FOR a proposal that seemingly gives credibility to the administration's campaign to improve the efficiency of the financial markets, the hullabaloo in the Senate over the Central Bank's prescription of N25 billion minimum capital base for banks may indeed be confusing.
With several of the senators linked to the ownership of some of the affected banks and some, contrastingly linked to them in debts, the survival or otherwise of the banks has indeed risen above partisan political considerations in the nation's upper legislative House. Besides the inevitable, speculation soon gained ground that the National Assembly was being used to intimidate the CBN from implementing what some were seeing as a well crafted policy and as such protecting the pecuniary interests of a few citizens.
“There must be people who have different interests to protect, otherwise how do you expect 109 Senators to have the same interests to protect,” Senator Victor Oyofo, the Senate chief whip said last Wednesday in response to a question on speculations that the Senate leadership was set to derail the new CBN policy because of the personal stake of several Senators in the banks.
When the new Central Bank Governor, Prof. Charles Soludo announced penultimate week that the apex regulatory bank was prescribing a minimum of N25 billion as the capital base for banks in the country, the new policy inevitably excited the nerves of the nation's lawmakers.
The first reaction from the Senate came from Senator Farouk Bello, vice chairman of the Senate Committee on Banking, Insurance and Financial Institutions, who told newsmen on July 7, a day after the pronouncement of the new policy, that the new prescription would have deleterious consequences on the sector. “Nigerians are very concerned that should we go all the hog to N25 billion that people are going to loose jobs, there is every likelihood that we will have monopolies and by that time, it will be the banks that will dictate what the interest rates should be, what should be happen in the industry,” Senator Bello claimed.
His words of caution were amplified by the Senate President, Senator Adolphus Wabara who told correspondents at the Lagos Airport on Thursday, July 16 that the new prescription would encourage money laundering. “We will be encouraging money laundering because all these 419 guys will probably own heavy shares in the banks, so that they can find an avenue to launder their money.
The CBN governor should be addressing the issue of high interest rates instead of raising capital base to N25 billion,” the nation’s number one lawmaker said with a wave of dismissal of the new policy. As the Senate President dismissed the new policy, the Senate Committee on Banking supposedly with his connivance was about the same time summoning the CBN Governor to appear before the Senate Committee to defend the policy.
In the invitation letter dated July 9, 2004, Committee chairman Senator Ambuno Zik Sunday while congratulating the new CBN helmsman on his appointment had pointedly warned him to desist from foisting half baked academic ideas on the nation’s financial system.
You will agree 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,” Senator Sunday wrote in his invitation letter for the meeting which the Senate fixed for Monday, July 19, 2004. The move by the Senate to check the CBN on the new policy, Sunday Vanguard authoritatively gathered, equally excited some section of the industry.
Despite orchestrated acclamations of the new policy from several bank executives, Sunday Vanguard gathered that many of them were privately seeking other ways to abort the policy which they feared, could lead to their irrelevance in the financial system. One source privy to the liaison between the industry and the National Assembly disclosed that within one week of the pronouncement of the new policy that as many as 15 banks had made subtle contact with the National Assembly to reverse the policy.
Two obvious points of contact in the Senate were Senators Wabara and Bello, both of whom had actually spoken against the policy. Senator Wabara is junior brother to Mr. Marc Wabara, the chief executive of Hallmark Bank, one of the country's medium sized banks.
Bello, a fresh term Senator who has carved an unpretentious image as a purveyor of populist if not progressive ideas in the Senate, was an executive director of Guaranty Trust Bank until diving into the political fray just before the 2003 elections. It was thus not unexpected that the two men would be at the vanguard of opposition to the new policy.
However, Sunday Vanguard gathered that the determination of the industry to abort the new policy may have led to the enlistment of the deputy Senate President, Senator Ibrahim Mantu to spearhead opposition to the new policy. As at press time, Sunday Vanguard could not confirm Senator Mantu’s position on the issue, but there were feelers from his colleagues that he may have taken position against the new policy.
In bringing Mantu to support its point of view those against the new capitalization policy are banking on the fact that he is not known to have a visible interest in the sector and thus would be seen to be more fairly minded. However, in giving the most visible opposition to the new policy, Senator Bello draws accusations of contradictions to himself.
Bello was the first prominent Nigerian within and outside the industry to call for an increase in the paid-up capital of banks from the N2 billion to N10 billion. Addressing newsmen earlier this January, Senator Bello had lamented the low capitalization of the country's banks saying that the low capitalization of the nation's banks had shut them out from active involvement in the real sector and from playing in the global market.
