All have 'messed up', says Sanusi at the stock exchange

Capital Market

The mood was dark. The preponderance of dark suits did little to lighten it, of course. The past months of stock market crash and crisis in the banking sector had dampened the spirit of all: investors, stockbrokers and other stakeholders. Would Sanusi shed some light on the dreariness?

It was therefore a historic visit yesterday, the first by any Governor of the Central Bank of Nigeria (CBN) to the Nigerian Stock Exchange (NSE) Lagos. Before the arrival of Sanusi Lamido Sanusi yesterday, investors understandably fretted, as expected disclosures from him were likely to jolt the market.

In measured steps and sprightly gait, Sanusi finally entered the event's venue, some one and half hours behind schedule. Obviously, he felt the tension on the floor of the Exchange, which he had earlier walked through while closing the market ahead of his meeting with the investors.

He acknowledged the extreme tension, hence before his presentation, he made a strategic preface: "I came in peace so that I can leave in peace. I am not here to announce the audit result of the other 14 banks or create tension.

"No one has a guaranteed job anymore. But I don't think there would be a tsunami anymore."

"We have not offered any of these banks to any investor and do not intend to force the banks on any investor. However, the Central Bank of Nigeria (CBN), would not allow these banks to go back into the same one-man structure that they were in before now. We will look for and advise the banks to look for appropriate core investors, local or foreign, that will bring in the governance and status that would ensure we preserve the long term value of shareholders by building an institution."

With these words, the CBN Governor reiterated the apex bank's resolve not to return the five rescued banks to their former owners even when they need to be recapitalised, as the apex bank works to release the audit reports of the remaining 14 banks in October, 2009.

Besides, Sanusi blamed all financial regulators in the country for the present situation in the banking sector, saying all the regulators 'messed up' in the discharge of their duties.

The regulators are the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC), and the Nigerian Stock Exchange (NSE).

According to him, the regulators need to re-assess themselves in order to avoid future occurrence.

"The banking sector has been over-burdened with the responsibilities of the entire real sector, hence making it even more difficult for regulators to monitor their activities", he added.

On the ownership of the rescued banks, he explained that the CBN was no longer looking at 'sole-proprietorship' of the banks. Rather, the stakes in the banks should be shared among investors.

Also, "CBN has no intention of nationalising these banks." According to him: "We are looking at the long-term effect of our actions. CBN is not micro-managing the banks. The appointed chief executives are managing the banks the way it should be done," he stressed.

Against the back-drop that correspondent banks have begun withdrawing their credit lines from Nigerian banks, Sanusi, denied this, saying that not a single correspondent bank has shut its credit lines to Nigerian banks.

Meanwhile, Stockbrokers at the nation's capital market have appealed to the CBN governor to urge the affected banks to treat issues of margin loans differently, as he urged indebted stockbrokers to pay back the loans.

Sanusi, in response, said the margin loans would not be treated differently but that the banks would only apply due process before taking further actions.

For instance, President of the Chartered Institute of Stockbrokers (CIS), Dipo Williams, urged the CBN and other regulators to develop a collaborative relationship on how to move the market forward.

He stressed that the association would not support the harassment of any of its members who have played by the rules.

Similarly, Chairman of the Association of Stockbroking Houses of Nigeria (ASHON), Alhaji Rasheed Yessufu, while corroborating the views of the CIS President, said the stockbrokers want a joint committee of all stakeholders to monitor and contribute to the development of the capital market.

Another stockbroker, Emeka Madubuike of Compass Securities Limited, pushed the case for the CBN to urge affected banks, in their quest for loan recovery to treat the issue of margin loans differently.

He added, "Given the nature of the facilities, the best thing to do is to look at the market and restructure the loans. Until the 14th of August 'tsunami' in which banks changed their minds, the share prices of stocks had been rising."

"There is hope for the market and if the prices of stocks rise today, the loans will become performing. If the market is not treated uniquely, there will be grave implications for the economy," he warned.

Similarly, the Managing Director of Maxifund Securities Limited, Mazi Unegbu, urged the CBN, being the primary driver of the economy, to carry along other operators. Sanusi, meanwhile, further disclosed plans to roll out N50, N10 and N5 notes in polymer.

According to him, 1.9 billion pieces of the new polymer notes would be rolled out by September 30 this year, with 1.3 billion pieces of the bills being printed abroad while the balance would be produced locally.

The governor explained yesterday in Lagos that printing the N20 note on polymer was a test case.

"Since polymer notes last longer in circulation, it implies that the frequency of processing/sorting and replacing unfit/dirty notes will be reduced, translating into cost-savings. The reduction in cost will free resources that could be diverted to other uses.

"Besides, the long-term cost advantage of polymer is backward integration as the material can be made from petrochemical products which exist in Nigeria.

"Polymer bank notes are also known to eliminate many of the environmental problems associated with the disposal of unfit notes. The waste can be recycled by plastic industries into other useful plastic products, resulting in a second life cycle and generating some revenue in the process."

According to him, the essence of the experiment was to determine the advantages and demerits of the polymer substrate and its acceptance by Nigerians.

His words: "The objectives of the currency reform were substantially achieved. The cost of printing banknotes was actually reduced, while the polymer note has been found to last longer in circulation. The polymer note does not tear easily nor get soiled easily.

'Further more, the N20 note has gained wide public acceptance. Hence, the decision to convert the denominations of N5, N10 and N50 from paper to polymer banknotes, the justification being that lower banknote denominations have a higher circulation rate than higher denominations and are therefore more susceptible to wear and tear.

"The new N5, N10, and N50 polymer notes have retained their current sizes, designs and other key elements. Only the watermark has been replaced with the transparent window and G-switch, which turns from green to gold when the note is tilted.

"These are the essential polymer features that are present in the N20 note which enhance security of the notes," he said.

Sanusi recalled that four lower bank note denomination of the Nigerian currency (N5, N10, N20 and N50) were redesigned and issued into circulation on February 28, 2007, under the Central Bank of Nigeria's currency restructuring programme.

According to the governor, the redesign of the Nigerian currency was in conformity with international best practices which require that the currency structure be reviewed periodically to safeguard the integrity of the currency as well as ensure efficiency land cost effectiveness.

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