“The era when banks were declaring huge profits without any translation to the economy should be put behind us for good”. This was the submission of many industry analysts and players in the manufacturing sector recently. Ike Abugu, president, Nigerian Association of Small and Medium Scale Enterprises (NASME), declared that the major reason for the existence of banks or any financial institution is financial intermediation. He noted that the nation currently needs to direct the funds to the real sector to support manufacturing, agriculture, food processing and small businesses in the country. The regulators, themselves, according to him, “have contributed to the mess and should also strategise to see how credit can return to stimulate the real sector for enhanced productivity in the economy”.
In an exclusive interview with Peter Bankole, director, Centre for Enterprise Development Services, a unit of the Pan African University, he agreed that the reforms would position the banks to give credit to the real sector, but however, blamed government for not providing the conducive environment to enable the real sector thrive.
“Even as regulators may strive to reform banking in a way to give credit to real sector, if the sector does not exhibit any viable profitability, the banks may still not be motivated to put their money there. Once government supports the real sector and the sector is buoyant, credit would naturally gravitate towards players in that sector,” he said.
Oba Otudeko, Chairman of First Bank of Nigeria Plc, at his maiden address to the board and management of the bank recently, called on operators in the sector to return to conservative banking. To him, recent industry developments place an enormous premium on a stronger moral backbone amongst the nation’s bankers.
Mansur Muhtar, minister of Finance, while accepting his appointment as Chairman, Board of Governors of the 2010 World Bank (IMF) meetings, called on the World Bank to press forward with actions to revive global trade. The minister’s appeal should also be a charge to managers of the nation’s economy to revive small businesses and other economic activities.
With a foreknowledge of the emerging rot in the sector, the appointment of the current Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, has brought about various dimensions of reforms, and in quick succession too, that suggests a ready-made mind set. The reforms have even thrown up heated controversies bordering on authority, integrity, honesty and equity of judgment. They have also received commendations from various quarters depending on what perspective they are assessed.
The CBN is relying on the Banks and Other Financial Institutions Act (BOFIA) of 1991 to initiate the various reforms in the nation’s banking sector. In 1991, BOFIA formerly BOFI was promulgated to replace the CBN Act of 1958 and the Banking Decree of 1969 (including later amendments). The policy brought the non-bank financial intermediaries under the supervision of Central Bank of Nigeria.