CBN AUDIT OF BANKS WILL NOT SCUTTLE MARKET MAKERS PROPOSAL
The Securities and Exchange Commission (SEC) has said that the rattling of the banks that would provide liquidity to the Market Makers will in no way scuttle the exercise.
Speaking to Daily Sun , Mr. Lanre Oloyi, spokesman for the Commission said that since it was liquidity that stalled the take off of the market makers, the matter has not been jettisoned.
He said the circumstances that led to the creation of market makers are still there, however, the Commission is watching to see the market increase its liquidity supply to give the liquidity provider the space to carry out the functions of liquidity providers and their functions as healthy banks.
Also speaking on a television programme recently on the path to rebuilding the economy, an Economist, Mr. Henry Boyo said that it is wrong to keep excess crude account when there are needs for the money at home. He said that it is wrong to keep money with people as foreign reserves only to turn back and borrow from the same people you keep your money with. This he said has led to capital flight and unless it is addressed, Nigerian economy will continue to suffer for it.
Boyo decried the situation where the country will have excess money yet it will be looking for borrowed money to fix the roads. He advised governments at all levels to look inwards to see how the money stashed in foreign countries be repatriated to Nigeria to help develop our economy. It will be recalled that Manufacturers Association of Nigeria (MAN) last month cried out that its members were finding it difficult to access credit from the banks as a result of the current banking reforms.
According to its President, Alhaji Bashir Borodo, the banks have become stricter in lending to the manufacturers adding that it adversely affected their profitability and growth in 2009. He said that the directive by the Federal Government to the banks to make lending to the real sector of the economy a priority has not yielded any dividend, adding that the banks are still trying to get their bearing with the ongoing reform and as such, they have virtually stopped lending. Their major preoccupation has been how to recover the funds outside .The banks are even stricter now in lending to manufacturers, particularly the small and medium scale enterprises (SMEs) who do not have adequate collateral, for the fear of entering into bad debt,” he said.
Supporting Borodo's view was Mr Larry Ettah, the Managing Director of the United African Company (UAC) who lamented the worsening banking crisis, said the problems of the manufacturers and other operators in the economy has also aggravated what was already a problem.
The ongoing fuel scarcity is a case in point: The fuel importers, who were hit by shortage of funds, had rushed to their banks for short term credit facilities to enable them flood the market with fuel .But unfortunately, the banks have learnt their lessons from the CBN sanctions over their exposure to oil and gas business.
Giving details of the exposure last August while announcing the suspension of the five banks that failed his stress test, Sanusi stated that the five troubled institutions had a disproportionately heavy concentration of loan exposure to high-risk areas such as the stock market and Nigeria's oil and gas sector relative to the rest of the industry. “Of a total loan portfolio of N2.8trillion, margin loans accounted for N456 billion, and oil and gas loans made up N487billion; aggregate non-performing loans totaled N1.143 trillion, or 40.81 percent, of total loans. At the end of May 2009, their liquidity ratios ranged from 17.65 percent to 24 percent, compared with the regulatory minimum of 25 percent. One of the banks was found to be technically insolvent by bank examiners, with a capital adequacy ratio of only 1.01 percent,” said he.
The Managing Directors of the affected banks were removed and the CBN then appointed caretakers to manage those banks. With this experience at the back of their mind, the banks then had no other option than to shun the request. Even at the best of times, the facilities extended to the real sector by the nation's banks pale into insignificance when compared with funds extended to other sectors of the economy.