By Ade Ogidan, Marcel Mbamalu and Bukky Olajide:

AGAINST the background of the relentless attacks on his reforms, Governor of Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, yesterday came out smoking, insisting that his policies were well intended and are being well executed.

Sanusi declared that the reforms were already yielding results, adding that both Nigerians and the international community now have more confidence in the sector and the nation’s economy.

To his critics, especially those alleging that his policies had eroded confidence in the industry, Sanusi asked them to look back at the state of the banks before the rejig and be objective in their comments,

In an interview with The Guardian in Lagos yesterday, Sanusi cleared the air on issues raised by critics of his reforms.

He disclosed that the CBN was not in a hurry to issue new licences to banks to fit into the apex bank’s proposed classification of the institutions according to operations, areas and regions, which would be based of separate capital bases.

The apex bank boss said he chose to expose the “rot” in the banking industry as a means of preserving depositors’ funds and guarding the public against the antics of critics, who, according to him, were bent on misrepresenting his intentions and actions.

Sanusi said leaving the banks to those who had sworn to undermine his good intentions could be counter-productive to the economy. He said the quest by the media to get explanations for his actions did not help matters, stating that if he did not explain the real situation to Nigerians, his critics would readily speak for him in a manner that could further plunge the industry into deeper crisis.

Justifying the CBN’s intervention in eight banks, Sanusi faulted the argument that the crisis, which prompted the removal of some banks’ chiefs, as well as the injection of over N600 billion into the financial institutions, was blown out of proportion.

He said the intervention was necessitated by the fact that the affected banks were having long-term liquidity issues, which had threatened their shareholders’ and depositors’ funds.

The CBN boss further said the apex bank under him was committed to stability in the financial system and making the apex bank act as real catalyst for economic growth.

According to him, “every single thing I have done has focused on establishing financial stability and contributing to economic growth,” adding that before the end of the month, the CBN would secure the approval of the Senate for the setting up of the Asset Management Company (AMC).

“We believe we’ll get the Senate approval within this month. When the legislative process is concluded, and we get presidential assent, the AMC is going to buy off non-performing loans in the banks. By buying off these bad loans, what you are doing is putting some capital into the coffers of the banks and that will be used to plug the holes.

“We have provided the banks with what we might call quasi-capital. We have said, don’t pay us back now. When they (the banks) get their money from the sale of assets, they will pay us back.

“My expectation is that by the time the AMC is set up and the assets are purchased, they will be able to pay us back by the second quarter. That is different from saying that I’ve given them a deadline of May this year to pay back.

“What we discovered is that the banks had a solvency problem. They had taken their money, lent it out and it was never going to come back. If you buy shares at N25 and the stock market has crashed to N3, you are never going to get back that money until the stock market goes back to normal.”

Citing the example of Afribank, Sanusi wondered how long it would take banks that lost funds in the ailing capital market to recoup such investments.

“It is different from lending to a contractor, who has performed and who is waiting for payment from government but government is delaying. So you have a solvency problem. What the banks need is recapitalisation,” he said.

Sanusi explained that at the time he became governor of the CBN, the only available tool for resolving issues of distress was handing over the banks to the Nigeria Deposit Insurance Corporation (NDIC), as the apex bank could not acquire equities in them.

“When I took over the CBN, the only tool available for the governor in handling the issue of distress is to hand over the banks to the NDIC. If we had liquidated Oceanic Bank or Intercontinental Bank, UBA, First Bank or GTB, for instance, the economy would have fallen, because there was so much hype about these banks. They were part of the system and I could not allow these banks to go under.

“Under the Banks and Other Financial Institutions Act (BOFIA), the CBN cannot acquire equities in those banks directly; so, I cannot even nationalize the banks, which was an option open to the United States (U.S.) government.”

On the categorisation of banks, he said the country needed to learn from what obtains in civilised countries like the (U.S.) where financial institutions are made to serve different and specialised sectors. Stressing the need for the banks to concentrate in areas and regions, Sanusi said the CBN would encourage categorisation without forcing the banks to chose specific categories.

He, however, noted that it would be too early to talk about issuing out new licences since the framework for the take-off of the process has not been streamlined.

According to him, it would be wise for banks to operate only in areas where they are culturally and systemically competitive, even as he hinted that the CBN would, in due time, issue national and regional licences to willing banks.

The CBN governor observed that the trouble with the nation’s banks began long before he was appointed.

“There is sufficient evidence that long before I became CBN governor, regulators had information about the status of these banks. I have a banking sector letter written by the NDIC (after a meeting with the Securities and Exchange Commission) to the Governor of Central Bank telling him that there was serious problem of banks manipulating their own shares, of banks using depositors’ funds to buy their own stocks, and that with the crash of the capital market, these banks had issues, asking that a technical committee be set up to look at the matter.

“I have a letter written by the Minister of Finance at that time following up on this NDIC letter advising the Governor of the Central Bank to act on the advice by the NDIC. And I have a reply by the Governor saying we didn’t need a technical committee.”

The full interview will be published on Thursday.

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