30 April 2004

Nigeria: Soludo is CBN's New Governor

Lagos — A NEW governor has been named for the Central Bank of Nigeria (CBN). He is Prof. Charles Chukwuma Soludo.

He will take over from Chief (Dr.) Joseph O. Sanusi, CON, who is retiring May 29, 2004 when his tenure ends and he does not wish his appointment renewed.

Prof. Soludo is currently the Chief Economic Adviser to the Federal Government and he is mounting the saddle of Nigeria's apex bank along with Mrs. W. A. Mshelia as deputy governor.

Secretary to the Government of the Federation Chief Ufot Joseph Ekaette, CFR, confirmed the appointments last night in a Presidency news release numbered SGF.45/VI/T/13.

Chief Ekaette said that President Olusegun Obasanjo had confirmed both appointments and accepted Chief Sanusi's notice of intention to retire.

According to the government secretary, President Obasanjo has described Chief Sanusi's tenure as CBN governor, as "competent and honest".

Mrs. Mshelia who is taking over from equally retiring Alhaji M.R. Rasheed was, until her elevation, director of the CBN's internal audit department.

"In accepting with regret Chief Sanusi's notice not to seek reappointment, Mr. President notes with satisfaction his competent and honest leadership which has successfully fulfilled its mandate of promoting monetary stability and a sound financial structure in Nigeria," Chief Ekaette wrote in the one-page statement.

He reported the president as also noting the CBN's (under Sanusi) monetary and credit policy measures ... all leading to successful re-orientation and re-engineering of the CBN.

Prof. Soludo was a senior lecturer at the Department of Economics, University of Nigeria, Nsukka (UNN).

He is an elected member of the governing council of the Nigerian Economic Society and has been a visiting scholar at the International Monetary Fund (IMF), the University of Cambridge, The Brookings Institute, and the University of Oxford.

Prof. Soludo is believed to be the main engine behind President Obasanjo's economic reform packages.

Notable among his numerous reforms was the recently launched National Economic Empowerment and Development Strategy (NEEDS), a comprehensive blueprint that is capable of restructuring and transforming the nation's economy.

Soludo, who hails from Anambra State, is expected to rely on both his academic and practical experiences garnered over the years, especially his international exposure.

The retiring CBN governor, Dr. Sanusi, had taken over from Dr. Paul Ogwuma in May 1999 after the inauguration of President Obasanjo's first tenure.

Other past governors of the CBN since its inception in 1958 included Mr. Vincent Ola, Dr. Clement Isong, Alhaji Adamu Ciroma, Alhaji Abdulkadir Usman and Dr. Ogwuma.

In a related development, the CBN has directed banks not to charge more than four per cent above the Minimum Rediscount Rate (MRR).

The MRR which is the rate at which banks borrow money from the apex bank is currently pegged at 15 per cent while banks are expected to lend at about 19 per cent following an agreement reached by the Federal Government, CBN and banks last year.

The agreement designed to help the real sector, is being violated by some banks which charge about 33 to 40 per cent lending rates.

The directive was contained in a circular titled," The need to adhere to the agreed lending rates and other charges as provided in the guide to bank charges signed by Director of Banking Supervision, Mr. Ignatius Imala.

According to the circular, the directive became necessary as some banks had continued to charge in excess of the agreed rates.

The circular stated," "Banks are reminded that in line with the position of the stakeholders, government, CBN and the banks and the circular reference: BSD106/2002, stipulating a maximum interest rate of four per cent above the MRR, every bank is hereby advised to strictly adhere to the agreed interest rates on bank lending and other provisions of the Guide to Bank Charges as recently adopted.

The apex bank said any bank that refuses to comply with the directive will attract sanctions.

It said:" consequently, any bank that contravenes this requirement will henceforth refund the entire excess charges plus the interest there on to the customer, in addition to other regulatory sanctions that will be imposed."

The circular also advised banks to reduce their overall cost of funds, particularly the overheads, charging the banks to reduce their personal costs to sustainable levels.

Meanwhile, the CBN has said insider-related credit as currently disclosed in financial statements of banks is inadequate for assessing the nature and effect of such loans on banks' overall operations.

According to a CBN circular titled," Disclosure of Insider-Related credits in Financial Statements," insider-related credits, guarantees and other related party transactions impact substantially on the risk profile of a bank.

The apex bank therefore directed all banks to henceforth disclose full information on all related party transactions in their financial statements.

It said the information should include the details of borrowers while auditors and audit committees are required to include in their report, comments on the information as a basis for their audit opinion.

The disclosure is required to be presented in the financial statement as follows: the aggregate amount of insider-related loans, advances and leases outstanding as at the financial year and should be separately stated in a note to the accounts and the non-performing component further analysed by security, maturity, performance, provision, interest-in suspense and name of borrowers.

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