- Godswill Iyoha Iyoke
“You shall know the truth and the truth shall make you free”; so says the Scriptures.
Truth is not an end in itself. It is a process. It is the process of discovering what is right. Truth is the means to an end. The end is what is right to do or to know to get desired results. In physical scientific processes, the end or result could be in the achievement of a state of matter and socially, it is a state of affairs devoid of troubles, worries or concerns. Nigeria is in troubling times and a spot of troubles, worries and concerns by the people and the government alike. The people seem hopeless, while the leaders seem frustrated, the facade of opulence, notwithstanding. Whether rich or poor; employed or unemployed; vulnerable or protected; none is immune. This is despite the nation’s rich resource endowments and the available opportunities to deploy them. Thus, our national circumstances fit squarely into the Ancient Mariner’s lines; “Water, water everywhere, not a drop to drink’. This pervasive state of hopelessness and despair ought not to be so.
Hope is the elixir to hopelessness and despair. In troubling times and troubled spots, as we are in, hope is raised when the process of truth begins. This is what seems to have been heralded by Tope Fasua, S.A on Economy in the presidency and a former presidential candidate, when he reportedly said, thus; “Honestly, in most other countries some or all of them will lose their Management. And prolly (sic) their licenses. The banks starved their customers and therefore, trade in the country. They starved students who needed to pay school fees, and sick people who needed to pay health bills. They were tripping. Simple. Declaring trillions in profit every year, even when the economy went into recession”.
Thus, begins the real conversation about our national predicament. The truth is not in the veracity of the entirety of the said quote, but in the fact that it draws attention to the heart of the Nigerian situation, which is the economy. The banking sector is the lubricant that oils the wheel of the economy. Just as with an un-oiled machine, a dysfunctional financial services sector leads to mechanical collapse. Until now, we have been hooked on to a boring endless blame-game between the leaders and the led. That quote, by a person in leadership, signals a transition from the noisy, troublesome and boring blame-game, to the start of the process of solution-provision. No person, people, society or nation grows beyond or above the mental state of its own leadership. Solution provision, which starts with the identification of the problem, is a function of the head or leadership, of a people, society or nation. As no government or leadership is capable of meeting every need the best to do is the creation of the enabling environment for citizens to engage socio-economically. Economic productivity is the main purpose of statehood; and the proof of political responsibility and good governance is the existence of systems, through laws, policies and functional institutions. These are the keys to a viable or sustainable economy and a strong nation.
The assurance of systemic integrity is the main purpose of the democratic processes of politics, elections, the Constitution and legal jurisprudence. Just as the heart is to humans, so is the banking sector to the economy of any nation. The banking sector is therefore, a veritable scale in the measurement of the economic development of a nation. Tope Fasua’s quote, that; “The banks starved their customers and therefore trade in the country”, is a very weighty indictment of how Nigerian banks strangulated the local economy. Serious interrogation and understanding is necessary, if we are to begin the process of economic recovery and development, the trajectory we were on until the 80s. Tope Fasua has thus heralded a healthy development-oriented conversation towards the restoration of the Nigerian nation.
A functional banking sector is necessary if we are to achieve the indispensable objectives of development, economic recovery and national restoration. Financial services delivery system that hoards and treats money as commodity strangulates the economy instead of lubricating. It is anti-banking. While banking reform is, therefore, imperative; however, the process is not the route of change in management, as suggested by Fasua. Efforts at banking reforms are not new. We have had several in the past 40 years. We had one aimed at prudential management under Abacha, which led to the Failed Banks Tribunals and the enactment of the Banking and Other Financial institutions (BOFI). Act. The other was under the CBN regime of Charles Soludo. Soludo’s, reforms, which capacity building reforms, which led to consolidation of banks, was misconceived, as it created the erroneous impression that share-capital is what defines the strength of a bank. This culminated in the acquisition of banks by money-merchants and ownership of banks by individuals. The integrity crisis generated thereby compelled the more purposeful far-reaching reforms of Sanusi Lamido Sanusi, which reform aimed, rightly, at good corporate governance and systems re-engineering. Regrettably, Sanusi’s which would have re-invented the financial services sector was sabotaged by the tonic of religious ideology. His religious-oriented non-interest banking reforms did not only defile the financial services sector, it erected avoidable disruptive bumps on the economic terrain. It further deteriorated commercial banking system.
The essence of reforms is to improve on existing quality or standard. In the context of banking, it is to reposition the financial services sector to be able to facilitate the processes of production, distribution and consumption. Our development crisis and national poverty reflects in all these facets of the Nigerian state. In such a needy economy, cost of funds, as high as 30% of interest (compound) or non-interest (capitalized interest), is symptomatic of economic incapacitation. It is tantamount to political irresponsibility and leadership failure to do nothing.
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Banking reforms have become necessary. However, reform that is anchored or focused on attracting more investor funds, is faulty and unhealthy. Any good and sustainable banking reforms must take the following historical factors of banking into account:
i.Just as the treasures in the goldsmith’s custody were not his own, monies in the banker’s vault are not his first instance.
ii.Just as with the goldsmith’s capacity to lend was a function of how much gold he had in his custody, the banker’s capacity to create credit is dependent on the extent of his liquidity.
iii.The banker’s capacity to attract deposits is a function of the trust that he enjoys and the goodwill of government of public functionaries.
iv.Just as with goldsmiths, the idea of banking business was not originally that of merchant-ization of money, but the custody of same.
The perverted form of banking business arose when, like the goldsmiths, greedy merchants usurped the business of financial services. Banks are sure to fail, as unscrupulous elements take over the business, as their personal vices are translated into business culture by which they operate. Thus, as banking came under the control of desperate money owners, shrewd selfish money-making practices crept into the business; at the expense of moral values. Consequently, as bankers began to own more of the money the weaker the regulatory power of the State over the banks became. Any meaningful banking reform must, therefore, take cognizance of the above facts; and indeed aim at re-establishing the sector on the foundation them.
The source of the regulatory authority of the State over banks should be understood. It is founded on the imperative of protecting deposits, in order to mitigate the risks involved in the process of managing third-party monies in the bankers’ custody. Thus, the management integrity aspect of Sanusi’s banking reform is imperative.
Any purposeful reform must also take into account the nation’s survivalist economic environment. Sustainable banking reform is therefore, feasible under the duo of Tope Fasua and Yemi Cardoso, the current CBN Governor, in view of their expertise and antecedent, respectively. Fasua is an economist, while Cardoso, as former chairman of a defunct commercial bank would have experienced the rough tides of the business, against which he could not thrive. He can therefore be trusted with requisite bankers’ regulatory responsibilities with Mr. Fasua who seems to have identified the pests responsible for our anemic economy. These are necessary foundational truths, on the part of the political leadership, which are required to begin the process of economic recovery.
