What have been your major achievements as the governor of the Central Bank of Nigeria so far?
In the last three years, we have had stability. From January to date, for the first time since 2008, we have had a consistent stretch of inflation at below 10 per cent. Last month, it was 8.2 per cent. By the end of this year, we would be under eight per cent and we will keep inflation in single digit throughout 2014.
Continue after the break.
The naira has been stable between January and August. Then, it lost 2.3 per cent of its value. Everyone has been complaining about the loss. But, the South African rand lost 17 per cent, the Indian rupee lost about 20 per cent, and the Indonesian rupiah lost 12 per cent. Every single emerging market that you can think of has lost value in excess of 10 per cent. We have had a stable currency.
The banking system was on the brink of collapse in 2009. We’ve been able to fix the banks. We’ve come out of these entire crises without a single creditor or depositor losing a single kobo in a Nigerian bank. Now, we’ve done this in an environment in which a significant percentage of the revenue of the country is being looted; either with oil literally being taking out of the pipeline and being shipped out or simply having all sorts of leakages in the revenue system. We’ve had a very high expenditure profile and increase in minimum wage in 2010, 2011; increase in non-discretionary government spending and therefore a reduction in excess crude account. In other words, we have achieved stability in spite of difficulties.
There are worries that banks are not lending to the real sector; what are you doing about this?
cbn-sanusi-naijanedu_Naijapals[dot]comIn this country, we spend foreign exchange on things we should not. We are one of the world’s largest producers of crude oil but one of the biggest importers of petroleum products. We have a population of 170 million people; we have all the land; all the water; all the fields; yet we import rice from Asia. We import tomato paste from China. We are the world’s largest producer of cassava, yet, we import starch; we import ethanol. We spend our foreign exchange to import what we produce. We specialise in exporting what we don’t produce. This is the miracle of the country.
So, if people say banks are not lending to the real sector; I say, where is the real sector without electricity, without infrastructure, without competent and highly skilled labour, without security? Where is the viable real sector in the economy? Is it the tomato farmer who is going to use 40 to 50 per cent of his output because there is neither storage facility nor power? Is it the textile firm that has to provide its own generator, security, and build its own road?
Has AMCON really achieved what it was set up to do?
If you go back to 2008/2009, you have the global financial crises as well as our own local crises. The Nigerian stock market was the best performing stock market in the world in 2007. The Nigerian banking stock was one of the most profitable. What people didn’t recognise was the strong correlation between the price of oil and the asset value in the stock exchange. The price of oil went up to $147 per barrel at some point in 2007. All that money went into circulation. So, after the crises when the price of oil went down, the Nigerian Stock Exchange lost 70 per cent of its valuation. That was the beginning of the end because you had a number of banks that had taken huge exposure in the stock market. We discovered that many of the so-called consolidated banks never raised any new capital. In addition, many of the banks that had huge concentration in the capital market also had huge exposure to oil marketers that were unprotected. The price of oil crashed; the stock market crashed and the banks had their capital wiped out from both sides.
By the time we looked at the banks in August 2009 and October 2009; effectively banks were counting short of 40 per cent of total inventory assets; 30 per cent of total liabilities were gone. If they had gone under, the entire banking system would have gone. I always say I do hope that this is not what I will be remembered for because there are more important things in central banking than recapitalising banks. What we faced in 2009, 2010, 2011 up to when the Asset Management Corporation of Nigeria took over three banks, I call it hygiene; just to clean up. When you talk about what we need to clean up, we talk about what we have laid as foundation for monetary policy and financial stability. We had to provide emergency liquidity which, guaranteed inter-bank market, and provided liquidity for those banks.
We had to make sure that individuals were held accountable for what they did. That was why we had to remove management in some banks and replace them with other people and some of them are still facing prosecution. And we have to deal with the big issue: how do we recapitalise the banks because the money had gone? People don’t understand what AMCON did. AMCON is one vehicle into which you transfer all those banks that were about to collapse from bad loans that were never going to be recovered fully. What AMCON did was to purchase the bad loans and also recapitalised the banks. When you add that; it is a lot of money. If AMCON didn’t put in the money, depositors would have lost faith.
People have been complaining about the huge cost of bringing AMCON into being. Are you not worried about this?
Whenever a bank fails, I don’t know if we keep statistics of how many old women who had been keeping their savings and had woken up to lose them; of how many retired public servants who kept all their savings and their pensions and their gratuities in the bank that lost them. How many children dropped out of school not because their parents didn’t have the money but because the money was lost in a failed bank? How many people died not because they could not afford to pay for their healthcare but because their money was in a failed bank and were told they were insured up to only N200, 000? I don’t know if we ever think about these people who faithfully keep their daily savings in the bank and then some people take the money, lend it to themselves and refuse to pay. Their friends buy private jets; they are called captains of industries with money taken from these poor people.
They contest elections and become senators, governors and ministers, all with money belonging to poor people who have kept them in the banks. You say the bank has failed, the CEO of the bank moves on. After some years, he gets a new banking licence or moves into industry and becomes a manufacturer or sets up a finance house with your money. Those who borrowed the money walk away.
What are you doing about this?
Of course, we will publish their names and tell them you can’t borrow from Nigerian banks without paying. If they don’t like it, they should pay back.
That ideological change is perhaps the single most important foundation for a change in culture because there is nothing that focuses the mind as the knowledge that there are consequences for crossing the red line. The days are gone when you will sit down as the bank CEO or bank director, take deposit and lend yourself money, buy property abroad then the bank fails and you walk away.
How do you explain a country in which a single family, taking advantage of the control of a bank and acquired over 200 housing units of real estate in Dubai with depositors’ fund, in addition to property in South Africa, property in Washington? Nobody has any problem with rich people. Dangote is one of the richest people in the world; he doesn’t steal depositors’ money. This is not a war against rich people but against those who take money from poor people and pretend to be rich when they are not. There are many Nigerians who are rich and they are not rich; they are parading themselves as rich people having stolen enormous money belonging to the poor. If you go and steal a vessel of crude oil and sell it and bring back the money, you can claim to be rich but you are a thief. Everybody can steal and be rich. The fact that some people are doing it does not mean we should let them go away with it.
So, for me, what happened in banking is a representation of what is happening across the country. And the question is: why is it so impossible for what happened in banking to happen in the oil sector, to happen in all the other sectors of this country where people are taking advantage of when given the opportunity and are destroying the economy. There is no point having clean banks. It is simply impossible to insulate the banks from the general economy.
PUNCH
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