Consequent upon the Chukwuma Soludo-inspired consolidation of 2005 in which Nigerian banks graduated into mega status, the entire industry was enveloped in a frenzy. Essentially, the banks by their sheer transformation could undertake funding of large ticket projects, especially in infrastructure, and oil and gas sectors, through the new window in the enlarged single obligor limits.
The larger size of the capitalised 24 banks engendered customer confidence, while employment in the sector rose from 50, 586 in 2005 to 71, 876 in 2010, while the capital market received a boost as several banks recorded success in their Initial Public Offers (IPOs), while supervision became easier for the Central Bank of Nigeria (CBN) as 24 banks were administered as against 89 hitherto under its regulatory armbit.
The gravity of the capital market bubble burst along the tidal sea wave of global financial meltdown, as the balance sheet of banks became eroded to the extent that some of them remained on CBN’s life support for a long time, even as inter-bank rates spiked. In a macabre struggle to stay afloat, many banks resorted to borrowing at any rate to remain afloat, while the size of non-performing loans significantly increased; customer panic re-emerged and several instances of unethical conduct among the management of banks were revealed.
Suddenly, a silver lining breaks as the Umaru Musa Yar’adua administration brought Lamido Sanusi Lamido to stop the wave of crisis in the banking industry, which was flowing fast and furious pulling down the confidence of Nigerians in the industry, expected to be playing the pivotal role of driving development.
Oblivious of the mounting opposition that; Sanusi is not matured enough in terms of age as he was 48 years old then, inexperienced (he just clocked 12 years in the industry) and lacked cognate intellectual sagacity like his predecessor (Chukwuma Soludo was a professor of Economics), the CBN Governor took over the mantle of leadership with the sole aim of cleaning the banking system of the rot, with the singular mantle of risk management philosophy, a forte he assumed industry wide recognition to translate his vision into reality.
Speaking on the banking reforms he initiated in August 2009 after mounting the saddle at the apex bank, Sanusi said what Central Bank of Nigeria (CBN) did was to fire the opening salvo in what could be described as a revolutionary battle against the nexus of money and influence that had held the country to ransome for decades. To him, on the augean stable is the poignant reality—the owners and managers of banks, the rich borrowers and their clients in the political establishment are one and the same class protecting their interest and trampling underneath their feet the interest of the poor with impunity.
According to Sanusi, eight interdependent factors led to the creation of an extremely fragile financial system that was tipped into crisis by the global financial crisis and recession. These eight factors he listed as; macro-economic instability caused by large and sudden capital inflows, major failures in corporate governance at banks, lack of investor and consumer sophistication; inadequate disclosure and transparency about financial position of banks; critical gaps in regulating framework and regulations; uneven supervision and enforcement; unstructured governance and management processes at the CBN/ weaknesses within the CBN, and weaknesses in the business environment.
Sanusi believed each of these factors is serious on its own right, and when acted together they brought the entire Nigerian financial system to the brink of collapse.
He charted a reform programme hinged on four pillars namely – enhancing the quality of banks; establishing financial stability; enabling healthy financial sector evolution and ensuring financial sector contributes to the real economy.
Despite the vituperations and volatile reactions to the implementation of the reform, Sanusi said he found solace in the words of Roman Emperor and philosopher, King Marcus Aurelius: “Do what is right, not popular; Do what you do for others first and for yourself second.”
Sanusi who has been honoured by several organisations as Nigeria’s Man of the Year 2010 was born on 31 July 1961. His father was a permanent Secretary in the Ministry of Foreign Affairs in the 1960s. His grandfather, Alhaji Muhammadu Sanusi, was an Emir and Islamic scholar in Kano. Sanusi bagged degrees in economics and Islamic law from Ahmadu Bello University in Zaria, northern Nigeria, where he also taught economics before going into banking in 1985.
He is highly respected having served as the Chief Executive of First Bank, having served as chief risk officer at First Bank and United Bank for Africa (UBA).
He has regularly spoken out about the need to fight corruption not only in the financial sector, but in the political system in Nigeria, winning him as many enemies at home as he has friends in the international investment community.
Sanusi sent shockwaves through the banking industry, sacking the chief executives of eight banks and felling pillars of Nigeria’s financial aristocracy who had long seen themselves as beyond the reach of the regulators in doing so. He exudes fierce independence and readiness to tackle vested interest stemming partly from his royal pedigree— being the grandson of the 11th Emir of Kano, one of Nigeria’s most powerful traditional rulers.
Sanusi started his banking career in 1985 when he joined Icon Limited (Merchant Bankers), a subsidiary of Morgan Guaranty Trust Bank of New York and Baring Brothers of London. He moved to United Bank for Africa in 1997 in the Credit and Risk Management Division, rising to the position of a General Manager.
In September 2005, he joined the board of First Bank of Nigeria as an Executive Director in charge of Risk and Management Control and became CEO in January 2009, the first northerner to assume that position in First Bank’s history of over 100 years. He carved a niche for himself for contributing towards developing a Risk Management culture in the Nigerian banking sector.
The CBN Governor is generally seen as a stormy petrel who drives his banking sector reforms with the passion of a reformer, by attacking powerful and interrelated vested interests exploiting the financial system. He cuts the image of a stubborn reformist who will not be cowed or nor succumb to pressure from operators of the same sector he is striving to sanitise. He attracted public scorn for joining the subsidy debate where he argued for the removal of subsidies. As reasons, he listed the high level of corruption engendered by the practice, the inefficiency of subsidising consumption instead of production leading to slower economic growth and the fact that the government borrows money to finance the subsidy, in effect taxing future generations of Nigerians to enable current Nigerians consume more fuel as his standpoints. Subsidy, like economists and development practitioners argue, is biased heavily in favour of the small, middle and upper class who use most of the fuel.
Sanusi’s critics accuse him of not complying with regulatory discretion and procedure and appropriate application of public funds. Said a critic: “If you are familiar with fundamentals of regulatory oversight in an industry, you will be aware that the cardinal function of the regulator is to guarantee a healthy industry by applying the various tools of intervention progressively in such a manner that correction of anomalies is effected with minimal disruption to the system.
Written by Adekunle Tayo
