Abuja — No Nigerian bank will be allowed to fail, the Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo, told the Senate yesterday.

He said the CBN was ready to take any necessary step to save the banks in the event of distress - including taking over "toxic assets" in the banks'balance sheets.

Soludo, who said it would take a while for confidence in the financial system to be restored after the stormy season, stated: "There are other measures that could potentially be taken. We have said it to our banks and I want to say this to this distinguished Senate today (yesterday) that we stand ready from where we see our banks, where they are today and the contingency plans that we have in place, no Nigerian bank will be allowed to fail."

He maintained: "No Nigerian bank will be allowed to fail. At the extreme, we have opened our windows to be the lender of last resort. That is part of our functions as a Central Bank, to be able to extend any credit that they want, and we can actually extend credit up to 360 days now to them and with lenders of last resort. No Nigerian bank will be allowed to fail.

"Second is that in the limit of it. Let us even assume that the banks' exposure to the capital market gets bad, at most, we could also have arrangements to take off some of those assets from their balance sheets and then free them up from those assets."

Soludo, who was briefing the Senate on the state of the Nigerian economy in the face of global financial crisis, said: "We did not wait for our banking system to collapse before we did our own recapitalisation (consolidation in 2004). If you recall, I did mention that part of the crises today, in many of these markets, is that they reacted too late.

"We did not wait for our banking system to collapse before embarking on recapitalisation. So, we have finished our own recapitalisation, which is part of what they are doing today."

He said on guarantee of private sector deposits, "we did the same thing then; and, we still insist today that none of the banks will fail."

Soludo stated further that "we restricted government ownership in banks and restricted foreign ownership of our banks too; and, this has proved with the benefit of hindsight to be very, very beneficial because many of these things have been transmitted via some of those foreign-owned banks."

He explained that the CBN also proposed an Asset Management Company during consolidation programme, but pointed out that the programme was not approved by the National Assembly.

According to him, "We proposed an Asset Management Company during consolidation programme; but it was not passed by the National Assembly. This is the time, President of the Senate, most distinguished senators, to pass the Assets Management Company where banks and other financial institutions could go to sell or deposit some of their distressed assets."

Soludo further disclosed that there was liquidity surge in the banking system, adding: "We suspended mop-up operations and extended our discount window and ready for one term lending to the banks.

"We have allowed our banks to restructure some of their exposure to the Capital Market up to end of next year. We have taken steps to safeguard Nigeria's foreign reserves and the Securities and Exchange Commission (SEC) has also reduced transaction cost on the exchange and arrangements to appoint market makers and also it instituted circuit breakers on the Nigeria Stock Exchange, of +5/-1 [share prices cannot rise above 5 per cent or fall below 1 per cent in a day]."

He continued: "The summary of what I have said so far is that the circumstances of our banking and financial system happen to be different from what is happening in the rest of the world.

"Much of what they are doing as a reaction is actually what we had done a few years ago. But in order to pre-empt and make sure that the contagion does not wipe out our own system, we have also taken out proactive measures by making sure that the system is as liquid as possible and we have opened our lending window to be able to extend credit to any bank that needs it as much as it can.

"This is why the collaterised window of the inter-bank rates today is still slightly less than 10 per cent. It is old collaterised path that is trailing about 15 point something per cent today in terms of the inter-bank markets. This is much better than what had happened in the much rest of the world."

He added: "Today, the market is fairly liquid; we are trying to expand further to make it even more liquid. Credit to the private sector, as I mentioned up to the end of September was about N2.3 trillion more than the Federal Government's spending and the banks will be expected in the future to still play even greater roles.

"The banks' exposure to the Capital Market is barely about 9.6 per cent of their aggregate credit. On annualised basis, the credit to the private sector as at end of September had grown up to about 71 per cent from the end of December, last year.

"This is against the target growth rate of 30 per cent. The target that was set was 30 per cent. So, even if they do not extend any kobo as credit for the rest of the year, they have already exceeded the target for the year."

Soludo also pointed out that the total non-performing loans of the nation's banks were miniscule at about 5.9 per cent, adding that "the stage it gets and you begin to think of the stress is 20 to 25 per cent."

He said contrary to claims, the US dollar was now much stronger, noting: "This is the good news of the global financial crisis - that it has not yet metamorphosed into a currency crisis. In fact, the dollar has in recent weeks strengthened against major currencies in the world."

