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After taking the banks to the cleaners in what is seen as one of the most radical reforms
in the banking sector, the Central Bank of Nigeria (CBN) Governor, Sanusi Lamido
Sanusi, used the greater part of 2010 to advocate that similar exercise be carried out in
other key sectors of the economy to protect businesses from future economic crisis. The
thinking in the CBN is that the ongoing reforms in the banking sector can only be
successful and further crisis in the sector avoided when government re-enacts the
relevant laws that will help bring efficiency and transparency in the operations of other
sectors that carry out businesses with the banks. 

Renewed focus on the econom



The CBN wants government to provide, through its agencies, enabling laws and
environment that allow financial services to thrive and offer the necessary contributions
to economic development.

The CBN is, therefore, pushing for the re-enactment of the Banks & Other Financial
Institutions Act (BOFIA) to strengthen the regulatory powers of the CBN over banks,
engender financial stability and confidence in the banking system. It is also angling for
the establishment of the Nigerian Financial Ombudsman Bill to be charged with
resolving financial and related disputes in the financial services sector and re-enactment
of the Nigerian Financial International Centre (Establishment) Act for creating a world-
class financial zone that would act as a catalyst for economic growth in the country.

CBN Deputy Governor Financial Systems Stability, Dr. Kingsley Moghalu, made this
disclosure in Lagos during a public lecture organised by the Association of Corporate
Affairs Managers of Banks (ACAMB), within the year, insisted that government should
provide, through its agencies, enabling laws and environment that allow financial
services to thrive and provide the necessary contributions to economic development.

Moghalu, said the energy, insurance, manufacturing, and other key sectors of the
economy need to be reformed using the right laws so that banks¶ exposures to them will
not turn bad. "The management of banks should pressurise the government to ensure
that the sweeping reforms in the banking sector are replicated in other areas of the
economy such as power, transport and other infrastructure, manufacturing and SMEs,
as well as a willingness to participate in and promote public-private partnerships," he
said. 

The thinking in the apex bank is that it is only when other key sectors of the economy
are reformed to operate optimally and effectively that banks and economy will benefit
from their existence. The CBN is also advocating for the establishment of National
Alternative Dispute Resolution Regulatory Commission to take care of the promotion
and regulation, practice and use of alternative dispute resolution mechanism in the
country. The apex bank is also seeking for establishment of the Electronic Transaction
Bill to provide a legal and regulatory framework for conducting transactions using
electronic or related platform as well as protecting the rights of consumers and other
parties in electronic transactions. This is essential in order that banks will have outlets
in the real economy to which they can lend with lower levels of risk. "If other areas of the
economy, especially the power sector, do not open up creditably, bank assets may go
again into various kinds of speculative lending and create another asset bubble that will
burst in due time," he said.

AMCON comes alive

Last July 19, the Asset Management Corporation of Nigeria (AMCON) Bill became law
after presidential assent. The new AMCON Board appointed by government on August
30, is chaired by Aliyu Belgore; Mustafa Chike-Obi is the Managing Director.

The AMCON is a multi-purpose platform empowered to purchase non-performing

assets from banks as well as inject needed capital in the form of appropriate securities.
In the case of distressed banks, the AMCON will, therefore, play the key role of
facilitating mergers, acquisitions or capital injection by new investors. 

AMCON made good its plan to buy over the toxic assets from banks with the issuance of
N1, 036,821,000 Zero-Coupon Initial Consideration bonds to 21 banks. The bonds, due
in December 31, 2013, have a yield of 10.125 per cent and have subsequently replaced
toxic assets in the coffers of the benefiting banks, putting them back in a comfortable
position to resume lending. 

The Group Managing Directors and Chief Executive Officers of the 21 participating
banks attended the completion meeting held yesterday in Lagos where they received the
bond certificates for their banks. 

