... N/Assembly May Review CBN's Powers
From Kola Ologbondiyan in Abuja
The supervisory powers of the Central Bank of Nigeria (CBN) may be reviewed by the National Assembly when it resumes on July 27.
Vice Chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Farouk Bunza-Bello, said yesterday that the National Assembly needs to review the CBN Act "to save the (banking) system from being destroyed."
It is believed the issue will form part of the discussion the Senate Committee will raise with CBN Governor, Prof. Charles Soludo, who had been officially invited to appear before it at an interactive session on July 19.
According to a letter of invitation to Soludo by the Senate Committee Chairman, Senator Ambuno Zik-Sunday, dated July 9, 2004, the committee noted that, "it took decades for Nigeria to find itself in the present economic state, therefore to turn things around may require patience to build up to the required level. It is in this regard that the above committee would want to have an interactive session with you and your management on the 19th of July 2004 at 11am at Senate Committee Room 14 to exchange views on some issues.
"You may kindly please come along with relevant information pertaining to banks and the banking system in Nigeria."
However, Bunza-Bello, who spoke to newsmen at an interactive session on why the committee is inviting the CBN governor, said "there are several things in that law (CBN Act) that have to be looked at. They include the powers to supervise banks. Look at community banks, right now, the way it is, the CBN supervises community banks whereas there is an Act that is established for the Boards of Community Banks.
"Ordinarily, a bank that is supervising N25bn worth of capital banks should not allow itself to be dragged into running community banks. We would have to allow CBN to do what it is doing and allow other sectors to do what they are doing.
"Also, look at the constitutional provision, it says the CBN must report to the National Assembly its affairs every six months but we have never received such a report in the Senate. The Banking Committee in the Senate does not have a report of affairs of the CBN on six months basis. Yet, they talk about zero tolerance from banks again on their returns because it is no longer accepted that banks should bring their returns late to CBN.
"Of course, at this point it is very necessary to accelerate the review of the CBN Act. This is a democratic setting and we expect every player to respect the rule of law and the only way to achieve this is to get the laws right.
"Now, should we review the CBN Act to ensure that the appointment of the bank's governor and deputy governor are subject to the confirmation of the Senate, we may not have the problems we are experiencing today.
"Then, if we call on the CBN governor to do what we want him to do, I believe he would respect the wishes of the people as reflected by their elected representatives. We would now have to accelerate that process so that we don't sit down and see an otherwise good sector of the economy rubbished."
According to the banker-turned-politician, "we had envisaged that there would be a change of vision in the CBN and that what we would see would be more of a focus on macro-economic policies, considering the background of the new CBN helmsman. And we believed among others that that was what informed the decision to bring an economic person against bankers that are micro-economic managers.
"It is therefore very surprising that the first thing that the CBN is addressing is micro-issues that is: the supervision of banks; what banks should do; which bank should hold public sector fund; which bank should participate in what and so on and so forth.
"They (CBN) should be talking about budget cut, talking about interest rate, about inflation and unemployment. We thought that is what we would hear as the first thing coming from a new CBN.
"The Senate Committee is therefore worried and this is among the reasons why we are inviting them (CBN) so that we would carry one another along. Again, we are also disturbed that a policy that is not ready, a policy that has not yet been articulated, a policy that is still half-baked, has been sold to the market prematuredly.
"In actual fact, this is what brings about panic and this is truly what destroys an otherwise good intention. We had all the time to consult with stakeholders: the banks, capital market operators, elected representatives of the people and bank customers. By the time we do that, most likely we would carry one another along and we would find ourselves working towards this noble intention that should come naturally. Not a forced marriage.
"We all know how forced marriages end up and I believe that is how this particular marriage would also end up except we allow it to take a natural course. In other parts of the world, they are not forced onto the system but allowed to happen based on global pressures and that would come once we open up the economy."
He added: "Once we really get our macro-economic policies right, our boundaries would collapse. It is just automatic that you will have to merge otherwise you will be extinct."
Admitting that capitalisation is provided for in the CBN Act, Bunza-Bello, however, noted that, the Act provided that "the bank shall from time to time determine the minimum paid up per capital requirement of each category of banks licensed under this decree (Act) 1991."
"If we look at what obtained in the United States for instance we have categories in this way; we have the players to cater for specific needs of a segment of economy like small scale and medium scale enterprises, mortgages etc.
"Then we have regional players like our own Bank of the North, ACB etc. That again is need players that want to serve certain section of the economy and you then have national banks which would want to be international to cover the whole nation. And, for this category, you can say they need N25bn but for the need players or regional players, they don't need it. Why then do you force it on them?," he asked.
He also accused the CBN of inconsistencies arguing that the apex bank is seeking reforms in the banks it supervises while the organisation has not looked inwards to carry out reforms before going to the banks.
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