All hail the Bankers’ Governor!

by Tunji Andrews

The emergence of Godwin Emiefele as the 11th governor of the central bank of Nigeria (CBN), marked the end of probably the most controversial CBN governorship in Nigeria. The man Emefiele succeeded, Mallam Sanusi Lamido Sanusi (now Emir of Kano)- was on suspension, months before his first tenure in office was even over. A tenure that had seen him jail a bank MD, take over banks and finger several government agencies for alleged misappropriation of government funds. To say Sanusi rocked the boat as governor, is to attempt a major understatement, as in wave after wave, in the months that preceded his suspension, Sanusi was either instigating or at the centre of some major controversy or the other. Known for his hawkish approach to monetary policy, Sanusi was a man who needed no introduction, a dogged, ruthless and intelligent governor, who was often accused of shooting from the hips.

In a sense Emefiele was a very sensible choice as successor, a little known conservative who had risen through the ranks to become MD at Zenith bank; because unlike Sanusi who had a history of being confrontational, nothing in Godwin’s persona indicated that Nigerians would witness the type of spectacles Sanusi had to offer.

The former CBN governor has gone on to become the Emir of Kano.
The former CBN governor has gone on to become the Emir of Kano.

In his first speech, which according to Emefiele was widely misquoted, the new governor had portrayed himself as the governor who was going to bring that doveish stance to monetary policy and regulation that Nigerians had been seeking. He proposed a gradual reduction of interest rates and even a cut in government bond rates, while indicating his support for agriculture and SMEs. Even though a large portion of Foreign Portfolio Investors felt threatened by this doveish stance, which in reality are pro-Nigerian; many Nigerian stakeholders held the usual scepticism reformers receive on arrival in Nigeria.

His first decision after taking office was in issuing fresh guidelines to Bureau de Change (BDC) operators on ownership and requirements for licensing. The CBN in a statement said, this was part of regulatory steps adopted to curb observed deficiencies, which culminated in gross inefficiencies and sharp practices in the country’s foreign exchange market. The new guideline, which forbids ownership of multiple BDCs and stipulates stiff penalties for violators when detected, also revised the minimum capital requirement for the operation of BDCs in Nigeria to N35 million, up from N10 million, in addition to a mandatory cautionary deposit.

Chairman, Senate Committee on Finance, Senator Ahmed Makarfi, was quoted as criticising the new plan by the CBN to bench the capital base for bureau de change operations at N35 million, saying it was unjust, unfair and inequitable.

The CBN then moved to increase the minimum capital base of Finance Companies by 400% to N100 million, with September 2015 as deadline for compliance. Explaining the rationale for the reforms, Mudashiru Adegbite, Deputy Director, Other Financial Institutions Supervision (OFIS) department of the CBN, said the new guidelines were the products of efforts to reform the sector. The reform, according to him, was due to the failure of the sub-sector to fulfill its mandate due to the following challenges and inadequacies: poor/inadequate funding; weak technical and human capacity; poor corporate governance; investment in high risk portfolio; poor industry perception and intense competition from banks and OFIs with higher funding capacity.

Recently, news broke that the CBN had caved in to pressure by the banker’s committee to remove part of its subsidy on customer third party ATM withdrawals. The re-introduction of the ATM charges, effective from September 1, 2014, comes almost two years after the CBN and the Deposit Money Banks cancelled the N100 ATM charge in December 2012. The new directive for the reintroduction of the charge was posted on the CBN website, but instead of N100 per withdrawal, customers using other banks’ ATMs will now pay N65.

The move, which has been widely criticized, has howeverfound some support from Nigerians who believe the removal of the charges in the first place was an ‘anti-bank’ move that could jeopardize bank expansion, especially as it concerns ATM deployments. Nejeeb Bello, a social media communications strategist, believes that the CBN had only just woken up to its responsibilities to the banks. He said “The move(ATM charge reversal)t does not benefit me directly, but when a bank like GT Bank spends N10 billion on procuring and maintaining its ATMs, then a bank like Unity Bank that spends nothing is issuing cards to its customers, what will be the result?!

Many have criticised the return of bank charges to ATMs.
Many have criticised the return of bank charges to ATMs.

“The banks which have invested so much should be able to be compensated by the bank which have chosen to invest so little. The N100 ATM charge which I have always been against is the one charged by a bank on its own customers for using its own ATM. Even that may have some sort of charge, but not N100. I think the removal of this charge by Sanusi was wrong, and I believe the reversal will rightfully benefit the banks which have gone the distance in providing the most ATMs to Nigerians.”

This would portray a governor who has the ears of the banking community and not just the economy or the people who this move may inconvinience. It however remains to be seen if this move would not negatively affect the cashless policy, as more people may begin to hold on to more cash to limit multiple withdrawals, and avoid charges.

Questions are also being asked on the rationale of this move at this time, especially in the light that the ATMs have gone a long way in cutting costs for banks by reducing the need for humanized branches and also greatly decongesting bank branches. Also, little was said on the charges banks enforce on over-the-counter deposits below N20,000, alongside the usual monthly ATM monthly charges banks charge customers.

It must also be noted that he also finanlised plans which authorized Western Union, Moneygram and RIA Financial Services to handle inward and outward money transfer services in Nigeria. Thus, while Sanusi may have strangeled the banks in favour of protecting the economy and customers, bankers would be relieved to note that in Emefiele, they have a governor who looks out for their interests.

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