Nigerian Bank Nigeria CBN Central Bank Of Nigeria – 2006 Bank Reform Horrendous, Misguided, Says Jaja

Source: Daily Independent, 20 Nov.2010

As the president of Africa-USA Chamber of Commerce and Industry, what do you think the biggest obstacle to Africa’s development?
I believe that the biggest obstacle to Africa’s development is the leadership crisis which has resulted in corruption, political strife; environmental stress and hunger because of the decisions of current and past leaders have caused economic programmes to add more to poverty rather alleviate poverty it.

The solution lies in the development and election of African leaders who are able to make wise and prudent decisions that support the economic development of their nation.

There is an argument that zoning formula arrangement of the People Democratic Party makes President Jonathan unqualified to contest for the 2011 presidential elections. What is your comment on it?
It is unfortunate indeed now that someone of the minority tribes have the opportunity to run this nation that these issues and discussions of zoning are now out to rob them of the opportunity.

I feel most people do not know the history of how Jonathan emerged as the vice president of this country. What happened actually is that the youth of the Niger Delta, the owners and indigenes of the region having been marginalised as a result of oil production and the calamities that came as a result of it, felt that all avenues explored to seek redress and call the Federal Government to treat them fairly resulted in nothing to show for it.

And so they took the laws into their hands and some of them went to the creeks and others went to the towns and the multinationals were completely destabilised and the oil production capacity of the nation took a downturn and the world market was affected and the economy of the industrialised nations was obviously interrupted as gas prices were shooting through the roofs in most of these countries. As consumers were feeling the pains, factories were closing down because the cost of production was coming down on the industrial enterprise of the West.

Most industrial nations now put pressures on the Nigerian government to begin to seek redress with regards to what is happening in that part of Nigeria. This was the pressure. because if you look at the entire Niger Delta region, the Ijaw communities that make up the region provides the land mass with which the total investment of the global industrial empire represented by many of these countries namely: USA,UK, Norway, Canada, France, Italy, Japan and China. Most of their major strategic investment in Nigeria is in the Niger Delta region. And so, the Niger Delta region houses huge amount of resources of the West. And because of this, most of them them said it is time for them, not only to worry about themselves, the owners of technology and capital that it is time for them to think about the owners of land and labour.

In a nutshell, it was the international pressures that produced Jonathan as Vice President in the 2007 general elections and not zoning as some politicians believe.

Why is the crisis in the region yet to abate?
The region needs meaningful and concrete development plan such as the Blue Print plan that the late President Musa Yar’Adua had for the region.

So until the nation begins to look at what late Yar’Adua had in mind for the Niger Delta region, for instance, for the first time, he established a ministry to answer the worry about the issues and concern the Niger Delta region.

Until the nation embraces Yar’Adua’s aspirations for the Niger Delta region that would put in place serious infrastructures that would pave way for the massive development of the region, serious infrastructure that would look at the international role of the region, that would support the welfare and public health of the region, that would deal with the ecological problem of the region and the overall impact of the region which has been neglected for many decades. So, by just producing a citizen of that region cannot in any way mean solutions to their problem because at the end of the day, they want to make sure that their children are in quality schools, their elderly have qualitative and efficient health care, to make sure that there is adequate and quality water, they want to have adequate and protective security services, want to be part of the system.

In fact the argument that Jonathan should not run is another marginalisation. It is manifestations of a deeper decentralised mentality by those arguing that it is not his time or that the people of the region do not have the right to rule.

And so saying that it is not his time, it is not his zone, is absolutely unfair for a region that produces most of the wealth of the nation and receives nothing in return. And now, it will be anti-Nigeria for any sections of the nation to challenge with all their might now that the region has the opportunity to produce someone that shares the conscience of the region to sit at the helm of power, to direct whatever that the entire nation has agreed as the resources needed to develop the region.

Is there any plan on ground for the proactive development of the region?
In my view, there is none yet. I am saying this not to indict any one, but I am saying it to raise the alarm that when we talk about development of Niger Delta, we are not just talking about development, we are talking about strategic development because the region presents a unique challenge of a section of the country that is surrounded by water, that the land structure is such that development cannot take place because it is capital intensive because to build any infrastructure in the Niger Delta region, you have to budget two and a half times more than you can do in any part of the country.

And so the challenge is huge because you would be fighting the art of God, natural structures unlike any other part of the nation where you have free land, but you have to reclaim land from the sea, and after that you have to face the dangers of disrupting the structure.

It is a very unique area that before you begin to think of development, it should not be the ordinary type of development we talk about, but a type of development that has deeper meaning, new technology being applied, and new sense of technological development being injected into the development.

You have spoken severally in local and international forum why corruption is endemic in Africa. If you take Nigeria as a case study, what solution do you think we need to get rid of corrupt practices especially from our leaders in government?
Corruption in Nigeria is a serious and deep problem. It is not that corruption is not in other parts of the world, but it is a serious problem in Nigeria.

