discussion may indicate that the respected financial intelligence magazine's observation may be far from reality.  Indeed, the CBN is yet to reveal a comprehensive or well_articulated exit strategy for their direct involvement in the management and equity values of the five sick banks!

It is also true that operations and policies of our Apex Bank are still controlled largely by the same management team that presided over the failure of the banking system post consolidation!  In the face of critics' call for investigation and prosecution of those CBN staff, who may have colluded and connived to bring the financial system on its knees, a Senior CBN Staff agreed that such corrective and deterrent measures would be embarked upon after sanity has been restored in the system.  In other words, the same bad eggs will be relied on to restore best practice banking regulation and supervision before they are shown the exit; some logic, you might say!

But, the obvious inconsistencies narrated above obviously eluded the esteemed banking intelligence magazine. A possibly uncharitable critic has likened 'the Bankers' award to the children's story of the 'Raven and the Fox'!  in that story, the rather unattractive raven with an even worse vocal endowment, while clutching a piece of cheese in its beak, was flattered by the clever fox to show off his 'sonorous vocal gift'; of course, the moment the gullible crow fell for the flattery and opened its mouth to sing, the piece of cheese fell down into the waiting palate of the fox, who promptly fled thereafter with his loot!

Nigerians will recall a similar award to Chukwuma Soludo, the erstwhile Governor, who presided over the rot in the banking sector before 2009.  The following is an excerpt of an article titled 'AWARDS: FOR SALE OR MERIT?' published in this column on that occasion.

In the light of Sanusi's current award from the same source, readers may observe to their chagrin that we have travelled this road before!

'On Saturday the 18th of March 2006, the crème de la crème of Nigeria's business class, particularly the moguls of the banking industry got together to celebrate the banker of the year award to our own CBN Governor by an international bankers magazine based in London.  The bash must have been in grand style as it reportedly cost the 24 newly consolidated banks, who sponsored it a neat package of N48m!

'Sections of Nigerian society, including the shareholders association have disapproved of such profligacy while others have questioned the ethic of the bankers' banquet vis-à-vis the CBN's regulatory and supervisory role of the banks!

Other curious analysts have questioned the touted achievements of our CBN Governor; such analysts argue that an award for global excellence in any endeavour or discipline should be backed by concrete achievements which have added value to the life of a country's citizens.

'So, other than the qualified success of forcing a field of about 90 banks to a more manageable 24, analysts argue that the parameters with which Central Bank Governors all over the world are judged relate to inflation, interest rates, exchange rate management, promotion of employment and sustained economic stability.  Now, where does Nigeria stand regarding these critical parameters?

Well, inflation, according to Prof Soludo himself, is still above 20% compared with 2_3% maximum in focused economies; CBN's control rate (MRR) remains adversely high at 14.5% compared with rates of 0_3%, while commercial lending rate is still above 20% as against 6_7% in serious economies while the naira refuses to appreciate at a rate commensurate with our reserves!

Meanwhile, our government's monetary framework promotes a climate of too much cash in the system when the nation's dollar revenue is unilaterally converted by the CBN and paid into the bank accounts of the three tiers of government every month, a system that supports the payment of double digit interest rates by government for its borrowing (read as mopping up and sterilizing huge naira balances in the banks) through the risk_free instrument of treasury bills, while the real sector is starved of funds!

'Indeed, curious observers conclude that if all these negative indices were abiding features in the UK economy, the base of the Global Banker Award promoter, the Governor of the Bank of England (the UK's CBN) would not stay a day longer in office, let alone win an award for banking excellence!  But then, cynics have noted that Soludo's award by the UK outfit was just a way of expressing gratitude for the benefits the UK in particular and the European Union have derived from Soludo's brief tenure as CBN Governor; remember the payment of $12.5bn to the Paris Club for the write off of the remnants from a debt of $10bn, which still ballooned to $32bn even after payment of $17bn?

'Furthermore, the cynics observe that our warm embrace of international monetary institutions ensures that both our Finance Ministry and our CBN have now become the 'bedrooms' of IMF and European neocolonialist hounds, whose interests are served by our predicament of a monetary framework that ensures that our people have become poorer with increasing foreign exchange earnings!

They know that the main cause of our poverty is the conversion of the nation's dollar earnings into naira before sharing, but it is not in their interest to tell the fools, who are their trading partners!'

SAVE THE NAIRA, SAVE NIGERIANS!