The CBN Governor stated that one of the buffers that "we have as insurance in Nigerian economy is that our productive sector is still dominated by the non-oil sector.

"It is still dominated by agriculture at about 40 per cent and this is not so much responsive to the global financial crisis and this is why output is still expected. We are not likely to get into a recession."

He told the Senate that the second quarter Gross Domestic Growth (GDP) rate was about 8.5 per cent for this year "and I do not think that will be greatly dampened by next year."

On the issue of foreign reserves, he said Nigeria was not yet experiencing a currency crisis.

"As at end of August, the total Foreign Direct Investment (FDI) was $8.5 billion compared to total last year. It is expected that the FDI will exceed the total for this year and trade finance has not fallen. I have tried to lay out in details the difference between the two regimes - what is happening and where we are and why we would likely survive it.

"But there are challenges going forward and that is the responsibility for the Senate. I think there are several bills before the National Assembly that need to be passed like yesterday that are needed to strengthen the financial system," he said.

He listed the bills to include the Banks and Other Financial Institutions (BOFI) Act, which he said had been in the National Assembly since early 2006.

According to him, "It still requires amendments to strengthen the regulatory capacity. There is also a bill for Consumer Credit. It is before the National Assembly; there is a bill for mortgage reforms before the National Assembly.

"These bills need to be passed urgently because they are required to unleash the boom in Nigeria's financial system and also useful for moving the economy forward.

"There are several other legislations pending here that are required and I think my recommendation will be that we could treat them like the US Congress treated their own Stabilisation Act- an emergency- and we could say that within the next 100 days, let us pass 10 most critical legislations required to strengthen the financial system and move the economy forward.

"We can select those 10 major legislations and several of them have been pending here for years now. This is the time to have that as an emergency."

Soludo, who stressed that there was no cause for alarm at this point in time going by the level of the country's foreign reserve which is currently put at $62 billion, explained that the Nigerian foreign reserve would serve as a buffer, adding that all Nigerian banks were very safe.

According to him, "any time we notice that our monies are not going to be safe, we move them and I want to assure that the recapitalisation we did three years ago has helped us absolve any problem. our banks now have the muscle to write off their loans; they are declaring profits unlike the banks in the other countries that are declaring losses and that makes our banking system different."

He, however, agreed while rounding off his presentation to the Senate, that "this is not the time to be complacent; it is the time to take action; it is the time for patience and it is the time to be vigilant."

Leading the nation's top managers of the economy to more than a six-hour briefing on the likely impact of the global financial crisis on Nigeria, Minister of Finance, Dr. Shamsuddeen Usman, declared that the economic fundamentals indicated that there was no cause of alarm, at least, for now.

He said pointblank that Nigeria was not experiencing any economic crisis at present although he painted a scenario of what could happen in terms of adverse effects on the economy if the crisis caught up with the country.

Shamsudeen, who was the first to make his presentation, said: "Do we have economic crisis at home? The answer is No, we don't have. Are we immune to the effects of the crisis? The answer is No, we are not; there are potential threats to the economy and this is why we are doing everything possible to contain it."

He contended that if nothing was done, the global crisis could have negative effects on two fronts: the fiscal side where the prices of the nation's crude oil would drop and ultimately affect the 2009 budget.

Usman, however, admitted that the development was responsible for the decision of the executive to review the budget, which he urged the Senate and the House of Representatives to expeditiously pass when it was eventually brought to them for consideration.

He hinged his plea on expeditious passage on the need to avoid a situation where the Nigerian economy could go into recession, which he warned could portend crisis with the potentialities of affecting other areas like the Niger Delta and infrastructure development.

According to him, "This clearly will have a serious impact on the budget but when Mr. President presents the 2009 budget to you very soon, you will see in fact that we have gone back; for example, we have to reverse the whole budget proposals for the 2009 to reflect the realities of what is happening to oil prices.

"We have anticipated the effect of this through a number of measures; one, obviously, is the drastic reduction in the benchmark prices that is going to be proposed to the National Assembly.

"But also a lot of work is going on to focus on key priority areas, especially infrastructure security and the Niger Delta areas that hopefully will address the serious supply constraint in our economy, and therefore will boost the economy and help us to avoid a slowdown in the growth of the economy, which is really an area of threat because if we don't do something, the targeted growth that we are planning for can be much lower because of the impact of the this."