In USA, we were the first to enact what we call the Foreign Corrupt Practices Act (FCPA) in the world. And that act prohibits any body, any USA citizens, multinationals, businessman from giving any thing of value to a government official that would influence him to in return give him any thing of value as well.

That law is seriously enforced and you can see the impact of it with the Halliburton case. You can see the impact of it with Siemens, and so many countries know that as long as they violate that law, whether they are USA citizens or not, as long as their stock even trade in exchange, that law applies to them. To a large extent USA companies have operated in the country with caution. In fact I may even add at this point that if you look at the Niger Delta in particular, most of them do not have any problem with USA companies, because wherever you find USA companies you find good relationship with communities, with labour and they have tried as much as they can to bring the communities along, care for their welfare; but if you look at other nations that have come, the indigenes and the people of the country, particularly the Niger Delta have always have crisis. Now on corruption, we cannot enforce or wipe out corruption, if we do not enforce our laws.

All the laws to stamp out corruption in Nigeria are already there but the will to enforce these laws is not there at all. It is that gap that has given rise to the huge amount of corruption that has destroyed the nation. And until our leaders now begin to say it is time for us to implement the rule of law and we care less who is being impacted upon and make sure if you violate any section of our criminal laws, civil laws, you are brought to justice. And that entails that we have to reform the judiciary in such a way that more judges are added, law enforcement infrastructure included and if the government does this very well, just that restructuring can create a lot of jobs. Can you imagine a standing number of judges and what that means. That a number of judges will have staff and these can help in ensuring that every commercial case cannot stay in court for more than 30 days or even 45 days in the trial court and in the appellate court, not more than 60 days and in the Supreme Court not more than 90 days.

And in so doing, the government would have increased the base of the nation’s judicial infrastructure, add all the inter-connected activities to them, broaden the vacancy for employment and all the talks of unemployment will begin to disappear, because in the judiciary, the system pays for itself if it is properly managed and even when it is not paid, at least most of the cost are recovered.

But what you would derived on the commercial level: foreigners would have interest in the country, because the foreigners would say if I go to Nigeria and run into problems, the maximum time of dealing with my case in court is 90 days, which can be easily be planned for in their programmes. But when cases are left in courts for 10 years, it would be difficult for any business-minded investor to come to Nigeria for investment. And so when the world knows that the country is serious to wipe out corruption and the judiciary is sound, reliable and fast to deliver justice, if it were a case that involved fraud for instance, or corruption in government, then the international investors can then plan to invest in Nigeria.

And the impact of the reform would broaden and energise the economy and encourage investors to come into the country to join us in our economic growth and development.

The CBN carried out the banking sector reform in 2006, but to date, the sector cannot find its feet. With business investors inability to take loans to finance their businesses, how do you think the economy can get out of the woods?
Absolutely the impact is horrendous because the banking system represents the blood in the system and when the blood dries up, you do not need to be the daughter of soothsayers to know what happens to the body. This is because it is through banking that the supply of resources to entrepreneurs’ institutions operates so that government can release funds to stimulate other factors of production.

I am in banking and I have been with the California Banking Commission as well as the USA Federal Reserve Bank for many years. And so, we deregulate banking institutions. I know much of what is happening around the world.

In the case of Nigeria, the banking reform that was undertaken few years ago in my view was misguided because in a developing economy where majority of the entrepreneurial institutions are in the category that would cut across small businesses, the economy in term of those who actively use the banking system alone with not be up to 60 per cent of the population, so for the CBN to say automatically, it wants mega banks with billions of dollars, with huge assets, is absolutely a misguided idea, rather than that, the CBN could have stratified the banking system by having community banks, regional banks and national banks with each having contributions to the economy so that the national bank will be the big bank to undertake international mega transactions and they must merge themselves with the adequate huge capital base for the international transaction and since they are international, of course the banking regulations and supervision will be high because they are our ambassadors in the financial world.

The CBN should make sure that their certificate of the deposit and loans of credit would be high and any capital instrument that they issue is backed without any sorts of question. And so, I specifically think that the reform was a poor public policy where the CBN forced all the small banks, the medium sized banks and even the large banks to merge and when they merge with these huge capital base of the so-called 25 billion size, show me the business that would support the huge capital base, because there is no business within the country that can support or go to borrow at that level because our entrepreneurial sector in terms of real enterprise was very small.

