Magazine article New African

Banking Revolution Continues: The Shake-Up of Nigeria's Banking Sector Continues, as the Central Bank Introduces Specialisation after Changing the One-Size-Fits-All Model of Banking as Currently Practised in the Country

Magazine article New African

Banking Revolution Continues: The Shake-Up of Nigeria's Banking Sector Continues, as the Central Bank Introduces Specialisation after Changing the One-Size-Fits-All Model of Banking as Currently Practised in the Country

Article excerpt

The banking sector received its biggest shake-up in recent years when the former governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo, gave the then 84 banks in the country a deadline of six months to recapitalise. Henceforth, licenses would only be granted to banks that met the minimum capital base of N25 billion.

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The result, after a frenzy of mergers, was the emergence of 24 banks by the end of 2005 deemed healthy enough to survive in an increasingly competitive international environment. That this was a wise move at the time was borne out by the fact that all survived the recent global financial crisis.

With President Umaru Musa Yar' Adua's government coming into office in May 2007, Soludo was relieved of his post and Mallam Sanusi Lamido Sanusi was appointed in his stead.

Within months, Sanusi shook up the banking industry again when he announced that internal audits carried out by the CBN had identified 10 banks whose CEOs had indulged in questionable practices with depositors' funds by giving out huge loans without adequate collateral, which were then used to buy shares in what turned out to be a volatile stock market. Many got their fingers burned and were unable to repay the loans. Nigerians were generally shocked at the revelations of financial impropriety, which led Sanusi to sack the CEOs of 10 banks.

More recently, in a public lecture he gave under the title, "The Nigerian banking industry: What went wrong and the way forward", Sanusi identified eight main problems that need to be tackled in order to put the sector on a sound footing.

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These include: major failures in corporate governance at banks, lack of investor and consumer protection, large and sudden capital inflows, inadequate disclosure and transparency about the financial position of banks, critical gaps in the regulatory framework, uneven supervision and enforcement, unstructured governance and management processes at the CBN, and weaknesses in the business environment of the country.

Once these were addressed, he argued, they would constitute "a revolutionary battle against the nexus of money and influence that has held the country at ransom for decades". But Sanusi did not spell out the precise nature of this "nexus" as he understands it.

Sanusi also declared his intention to review the one-size-fits-all model of banking as currently practised. …

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