[size=18pt]Soludo, banking reforms and the high profile debtors [/size]
By Said Adejumobi

SHORTLY before Charles Soludo, the former governor of the Central Bank stepped down, the Nigerian syndrome was at play in which there were insinuations, rumours and fears that if he was allowed to go, the Nigerian banking system would collapse; that he has done so much and so well for the system that he should be granted automatic term renewal and allowed to continue in office. Umaru Yar'Adua, Nigeria's president, reputed to be very slow in taking decisions, made a correct political decision in this case. He thanked Charles for his 'good works' and duly appointed a successor in Lamido Sanusi. Yar'Adua resisted the temptation of the personalisation of public office, which has become a plague of public life in Nigeria. It was this plague that made Babangida to seem invincible, and Abacha to play god and an Obasanjo to feel indispensable! Charles Soludo's exit makes for continuity and stability in the governance of the Central Bank, and has also exposed the shortcomings of what seemed a perfect, unbeatable regime at the Bank.

Charles Soludo conducted a much celebrated reform of the banking system in Nigeria - what is called the bank consolidation exercise. He increased dramatically the capital base of the banks, encouraged bank mergers and acquisitions and evolved in the process what is referred to as megabanks in Nigeria. In spite of what critics may say, there must have been something good about those reforms. A practical testimony to it was that as soon as those reforms were carried out, the Nigerian banking system witnessed massive expansion and foray outside the country. Nigerian banks sprang up in neighbouring countries like Ghana, Guinea, and Liberia, etc. Those banks assumed transnational character, and for the first time, the prospects of benefiting from our African centered foreign policy began to gain expression.

But the gaps in those reforms are now becoming manifest and the frailties of the system being dangerously exposed with the sudden revelations about the accumulated debts by some "privileged Nigerians" in collaboration with the bank chiefs. What was the nature of the monitoring and accountability systems in the banks? What were the oversight mechanisms that the reforms instituted which allowed a group of Nigerians to nearly again collapse some of the megabanks in the country? Were there cases of deliberate indulgence, favouritism, and abetting from the Central Bank in allowing some of those Nigerians to accumulate so much debt to the detriment of the health of those banks? Were there cases of cover-ups, 'massaged' accounts and false reporting and declaration by those banks under Charles Soludo's regime at the Central Bank? What could have happened if there was no change of guard at the CBN, and the situation was covered up and allowed to deteriorate further? Were we treated to media propaganda and exaggerated stories on the so-called achievements of the bank reforms? These issues require being investigated!

Towards the end of Charles Soludo's tenure in office, there were media reports which alleged his undue closeness and flirtation with some of the banking chiefs, and the so called 'captains of industry', who are today the high profile debtors. Charles featured prominently in several social events of those personalities and enjoyed the media limelight that came with it. It may be interesting to know whether he was at all compromised in the discharge of his duties in his relationship with those people.

The steps taken so far by the new Central Bank Governor to rescue those banks from imminent collapse deserve the commendation and endorsement of all well-meaning Nigerians. A bank is a not and cannot be a private property to anyone, even if it is owned by someone or a few. A bank is a public trust; it holds in trust and manages peoples' funds and savings for them, and the credibility of the system is at the heart of financial stability and growth of any economy. The attempt to ethnicise the surgical steps taken by Sanusi as a means of changing the ownership structure and control of those banks in favour of the north is baseless, diversionary and completely unfounded. The actions so far project a nationalistic approach designed to save the ordinary Nigerians who are usually the victims of failed and collapsed banks in Nigeria.

The prosecution of the bad debtors offers the new EFCC leadership an opportunity to redeem itself as being committed, serious and even in its anti-graft responsibility. Those who seek to collapse the banks either through deliberate acts, collaboration or default perpetrate heinous economic crime which would have had serious ripple effects on the banks, economy and the ordinary people. The billions of naira used to save those banks from imminent collapse could also have been judiciously used to provide public goods for the people. High profile personalities with little consideration for the interests of people and the well being of the economy of the country deserve high profile prosecution. There must and should not be any cover-up in this case.

The excuse some are likely to give is that the world economy is in recession, and banks are collapsing everywhere, and so why is Nigeria an exception and why should those responsible be prosecuted, since they are not in many countries of the world? The answer is that the Nigerian case is not a systemic problem in which market failure in a sector led to serious default by a large chunk of debtors - which in the case of the U.S. is the mortgage holders. In the case of Nigeria, it is a culture of impunity, recklessness, lawlessness, and dubiousness which was about to put our banks in crisis again. When Charles Soludo was still the CBN chief, and was asked how the global financial crisis will affect Nigerian banks, his response was in the negative - that it would not affect our banks. The Nigerian case is not a product of the economic crisis; it is a case of criminal behaviour, which has become the pastime of our ruling elite in all sectors of national life!

Sanusi, the new CBN chief needs to go a little further in his investigation of the current situation. More deeper and reflective questions need to be asked and answered. Was the CBN complicit in this situation? What are the existing regulatory instruments of the banks and how adequate are they? What measures should be put in place in order to prevent a recurrence of the situation? Sanusi has to provide answers to those questions.

The current banking scam shows that you never celebrate aleader until he leaves the seat! Perhaps, Charles Soludo may do the nation some good to open up and respond to the raging questions on what happened to the banking system at the twilight of his reign at the CBN!


Adejumobi, an African Governance expert lives in Addis Ababa, Ethiopia.


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