When he spoke then, several banks were still making ambitious efforts to realize the CBN’s earlier directive that all banks attain a minimum N2 billion paid-up capital before the end of December 2005. “Nobody can tell me that the capital base of $13m (N2 billion) is enough to survive a bank...the intention is to enable banks merge so that they will have the necessary strength to compete internationally so that depositors will have confidence to take their money to banks (and) so that there will no longer be distress in this economy.”We believe it will be in the interest of this nation to have a robust banking industry, that will be a catalyst for development, we need development today more than any other time, the government is almost on its knees.
Defending the proposal for the merger of banks and dismissing supplications that the country was under-banked, he said: “Nigeria has more banks today than what you have in London, what you have are more like Bureau de Changes calling themselves banks (but) I believe the banks we need today are banks that will be able to finance start-up projects, start up manufacturing enterprises that will provide enough employments,” Senator Bello said last February.
His proposal immediately provoked sharp reactions from the industry and some national newspapers, some supportive and others sharply against. So, what could have changed his position between then and now, Sunday Vanguard asked Senator Bello last Thursday? “Nobody can fault the increase in the minimum paid up capital of banks, I am for it, but my concern is the level it is being taken to and the time frame,” Senator Bello said.
His words were echoed by another member of the Senate Banking Committee, Senator Victor Ndoma-Egba who said that the proposal could dislocate the country’s social environment. “These are weighty issues and we have called him to see how it will affect the banking sector and the economy in general and especially the social dislocations that is likely to go with it with the loss of about 32,000 jobs,” Ndoma-Egba told Sunday Vanguard.
When Prof. Soludo eventually came last Monday, journalists who expected to see the legislators and the CBN team exchange sharp positions were nearly disappointed. Immediately Prof. Soludo came in, the newsmen were sent out for what Committee chairman, Senator Sunday said was to be a closed-door session. At the end of nearly five hours of discussions, both sides came out to give quite different positions of what transpired at the meeting. Prof. Soludo said the CBN team told the lawmakers the imperative of the raise and stood his ground that there was going to be no turning back on the issue.
Point of acrimony
Following his briefing, Senator Sunday also briefed the press during which he tried to circumvent the issues discussed, a situation that gave the impression that the CBN had taken the day. However, sources at the meeting told Sunday Vanguard that the meeting took off from almost a point of acrimony as Prof. Soludo reportedly took offence at what he considered to be ill-feelings against him by Senator Bello who he said did not allow him settle in his new position before attacking him. He was said to have complained that before criticizing his appointment that Senator Bello should have given him the benefit of the doubt.
He spoke in response to Senator Bello’’s observation that President Olusegun Obasanjo had violated section 9 (1) of the CBN Act, 1991 in appointing an economist into the position of CBN Governor. Quoting the section at a press briefing on May 3, 2004 shortly after Soludo’’s appointment, Senator Bello had said: ““The Governor and Deputy Governors shall be persons of recognized financial experience and shall be appointed by the President by instrument under the public seal and on such terms and conditions as may be set out in their respective letters of appointment. I am not against the appointment of Soludo, because I have very high respect for him and his appointment is a good omen for the country.
However, what we are talking about is for point of procedure, that as lawmakers, we should not be party to whatever is against the position of the law,”” Senator Bello, had said then. As the encounter with Soludo got under way, Senators were said to have pointed out their misgivings about the new policy, pointing at essential provisions of the CBN act which required the apex bank to categorise banks in terms of paid-up capital. Soludo was also pointedly told that there was no provision in the enabling act that vested the CBN with the powers to regulate shareholders funds and also referred him to the international convention of using the Bassel 2 accord in the classification of banks.
On all the issues listed, Soludo Sunday Vanguard learnt was said to have agreed but reminded the Committee that it was indeed Senator Bello that first called for an increase of paid-up capital of banks. He was said to have sent in a puncher that if he was to go by Bello’’s N10 billion paid up capital requirement, that it would indeed may be more difficult for the banks to meet.
That it seemed would have opened a way for negotiations as the Senators desired. They thus pratically pleaded with the CBN Governor to then see the matter of N25 billion as a mere proposal that is open to debate. Soludo, it was learnt, however, refused affirming that it was a policy which the apex bank was determined to carry on with.
