PRINCE Oghene Emma Egoh is the Executive Chairman, Emat Ventures Nigeria Limited. He spoke to OBIRE ONAKEMU on corporate governance in the banking sector and the need to deregulate the foreign exchange market.
COULD you comment on the issue of corporate governance and crisis of confidence in the banking sector?
The issue of corporate governance in the banking sector is very bad. It seems these banks grew so big that the managing directors thought they were insulated from the problems in the society because of their sizes. Thus, they started giving out loans without taking due cognizance of the credit risks involved.
Banks should emulate insurance companies. They (insurance firms) are very good at risk syndication. What they do is that, they take only the maximum amount that can be accommodated in their risk portfolio. They allow other operators to underwrite the remaining risk so that when there is a problem, only one company will not bear the risk. This reduces the risk of insolvency.
But as it is, the corporate governance of the banks looks weak. They do not properly assess risks before giving loans.
Somebody said that it took Central Bank of Nigeria (CBN) seven years to do proper auditing of banks. It should be done on annual basis so that CBN can draw attention of banks to areas where they are not doing well in terms of corporate governance more regularly.
What do you have to say about Nigeria’s current global status?
This is a great country endowed with vast natural resources. We have intelligent people, unlimited investment opportunities. Private universities are opening too to provide the needed human capital to run the economy.
We are responsible for the state of our global status today. Look at what is happening at the presidency today because of the PresidentÕs health issue. How do you think other nations will rate us when they analyse this? Again, the issue of Abdulmutallab is a serious setback to NigeriaÕs image.
We can start making amendment by putting good governance in place, combating corruption, developing infrastructure and improving the standard of the country generally.
If we get to the stage where we begin to grow the economy at 9% per annum, the world will recognise us and there will be inflow of investments into the country.
What are the major factors responsible for the present crisis in the banking sector?
We were told that some of chief executive officers (CEOs) of the banks ripped the banks off. But the major factor is the international crisis that led to the collapse of stocks. Secondly, the international oil price, which got to $140 per barrel at a time crashed to about $30 per barrel. These crises made it difficult for some people who borrowed money from banks to pay back.
But the CBN says the managing directors of the banks ripped the banks off. Well, that may be true or not. But the international financial crisis is the major reason.
It seems that the apex bank is bringing itself to a ridiculously low level by publishing, for instance, the assets of the some directors of banks, as in the case CEOs of Intercontinental Bank and Oceanic Bank.
The Managing Director of Intercontinental Bank said that he had been investing the profits he made in the past 19 years he was the head of the Bank. So the action looks witch-hunting. CBNÕs action looks so strange.
In America, the Federal Reserve Bank (FRB) gave money to banks, insurance companies and auto industries as bailouts. In Britain, the Bank of England gave money to banks to help boost liquidity in the sector and stimulate the economy.
That is what the CBN is supposed to do in Nigeria in the first place. But the emphasis, which is now on sale of the banks to foreigners, at ridiculous rates, is very bad. We know that banks like Oceanic and Intercontinental have assets worth billions of naira. Even the current Oceanic Bank management revealed that despite what happened, the bankÕs deposits was still increasing. This shows that these banks are not as bad as we think.
The Central bank Governor needs to look at a corrective measure to boost the liquidity of the banks.
How would you rate the CBN in terms of management of the volume of money in circulation?
In this area, the CBN has not really done well. A situation where it withdraws N100 Billion from the economy because it feels there is too much money in circulation is bad. It should look more deeply into what is happening in the economy. It should not be myopic.
Is there any need to deregulate the foreign exchange market?
The foreign exchange market, as it is, is deregulated. There is no need to do further deregulation. People should rather be encouraged to engage in productive activities that can boost foreign earnings. This has to do with export-driven businesses. The government needs to encourage the banks to grant loans to these people.
If we continue to depend on only oil, advanced technology could discover alternative to oil one day. So, the Central Bank should be more dynamic. When one talks about deregulation, it should be geared towards getting Nigerians to produce for exports.
How would you advise the CBN at this point?
The Central Bank should look at how economies all over the world are being managed. How did South Korea, Taiwan and Indonesia grow their economies? In 1960s, these countries were in the same level with Nigeria in terms of gross domestic products (GDPs). But they are far ahead of us today.
The Central Bank should go to those countries and ask: how do you manage your economy? How are you doing it? How does the government intervene in the economy? What is the interest rate? How are you helping the banks to finance the real sector? How do you monitor it?
If the Central Bank does that, it will benefit the economy more. I advise that the CBNÕs action on the ÔtroubledÕ banks should not be intended to witch-hunt. Their aims should be centred on how to stabilize the industry.
If there are offences, there is nothing wrong if the offenders are punished. But if you just publish a list of properties owned by some people just to disgrace those who invested in the banks, you are not fair. Even if, there are mistakes, they should be properly resolved so that there will be public confidence in the system.
(Source:Guardian)
