allAfrica.com: Nigeria: Probing the Banks (Page 1 of 1)

The conduct of legislative oversight into the banking sector is, no doubt, one of such probes being carried out in the economy by the House of Representatives.

Yet, there is every reason to exercise caution and restraint by the House Committee on Banking and Currency in carrying out the banking sector probe, given its sensitive nature. We say so because no economy grows beyond its confidence level. And the confidence level is based on the ability of the economy to retain investment and generate profitable returns to all its stakeholders.

This position was also supported by Prof. Chukwuma Soludo, Governor of Central Bank of Nigeria (CBN), when he recently appeared before the House committee on Banking and Currency prying into the books and activities of banks on issues of "unethical practices in the banking sector". Soludo had told the lawmakers that the probe of the banks may give wrong signals to the international community and other investors to the point of doubting the safety of their investments. He went ahead to re-assure the lawmakers that the CBN was alive to its responsibilities, hence, doing everything possible to ensure that commercial banks in the country operated within law. We cannot, but align our position with the CBN governor on the issue.

While we do not question the authority of the House to pry into the affairs of the banks, it is, all the same, imperative to remind the lawmakers that nothing should be done to erode the confidence that is gradually being built back into the country's banking sector. This is because there was a time in this country when depositors' funds were routinely trapped in distressed banks; when banking professionals merely bore the tag without living to their responsibilities; and when few individuals and families would gang up and incorporate a bank only to siphon public funds into their private pockets.

Besides, no Nigerian commercial bank was mentioned in competitive banking, either on the African continent or in the world. Indeed, their entire capital base was not as much as the second biggest bank in South Africa. Today, all these have changed following the consolidation exercise of 2005 by the CBN under Soludo. Our commercial banks are gradually becoming a force to reckon with in Africa, indeed, the world, as more foreign investors are being attracted to the sector due to its robust business and professionalism, with cases of imminent collapse or distress of banks now a thing of the past. No doubt, the ordinary depositor, who does not understand anything else in the banking business except perhaps, the safety of deposits, can now go to sleep with assurance that his funds would not be trapped in any distressed bank.

Again, the influence of family banks or circle of friendship banks has been checked significantly. Bank ownership today is broad-based and devoid of any known polarisation. In the light of the above, the lawmakers must necessarily be patriotic in this probe. They must not portray themselves as carrying out a personal or private vendetta as current exercise suggests. Already, some operators of the banks have alleged that they were being arm-twisted to offer shares at ridiculous rates to the lawmakers; give employment to some of their candidates and to 'lobby' them for protection arising from the probe.

Perhaps, the most worrisome aspect of the case against the House probe is the allegation being made by some of their colleagues in the Senate: that the probe is targeted at Soludo. The aim being to rubbish him and de-consolidate the banking sector to enable some individuals wishing to reievent family and circle of friendship banks' ownership, to have their way. These issues are weighty as they are a test of character for those engaged in the probe.

We believe that some of the issues being raised by the committee upon which the probe is hinged namely, high interest rate, charges such as commission on turnover, failure by banks to engineer and regenerate growth and improvement in the real sector, setting of too high deposit rates for especially their female staff and posting jumbo profits as well as a growing number of dormant accounts, poor treatment of customers complaints, among others are within the purview of the CBN to handle. Some of them are also issues that could be resolved within the broader framework of good governance, rule of law, security of lives and property, functional social and economic infrastructure.

For instance, there is little the banks can do to regenerate the real sector, when public power supply is zero. It is equally specious argument, perhaps, standing logic on its head to accuse the banks of not reflating the real sector, despite the acclaimed success of the banking consolidation, in an economy where a chemical substance as ordinary as carbon black, used in textiles and tyre production cannot be sourced from local refineries. Today, all the tyre companies but one, have shut down while over 95 per cent of the once flourishing textiles companies have also died.

We challenge the House to pursue these concerns of our national life through adequate and prompt legislation as their absence had equally impacted on the liberty of the banks to freely operate.

Indeed, the lawmakers should not give the impression that they do not know that these commercial banks are privately owned, hence setting targets must necessarily be part of strategic corporate goals attainment and performance measurement. Being profit driven, they cannot afford to operate like father christmas, since they do not expect any grant or subsidy from anywhere. This is not to suggest that they should operate outside the law or with disregard to acceptable morality, which explains why the CBN is there to supervise and enforce compliance to such laws and operational guidelines.

Even then, while we do not wish to engage in the debate of the issues raised in the main, especially as some fall into the realm of speculation, the fact still remains that the consolidation carried out in the banking sector was a success story as it brought greater and enhanced investment, stability, confidence and professionalism into the industry. The lawmakers should do nothing to erode these clearly seen gains in the industry.

Above all, the lawmakers should also appreciate the fact that no economy ridicules its business class by whatever means and hope to gain the confidence of the international community whose investments drive any growing economy such as ours. We therefore urge for caution.

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