Benin — Nigeria's economic recovery on a sustainable basis was on Tuesday tied to the convincing resolution of the ongoing banking crisis, amidst hopes that such may begin to be realized towards the end of this year, going by current rate.

Speaking at the ongoing workshop organized by the Central Bank of Nigeria (CBN) for business editors and finance correspondents in Benin City, Edo State, Biodun Adedipe, blamed the intensity crisis on the absence of an institutional framework in place by the banks to deal with such crisis.

Adedipe, managing partner, Biodun Adedipe & Associates, who spoke on "reforming the Nigerian banking sector: some emerging issues," the latest reforms are necessary because of the role of banks to any economy, because a robust financial system drives economic growth. The nation's economy could have been worse off by now, he continued, if the 2009 reform was not undertaken, as Nigeria would have lost all the gains of the industry in recent years.

It is obvious, Adedipe stressed, "that the problems that the second reforms were initiated to solve were not in any way peculiar to Nigeria, banks were in trouble everywhere around the world. He lamented the national culture of always seeking extra-industry explanations for any action aimed at industry cleansing or to align our system with global best practices.

Banks, he added, plays a pivotal role in any modern economy, beyond intermediation and includes facilitating both domestic and international payments, market making, policy implementation, agency and guarantor services.

There is need for a robust financial system, he continued, to drive economic growth and interconnect the domestic economy with the rest of the world, while "providing the transmission mechanism for capital flows and current account transactions, (hence) the need for the banking industry to stay healthy and sound."

Adedipe also spoke of the need for banks to become safer, while becoming a more vibrant channel for attracting new investments from around the globe, lamenting the situation where some of the rescued banks started showing stress signs due to lack of strategy, implementation capacity, or sheer greed by the board and management.

He also took a swipe on the regulators for playing the ostrich while wishing away the problem, deciding not to rock the boat, just as the banks themselves had corporate governance issues that can compromise the best of strategies.

This was just as officials of the CBN explained that the latest reforms is actually ingrained in the 13-point reforms agenda blue-print promoted by the CBN under Prof. Chukwuma Soludo, immediate past Governor of the CBN. A key component of the agenda that was the major focus before now, was the banking consolidation exercise that took place between July 2004 and December 2005, leading to the emergence of 25 banks out of the then existing 89. Others included the setting up of the Asset Management Corporation, and credit bureaus.

Responding to a question, Mohammed Abdullahi, a deputy director and spokesman of the apex bank, noted that the CBN is still executing part of the agenda, with the only difference being the focus.

While Soludo concentrated on the banking consolidation, Sanusi Lamido Sanusi, his successor, is currently consolidating the consolidation, he said, insisting that "there is a continuation in the CBN banking reforms."

Adedipe agreed that the ongoing reform is a continuation of the unfinished business, became necessary to make Nigerian banks strong and relevant in the global financial system.

The stress test by the CBN last year, he continued, should have come much earlier, as most banks were afflicted by unresolved problems arising from the consolidation exercise. The 18-month consolidation exercise, he believes, should have been immediately followed by a credit audit to determine whether the banks actually had the minimum N25 billion capital unimpaired by loses. He lamented the huge undisclosed toxic assets that where hidden during the due-diligence conducted before the various marriages were consummated.