The banks, whose CEOs were present are: Intercontinental Bank, Oceanic Bank, Unity
Bank, Bank PHB, Spring Bank, Zenith Bank, United Bank for Africa (UBA), Wema Bank
and Afribank. Others are: Ecobank Nigeria, Access Bank, Guaranty Trust Bank, Union
Bank, First Bank, Diamond Bank, Equitorial Trust Bank, Fidelity Bank, Sterling Bank,
First City Monument Bank, Skye Bank and FinBank. Citigroup Inc., Standard Chartered
Bank Plc and Stanbic IBTC local units have opted out of the arrangement and therefore
were not at the meeting.

©
ear tenure for bank chiefs

During the year, the CBN also gave an order that chief executive officers (CEOs) of
banks will serve a maximum tenure of 10 years so as to strengthen the corporate
governance structures in the banking system. It mandated all CEOs who would have
served for 10 years by July 31, 2010 to cease to function in that capacity and hand over
to their successors. 

On July 31, 2010, Jim Ovia, Tony Elumelu, Akinsola Akinfenwa who were former CEOs
of Zenith Bank, United Bank for Africa (UBA) and Skye Bank respectively who had
served in that capacity in their banks for a period of 11 to 20 years relinquished their
positions to new successors. The UBA appointed Phillips Oduoza to take over from
Elumelu, Zenith Bank followed up by appointing Godwin Emefiele, its deputy managing
director to succeed Ovia while Skye Bank appointed Kehinde Durosinmi-Etti as its
managing director.

Ýanks get CÝN backing for foreign credit

In January 2010, the CBN started the year by guaranteeing all foreign credit lines and
inter-bank exposures to banks up to December 31, 2010. The apex bank re-affirmed that
in each and every circumstance, all exposures to foreign banks and inter-bank takings
will be fully repaid in the event of a decision to withdraw the guarantee before December
31, 2010. The Central Bank says it reserves the right to keep all options open in its
exploration of resolution options for affected banks, depending on the level of co-
operation received from other stakeholders.

It re-affirms that in each and every circumstance, all exposures to foreign banks and
inter-bank takings will be fully repaid in the event of a decision to withdraw the
guarantee before December 31, 2010. The Bank says it will continue to take all necessary
steps to protect creditors in line with its commitment in pursuing the safety and
soundness of the Nigerian banking system.

The over $1.8 billion dollar foreign direct investments into the banks in the last one year
from financial institutions like International Finance Corporation, African Development
Bank, are still being concentrated in bigger banks, leaving crisis-ridden ones empty.
CBN says Export Import Bank exposure to Nigerian banks alone increased from $403
million to $1 billion in the last 10 months.

CÝN¶s internal operations strengthened

The apex bank decided to carry out a reform of itself aimed at improving accountability,
communication and efficiency as well as effectiveness in actualising its strategic
objectives. The structure, which streamlines the bank into 25 departments, takes effect
from March 1. The bank had 20 departments before the exercise. 

The structure is the outcome of "a detailed exercise that commenced on July 21st, 2009,
aimed at the development of a more functional organisation structure, alignment of the
structure in line with the bank¶s mandate and strategy, promotion of efficient and
effective operations and building synergy with both internal and external stakeholders
of the bank.

The CBN said the development is in line with public demand that the CBN reorganises
itself to meet with the new banking reforms challenges. The exercise is expected to
facilitate information flow and integrated data management, the achievement of key
deliverables of Management and conformity with global best practices. There are five
directorates, 25 departments, 91 divisions and 198 offices under the structure.

CÝN reviews economic indices

At the Monetar Polic Committee (MPC) meeting of 22nd and 23rd

November, 2 © the review domestic and international economic and
financial conditions was carried out to reassess the options for monetar
polic for the rest of the ear and beond. On the global scene, the
Committee noted with concern the continued slowdown in global economic
recover, especiall in the US against the backdrop of the huge US trade
deficit, requiring both domestic and external rebalancing of demand. 

On the domestic front, the MPC noted the high economic growth rate and
the progress made towards restoring stabilit in the banking sector. It,
however, observed with concern the continued high inflation rate and
reiterated the urgent need for fiscal consolidation and the continuation of
comprehensive economic and structural reforms to remove suppl
side
bottlenecks. Ke Domestic Macroeconomic and Financial Developments.



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