Wednesday, April 18, 2012

This is Africa Presents Lamido Sanusi: Africa Person of the Year

Lamido Sanusi

Governor of the Central Bank of Nigeria
~ By Adam Robert Green | Published: 05 March, 2012

“There can never be soft touch regulation. But it has to be regulation that is not arbitrary. The direction needs to be clear”

As African central bank governors go, Lamido Sanusi has a higher profile than most. This year, his shelves are piled high with awards, including Forbes’ ‘Africa Person of the Year’. At home in Nigeria, his audacious moves to fix Nigerian banks have toppled vested interests, while the controversial fuel subsidy reform, which he backs, brought thousands of Nigerians on to the streets.

Speaking to This is Africa during a visit to London, the softly spoken banker-turned regulator – whose gentle manner is at odds with his management style – says he is “on course” to reach the ambitious targets he set for himself when taking the post in 2009, as Nigeria’s banking sector teetered at the edge of collapse.

From the outset, Mr Sanusi has pursued a two-pronged reform strategy to deal with both Nigeria’s troubled banks, and the structural weakness of the economy. He first attempted to clean up and recapitalise the banking sector. The immediate problem was the second round transmission of the financial crisis to Nigeria, primarily through the oil price drop, from $147 a barrel in 2008 to less than $40 a barrel in 2009; during which period Nigeria’s stock exchange went from being one of the world’s most promising to its worst performing. As a consequence of the crisis, Mr Sanusi sent in teams to examine the banking sector, at which point the full extent of the country’s internal banking problems became apparent, with systemic corruption, lethargy and incompetence, and ill-conceived forays into high risk lending with depositors’ savings.

Eight out of 24 banks, comprising 30 percent of total liabilities and 40 percent of total assets of the industry, were in particularly grave situations. Banks had been lending significant quantities of savings to asset management companies and stock brokers. Fraud was endemic with depositors’ money used to purchase overseas properties in Dubai and South Africa.

Some banks were using depositors’ savings to set up private equity funds.

But the crisis had provided an opportunity to reveal the extent of the rot. Speaking to the London School of Economics, Mr Sanusi recently joked: “When the tide goes out, you see who has been swimming naked.”

CEOs were fired, with one jailed and others currently being charged. New rules limiting commercial banks’ abilities to enter new sectors were drawn up, and most universal banks opted to sell subsidiaries and get out of asset management, real estate and investing banking. All CEOs who had been in post for over 10 years were booted out, and non executive board members present for over 12 years suffered the same fate. This, Mr Sanusi explained, was because CEOs in power for lengthy periods were over-riding board decisions and erecting elaborate patronage networks. Regulators have also been constrained, and now cannot enter regulated industries for several years after leaving a post; an effort to crack down on their tendency to grant favours to banks so they could land comfortable jobs when leaving.

Click here to read the full interview.

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