Dr. Godwin Owoh, executive chairman of the Society for Analytical Economics, Nigeria (SAEN), is an expert in public sector accounting and macroeconomics. In an interview with GEOFF IYATSE, he examines the reforms in the banking sector under Mallam Sanusi Lamido Sanusi, saying that it has killed entrepreneurship.
It is, perhaps, very difficult to assess the journey of the banking sector or the financial system generally. I am not aware of the existence of ‘Reform Master Plan’ or an omnibus roadmap that is being followed. Adhoc pronouncements or avalanche of tempered decisions that shock the financial system negatively, in most cases, cannot be classified as ‘reforms.’ This is because, apriori, no one knows what the reform targets are; what benchmarks are set and the means/costs associated with them, assuming there is any reform ongoing.
It is usually apt to talk of reform as an improvement of performance. The message the economy gets is that the sector never performed in the past and that it is just recently that central banking commenced in Nigeria. If this assertion is wrong, then, there is nothing like reform. Rather, what is being peddled as ‘reform’ is meant, essentially, to serve only political context.
Truly, the greatest threat to the financial system is the excessive monopoly of power and huge layers of discretionary powers, which the current CBN Act confers on the Governor. Even angels will cause an abuse of office with such absolute power that places the entire economic soul of a nation on the chessboard of one individual.
The nature of the current central banking statute does not afford emphasis for the development of the financial system within the context of institutions and all the strengths that could be achieved therein. Rather, the financial system is set to reflect the nuances, choices, likes and dislikes of an individual at all times. So, we remain and oscillate at the zero coordinate where nothing meets nothing.
Don’t you agree that the specialised banking model has helped to contain the excesses of banks, restricting them to areas they have competences?
That policy reversal changed nothing. What it achieved was simply a change in the tactics, and some times, a change in nomenclature. Financial misfeasance is a thing of the mind, and indeed, more of the ingenuity, sometimes, of the most intelligent. The rat can still die in other forms.
The specialised banking model still allows a relationship between the parent banks and their subsidiaries that may be engaged in estate business, stock brokerage, insurance, or other forms of business. Remember that the corporate statute does not outlaw multiple directorship. So, the policy is as good as a new name that expands the cost and regulation but makes no difference from the scenario ex ante.
The Asset Management Corporation of Nigeria (AMCON) was created, in the course of the reforms, to soak up non-performing loans. How would you assess the success of the programme?
We at SEAN opposed the establishment of AMCON in the form it was established. The extant AMCON law did not offer solution of who bears the final burden of the bad loans being taken over. There are monumental issues bordering on valuation of assets being taken over by the company; there are issues on the fact that it would increase the national debt stock.
There are issues that AMCON may eventually become an octopus that would create billionaires out of its mangers but dwarf or kill entrepreneurship. There are fears on its ability to liquefy its bonds as they mature.
There is the need for those who currently mange AMCON to give Nigerians an indemnity that they are truly convinced that what they are doing is right so that, at the right time, they could be held liable.
Short-term paper gains will soon give way to streams of excuses of why we have to return to further financial system collapse. Unfortunately, AMCON is basking in the euphoria that those who are supposed to exercise oversight functions over it are yet to resume duty.
The reforms also brought about ‘abridged banking’ wherein AfriBank, BankPHB and Spring Bank were nationalised (or abridged to use CBN language). Has the nationalisation option helped the industry in anyway? Is there any gain from this?
I am not fully aware of the way the nationalisation was carried out. However, going by reports from the media, it appears that the process was riddled with irregularities. The media reported that certain regulatory agencies engaged in forgeries; that the process usurped the powers of shareholders, claiming that the shareholders held meetings that never held.
If reform is not carried out within the provisions of the law, then, such reform could best be described as a noise. There cannot be any gain where extant corporate statutes are not followed. There is no gain in circumstances that torpedo the rights of shareholders. There is no gain where what was done cannot be cited as an example worthy of emulation by other countries.
An evaluation of the jurisprudence of the actions and roles that led to the ‘nationalisation’ of the three banks would raise a critical question on material issues of corporate rule of law.
Do you agree that the intervention of the CBN in critical sectors such as agriculture, aviation, textile and manufacturing has impacted the economy?
These are ways through which the CBN confuses itself regarding its understanding of what its mandates are. The CBN cannot constitute a primary source of liquidity injection while it prides itself as a conservative institution that should balance liquidity levels.
In ordinary language, if you are charged with the duty of mopping water from floor, would you now pour water on the floor at the same time you claim to be mopping the floor? That would amount to insincerity and self-deceit.
The CBN causes inflation by the interventions. It cannot, however, intervene without parliamentary approval; else, it would be required to explain the sources of the funds it uses. This is why the interventions fuelled inflation and unemployment; the injections were not functionally targeted.
There is also a new prudential guideline where the regulator seeks to guide the credit exposure of the lenders to different sectors. Has the industry fared better as a result of this?
THE CBN had done a wonderful job in that area. The prudential guideline is well thought-out. It would require some little more time to achieve the desired outcomes. However, there are huge exogenous variables that distort the cost of money, which requires attention beyond the CBN.
Could you examine the success story of the cashless economy as a critical component of the reform process?
I do not believe in the cashless policy. The threat of cyber criminals is huge. Hackers are far more ahead than most people. We are all witnesses have how a 17-year-old boy in Russia had been accessing confidential information from the net since 2007. We saw the numerous hackers witnessed last year that cost America billions of dollars.
There are many reasons we should suspend this policy. The CBN has suspended the take-off of the policy already. I think the regulator is aware of the challenges of a cashless economy, and it knows that it cannot be implemented in the country by fiat. It has to evolve naturally. Whoever wants to transact through electronic platforms should be assisted to do so. Coercion should be out of it.
The sacking of some CEOs remains an issue, with some cases yet to be dispensed by the courts. Was this a path we should have followed? Are there gains from the arrest and prosecution of some chief executives deemed to have erred in the conduct of their official responsibilities?
The CBN should be commended for its efforts in that direction. The courts and the investigating agencies should be supported to carry out their roles, too, in that respect.
How has the reforms benefited the entire economy?
My position remains that there is no reform going on in the banking sector. The sector should rather be made to perform. It has to perform before we can talk about reform.