He continued: "A number of steps have been taken in the budget including a greater efficiency in the expenditure; basically, what this has served is that it has become a wake-up call, first starting with the executive but I believe in all Nigerians for us to improve the efficiency of the budget process and the efficiency of public expenditure.

"I will like to say that I hope that the National Assembly will buy into this, the kind of proposal that will come and accelerate the passage of the 2009 budget, because it is very important that we have this budget approved in time so that we can start the implementation in order for the economy not to go into a recession."

Also Chief Economic Adviser to the President, Dr. Tanimu Yakubu, and Minister, National Planning Commission, Senator Sanusi Daggash, also briefed the Senate after Usman.

Yakubu and Daggash called for extreme caution regardless of the claim that the economy was yet to witness the effects of the global financial crisis. They contended the government would take pro-active measures towards ensuring that the nation did not experience economic downturn.

Yakubu, who gave the highlights of the 2009 budget to include turn around specifics of railways; dredging of the River Niger; the construction of the national gas grid; among others, told the Senate that foreign investments into the country would be affected as credits get dry abroad.

Daggash, in his presentation, called for proper planning even though the national economy was not in trouble. He canvassed increased surveillance on the financial sector; banks to insulate themselves from the financial crisis; CBN should work closely with other banks to consider the re-capitalisation of banks and reduction of the interest rates, among other measures.

Meanwhile, after a meeting that lasted over two hours with the management of the NSE, stockbrokers yesterday called on the Federal Government to intervene in the stock market to stop the current slide in prices of shares.

Although the National Planning Minister, Sanusi Daggash and the CBN Director of Banking Supervision, Mr. Ignatius Imala, on Monday foreclosed bailing out the stock market, stockbrokers said yesterday that the Federal Government should look at what is happening in the market and take a definite position.

Briefing journalists on behalf of chief executives of other stockbroking firms, the Managing Director of Compass Investment and Securities Limited, Mr. Emeka Madu-buike, said given the current situation in the market, there was the need to ensure that confidence is retored to the market.

"The Securities and Exc-hange Commission (SEC), Nigerian Stock Exchange and Central Bank of Nigeria (CBN) are working closely to address the situation. The process is ongoing There is going to be another meeting tomorrow (today) or next. But our (stockbrokers) position is that the Federal Government should take a definite position to correct all imbalances we see in the financial system. We are asking the government to take a position," he said.

Madubuike, who was accompanied by the Managing Director of ICON Stockbrokers Limited, Mr. Chike Nwanze, his counterparts from ICMG Securities Limited, Mr. Michael Osime, and Alangrange Securities Limited, Mr. Sam Amedu, said the meeting with the NSE was "successful".

He said the fundamentals of the companies quoted on the NSE are very strong, urging investors to be confident that a solution would be found to the dwindling fortunes in the market very soon.

Speaking in the same vein, Nwanze said discussions with regulators and government were ongoing.

"We have reviewed the market. It is not proper for us to start giving out the information. But our discussion at the meeting at the NSE centred on liquidity and how confidence can return to the market. Our discussions are ongoing," he said.

While the NSE Director-General, Prof. Ndi Okereke-Onyiuke, was attending a meeting called by the World Federation of Exchanges (WFE) in Milan, Italy last week, stockbrokers met on the trading floor in order to proffer solution to the persistent fall in share prices.

One of the suggestions at that meeting was to ask the National Assembly to prevail on the Federal Government to inject funds into the market. It was also suggested that peg of one per cent maximum placed on the downward movement of shares should be removed.

Daggash, who spoke in Lagos on Monday, had said that the current bearish trend in the market was normal, therefore the call for government's intervention was not necessary. Similarly, Imala, who spoke in Abuja after an Extra-Ordinary Bankers' Committee meeting, said that bailout of the capital market is the responsibility of SEC and NSE. But he said that there was nothing to bail out in the first place.

The Director-General of SEC, Mr. Musa Al-Faki, had told the House of Representatives Committee on Capital Market that the slide in the market was normal. He explained that the problem facing the Nigerian stock market was different from what is happening in the United States, Asia and some parts of Europe.

According to him, while in the Western countries where the banks are unable to meet their obligations to customers, the Nigerian situation is a normal slide which should serve as a lesson to investors on the need to be prepared to engage in long term investments rather than short term investments.

However, the Chairman of the House of Representatives Committee on Capital, Mr. Aliyu Wadada, expressed displeasure at the discordant tunes from officials of the regulatory agencies in the financial system. He called on the regulatory agencies to speak with one voice.