There is no reason why a bank will have a loan in its books, and the loan has not performed for more than one year and the bank is still counting it into its capital. In every serious economy of the world, any loan is classified within 90 days and adjusted to a level where it is fixed into the risk profile where the banks operates it and then it cannot be booked at that full amount. And if the loan goes to 120 days or up to six months, the banks should fully reserve it and write it off and if it is recovered, the block. And so I feel that the strategy of selling off large bank with huge capital was not well conceived and even the level of businesses in the country that will deal with such transactions was not there because most of these businesses found around the country are looking for small money to do basic transactions at their own local levels like small imports, small export and by just focusing on big banks, I think it was driven by political motives and nothing more.

The CBN governor recently planned to sell off the five distressed banks to foreign investors. As an international finance expert, is the decision right?
I support the present CBN Governor, Sanusi Lamido, because I think Sanusi may have been probably misunderstood on the new reform because of the discipline and prudential guidelines on how banking institutions must be managed and operated.

I think Sanusi was misunderstood in terms of his strategy because just having money alone is not enough to run a bank. What was on the back of his mind was what would bring in competence, technical know how that would go with the reviving the distressed banks.
As a consultant to banking institutions, I do have a bank that I have arranged for sale, the capital is into the bank, but the regulators in USA have their standards that must be followed.

The capital to be injected into the bank is not enough to give it out rather the managerial competence, the capability of the directors that are as good as money must be put into considerations. This is because $1 billon for instance can be put into the bank, but if the managerial competence is absent, that is managers that can see through development in the finance industry globally are not there, the capital will dissipate only to create the same problem again for the regulators before the banks were shut down.
And so what I think Sanusi could have done was to articulate these positions to the shareholders to carry them along in the revival strategies of the banks.

And there is no shareholders that would throw away his money and maybe some sorts of consensus could have been reached where the shareholders of the banks would now see the need to bring in a well- trusted group that is foreign base but have commitment and strategic interest in Nigeria or Africa as a whole to be part of the consortium to run the banks.

It was argued that if the FG through CBN gave out N420 billion as stimulus money to bail out the banks, why should the CBN want to sell the banks?
If the Federal Government has given out such amount before bringing in the foreign investors, the intension was not to sell a weak bank because the coming investors may want to buy weak bank at a give away price and so it is when the bank being strengthened and the capital position is good enough then that the CBN will be in a better position to negotiate the better capital structure of the banks.

This is because weak bank could be bought in a five cent of a dollar, but if the capital position of the bank is strong, the investors can buy same bank in a premium because they are no longer worried about cleaning it up so that the bank will be stabilised, they would be more worried about expansion when they come in to take over the bank. I think that may be the thinking.

The late Obafemi Awolowo said in one of his books that he would see democracy at work on the day the South -South becomes the president of this country. Now whether by design or providence, we have a president from the region there. Do you share late Awolowo view of democracy? And to what extent is the Ijaw Foundation working to consolidate on this to ensure Jonathan wins the 2011 presidential elections?
I think as you all know late Chief Awolowo is a president this country never had and world nations know him as a man of deep thought and a philosopher of an immense measure.

The statement is absolutely true. Why, because the South-South is the only region that does not have the requisite conflict of interest to diminish the national aspiration of the country. This is because they know that they would be recipient of the Mobutu impact of a disorganised nation, why because of their numerical disadvantage.

And so, when you now allow the minority to rule the majority that is so infested with conflict of interest that impact their region, interest of advancing their religion or the interest of advancing the cause of their tribe and you see all these conflicts driving the system together and at the end you see the conflict of interest in that structure that get the worst impact.

And so it was a very deeply rooted thought point that looking on it on the surface you may not understand what exactly it means because the variable that late Awolowo was looking was that the North has its own orientation deeply rooted in its own values and norms and they have come together collectively as a political force and the force continues to rotate around the norms and values and you find the same thing with the East by the Igbo in particular and the same thing in the West by the Yoruba in particular.

But the South-South is a collection of different groups that can never come together as one force, where you have the Ijaw, the Ibibio, the Edo and they are not culturally strong enough to bind together because they are strong culturally themselves. And one thing that people do not realise is that this South South people were the first point of contact of civilisation in the country. The first administration of a country to be born for Nigeria was first nurtured in the region with their interaction with the European power in those days with the Spanish, English, the Germans, the Dutch and so that interaction sensitised them to understand the principle of governance. This is because if you go and examine the ancient kingdom of Bonny, Benin, Itshekiri, Warri, Calabar, Degema and Brass in those days, you would see that governance was actually instituted to the point where there was executive, legislative as well as the judiciary in a very raw form.

In those days, the king controled the executive powers, the council of elders and the chiefs control the legislature and the juju priests were the judiciary that interpreted the norms. And so it was that culture that was brought to the Nigerian nation when she was conceived. I would say here that most people should give their thought sometimes because we have studied our nation carefully and I know that the forces pulling the country together are always the South-South and maybe that is why God allows the South South to carry the country along otherwise we see ourselves a different country.

Nigerian Bank Nigeria CBN Central Bank Of Nigeria, World Bank