18 January 2013

Nigeria: Stop This Charade


A member of the House of Representatives recently gave notice that the supervisory function of the Central Bank of Nigeria (CBN) over financial institutions would be taken away and ceded to an institute for chartered bankers.

The CBN core function has been in monetary policy matters as well as performing supervisory role over banks and other financial institutions. The House of Representatives' proposal would remove the CBN's supervisory power over the banks and vest same in the Chartered Institute of Bankers of Nigeria (CIBN).

The CIBN is the umbrella professional body for bankers in Nigeria. The organisation was incorporated in 1976 as Nigerian Institute of Bankers; Chartered in 1990, it is now backed by Act of Parliament No. 5 of 2007. Essentially, the CIBN, unlike the CBN, is a private aggregation of professional bankers in Nigeria.

The CBN's supervisory function is backed by its enabling law and has the advantage of having the government's financial muscles in certain cases, as have often happened, the conduct of individual bankers lead to the collapse of the banks. That scenario characterised the banking sector in the country in the pre- and post-consolidation of the sector some four years ago. During the period, some banks had to merge with others; others bought over stricken ones to avoid being wound up. In recent years however, some stability has been restored to the country's banking sector, though experts believe some challenges remain. Whether such challenges explain why the legislature is contemplating the new law is not clear.

There is no indication, too, why the House of Representatives is contemplating ceding the CBN's supervisory role to the CIBN.

The Chairman of the House of Representatives' committee on Banking and Currency, Mr Jones Onyereri, said that the lawmakers would devote much of their business this year to ensuring that the CBN's supervisory role over banks was excised from its core mandate. In fact, Onyereri even went as far as advising the CIBN to begin training its members for the expected new role for it.

Beyond Mr Onyerreri's statement, there is no coherently articulated reason for the contemplated course of action by the House of Representatives. The lawmakers have for long been angling to, as some of them have publicly advocated, clip the wings of the CBN governor since its present occupant, Sanusi Lamido Sanusi took office. Sanusi has on several occasions spoken in terms that the lawmakers considered disparaging to their person.

They threatened in the past, and held several public hearings, to amend the CBN of 2007 that would have compromised the apex bank's autonomy by removing its governor, the deputy governors and executive directors from being members of the bank's board, among other proposals. They also sought to amend the law to compel the CBN to route its annual budget proposals like any other government agency for the purpose of appropriation

The CBN governor, on his part, has maintained that his conduct did not breach the law. There is the likelihood that the lawmakers' current course could be viewed by the public in the light of their sometimes frosty encounters with Sanusi.

We shudder to think of the house's proposal succeeding. A clear case against it is the recent history of the CIBN when its own sitting president at the time turned out to be one of those busy abusing his priviledged position as a chief executive of one of the banks that eventually sank. One question the House needs to settle is whether the proposal to cede CBN's supervisory powers over banks is part of the lawmakers' effort to 'clip the wings' of the bank's governor.

Another question is whether the policy initiative itself has been thought through and considered to be a good one. Would such ceding improve banks' performance and the professionalism of the bankers? Does the contemplated move compare favourably with global best practice?

The problem for the lawmakers-and the death knell for their putative move- is that they have not made a strong case to justify changing the status quo. It would seem, even to the detached observer that they are planning to elevate personal disagreement with an individual, whose tenure in public office is limited, to the level of influencing policy, with potentially profound impact on the country.

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