The Central Bank of Nigeria's (CBN) latest banking regulation guideline titled "Regulation on the Scope of Banking Activities and Ancillary Matters, No. 3, 2010", came into effect last week Monday, November 15.

It effectively repealed the Universal Banking Guideline previously in operation. Henceforth, banks in Nigeria are to be registered under three categories: Commercial, Merchant and Specialized Banks, which include non-interest banks, Microfinance banks, Development Banks and Mortgage Banks. Whereas Commercial Banks will now be licensed to operate on a regional, national or international basis in accordance with existing rules and regulations. Non-interest banks may be authorized to carry on banking business on a regional or national basis.

But the aspect that really interests us most is that forbidding banks from acquiring real estate or immovable property other than as business premises for its own use, as may be authorized by CBN; or grant, permit or subsist, any loan, donation, gifts or any form of financial accommodation to any political funds, political party, or for political purposes whether directly or indirectly; incur any political expenditure; grant or permit to subsist, any loan to any persons to invest in the primary issues of any stocks of any bank; or, grant any loan or any form of financial accommodation to any person or enterprise to facilitate the acquisition of any related entity from which the bank is divesting in compliance with this regulation. The CBN Governor, we are told, was acting in exercise of powers conferred on him by Section 57 of the Banks and other Financial Institutions Act, Cap B3 Laws of the Federation of Nigeria 2004. According to the apex bank, the latest action has become necessary given that the practice of Universal Banking had exposed Banks to higher operating risks; increased the propensity to put depositor's funds into risky non-banking businesses; and, consequently heightened the risk of financial system instability.

We particularly welcome this development given that it will not only assist in sanitizing the country's financial system but by extension give further impetus to the overall health of the economy. Of course, Nigerians are aware to what extent such issues were abused in the past. Banks and especially their CEO's openly hobnobbed with politicians and governments in office, funding electioneering campaigns and playing one administration against the other. The craze even went to the extent of the so-called Corporate Nigeria, organizing a Fund Raising Dinner for President Barrack Obama then a candidate for the U.S. elections. In return new administrations either open fresh accounts with these Banks or divert greater government businesses to the favoured ones as payback. This is however, possible given that practically all the Banks depend on government funds since government remains the greatest spender in this environment.

At the same time, we refuse to be fooled by the CBN's action given that it also caused the problem. For us, CBN is only playing to the gallery and trying to save its face from the public. The truth about it is that CBN for some time now has completely lost focus. Not only has it failed in its primary responsibility of ensuring price stability, but it has not delivered on its regulatory mandate. Had it done this, perhaps the recent mess in the banking system may not have occurred at all.

Even the latest CBN directives are not entirely new to the banking sector. They form a critical component of the Prudential Guidelines and Standard Practices of banks. Of course, a focused CBN as apex regulator should immediately notice once unusual things begin to happen in the banks because the figures would certainly prop up. Malam Sanusi himself admitted this much in his Convocation Lecture at the Bayero University, Kano (February 26). According to him "the Supervision Department within the CBN was not structured to supervise effectively and to enforce regulation. No one was held accountable for addressing the key industry issues such as risk management, corporate governance, fraud, money laundering, cross-regulatory co-ordination, enforcement, legal prosecution or for ensuring examination policies and procedures were well adapted to the prevailing environment... Critical processes, like enforcement, pre-examination planning and people development were not delivering the results required to effectively supervise and engage the banks to enforce good conduct". So to what extent has the CBN now gone to sanitize itself, or even to restructure its systems? How many CBN officials for instance have lost their jobs as we have witnessed in the commercial banks on account of their failing to deliver their regulatory responsibilities, which to a large extent caused pain to a lot of Nigerians?

Therefore, we challenge the CBN to first put its house in order and then rise up to its responsibility by introducing measures aimed at ensuring financial stability, enabling a healthy evolution of the financial sector and ensuring that the banking system ultimately contributes to the development of the real sector.