*Senate split over bid to stop CBN
LAGOS — THE Central Bank of Nigeria (CBN) dismissed yesterday threat by the Senate to stop it from implementing the N25 billion recapitalisation of banks, and declared that it had statutory powers to stipulate minimum capital base.
The Senate itself appeared to be split, last night, on the issue with the Chief Whip of the upper chambers of the National Assembly, Senator Victor Oyofo, vowing that the Senate would not be used to protect individual interests.
Senator Oyofo spoke against the backdrop of the public denunciation of the recapitalisation policy by Senate President, Chief Adolphus Wabara, and the Senate Committee on Banking, Insurance and other Financial Institutions.
Reacting to the pronouncement of the Senate on the new capital base, Deputy Director, Corporate Affairs, CBN, Mr Tony Ede, told financial journalists, yesterday, in Lagos that, “the apex bank is statutorily empowered to stipulate banks’ capital base.” The CBN, he said, “has laws that empower it to conduct and review monetary policy from time to time. The CBN has been given responsibilities and there is a Central Bank law that gives the backing for doing what we are doing.
“We have not encroached on anybody’s territory. We met with them to tell them that there is a policy already in place and there is no going back on it. Let me tell you, it will be the end of the CBN if it reverses itself on that decision. We will lose integrity, we will lose credibility. The CBN cannot go back.
“It is a well-thought out vision and there is no where the Central Bank makes such policy and reverses itself. We expect resistance to the policy because we know we are going against entrenched interests. Owners of banks are not ordinary people on the street. Bank chairmen and managing directors are not common people you have around, and these are the kind of people we are going against.”
The reform measures, he stressed, “are pro-active actions on the part of the CBN. If we don’t do it, we will experience the Malaysian crisis that resulted in Malaysia doing it within one year. They reduced the number of banks from 80 to 12 within one year. The CBN is generous with the 18 months it has given for the good of the economy.”
He said though banks could segregate into small, medium and big banks, the minimum capitalisation for any bank remains N25 billion. This policy, however, excludes community banks which will continue to operate as before, providing services for the rural communities.
He said: “Weak banks in any economy don’t help anybody and they don’t add value. Some banks rely on 95 per cent of public sector funds for their deposit which they use for nothing but to engage in importation and foreign exchange transactions from which they make huge profit. These banks don’t lend to the productive sector of the economy,” and “Nigerian banks have weak capital base.
They cannot withstand domestic shock. That is why depositors are always apprehensive and rush to go and withdraw their money at the slightest indication of problem in any bank. Strong banks are able to withstand shocks and this will lead to rest of mind for depositors. A lot of the banks in the country concentrate on big depositors and ignore the small savers.
The economy cannot grow with this type of behaviour.”
Responding to fears that mergers and acquisitions would cause mass retrenchment, Ede said it was counter-factual, and that a lot more people were going to lose their jobs anyway since some of the banks would have collapsed because of their weak structure.
Senate splits
However, the Central Bank’s prescription of N25 billion as minimum capital base of banks appeared to have split, last night, the leadership of the Senate along two camps with the Senator Victor Oyofo, the Senate Chief Whip, vowing that the Senate would not be used to protect individual interests.
Senator Oyofo, who maintains discipline in the Senate, spoke against the background of the public denunciation of the new policy by Senate President, Chief Wabara and the Senate Committee on Banking, Insurance and other Financial Institutions.
Rebutting Senator Oyofo’s position, Senator Farouk Bello, vice-chairman of the Senate Committee on Banking, told Vanguard on telephone last night that Oyofo lacked the capacity to speak for the Senate or the Senate Committee on Banking on the issue. He cited the 100 per cent opposition of Senate President Wabara and his deputy, Senator Ibrahim Mantu, both of whom he claimed had last night separately restated their opposition to the new policy.
At a session with newsmen yesterday, Senator Oyofo praised the new CBN proposal, saying it would help nudge the banks into developing the real sector and stop their penchant for feeding fat on the foreign exchange market.
“The main thing with banks in Nigeria is that they are trading on government funds. They are the people that are responsible for the fall in the Naira value, because they are all hanging around government money.
They are not interested in the industrialisation of the economy,” he said.
Querying their commitment to the development of the real sector, he asked: “How many of them want to open branches in Zuba? No, they are all hanging around National Assembly,” he answered just as one of the old generation banks prepared to open shop to become about the 16th bank operating from the National Assembly complex.
On the world wide consolidation of banks, Senator Oyofo said: “The bigger, the better. You can see in the world, banks are getting bigger (and) not smaller and those who are saying that N25 billion is too big should recognise that we need to protect the public, that is what we in the National Assembly were elected to do.”
Responding to insinuations that the opposition of the Senate to the new CBN regulation on banks was borne out of the personal interests of some Senators in the banks, the Chief Whip said: “There must be people who have different interests to protect, otherwise how do you expect 109 Senators to have the same interests to protect... but I know that the Senate leadership will only offer that kind of leadership that progresses Nigeria.
We are not going to be moved by individuals who may have (reasons) why they are saying this or that,” adding that everybody has the right to say this or that, but the Senate leadership will only do those things that will advance the interest of Nigeria and banks that fail don’t advance the interest of Nigeria.”
Responding to threats from the Senate Committee on Banking to review the laws establishing the CBN to bring it under the influence of the National Assembly, Senator Oyofo said the Senate would rather strengthen the existing laws to give the apex regulatory body firm control over the financial markets.
“It is the Central Bank that is the supervising body of banks, if the law doesn’t give them, then we will give them the right. The Central Bank is the only agency to supervise banks, if there is any loophole in the law that does not make them strong, then we will strengthen them,” he said.
But responding to the development, Senator Bello told Vanguard on telephone last night that Senator Oyofo was only speaking for himself as he expressed the opposition of the Senate President and his deputy to the new CBN regime. “Oyofo does not have the authority to talk for the Senate on this issue.
He is neither a member of the Senate Banking Committee nor does he speak for the leadership on this matter. I have spoken to the Senate President and the Deputy Senate President and they both said that they are 100 per cent against the policy.”
Speaking to newsmen last Thursday, Senator Wabara had criticised the new CBN policy, prescribing N25 billion as minimum capital base for operating banks as excessive, warning that it would help to encourage money laundering.
