Mr. Soludu And The N25billion Minimum
Capitalization Abdullahi
It
did not come as surprise to keen observers of the unfolding political
economics of the country. I have said it before that the economy has now
been handed to the World Bank and its surrogates to do as they like,
because one of the condition of IMF is modernization of the banking
system to be in line with globalization.
Globalization as Mr. Soludo wants us to believe is suppose to be
for our own benefit, but as we all know it is the method of capturing
emerging markets for the big players. United State and Let
us come to the issue of minimum capitalization of N25 billion in an
economy that is as poor as that of Nigeria with market capitilsation on
the stock exchange of less than $15 billion compared with market
capitilisation in Malaysian stock exchange of over $180billion, export
per capita of less than $300 compared to that of US, Malaysia and U.K.
that he compared us with of over $2,700, $4,500 and $4,800 respectively.
Given
the above scenario, banks would find it difficult to be able to
capitalize from the economy and foreign investors would find it
difficult to come and invest in the sector because of the capitalization
of the stock exchange. A country whose manufacturing sector is in
comatose, agricultural sector in tatters and a small scale industry that
is disorganized is not the type of economy that such radical reforms
would be applied to in isolation without considering other aggregates.
What conditions are in place that would ensure that the economy is
vibrant and free of uncertainties? How can a banks lend to a sector,
like manufacturing, whose functioning depend so much on government that
is not responsive. Take
Malaysia for example, about 27 per cent of Malaysia’s labour force is
employed in manufacturing contributing about 33 per cent of GDP in 2000
and about 80 per cent of export revenues. The economy was almost
exclusively driven by exports with export in 2002 estimated at about
$95billion compared to $17.3billion of Added
to all this is the strong political will exhibited b their leaders in
telling the World Bank and the IMF that its recipe is not acceptable to
the people of that country. The country has also been trying to adopted
an economic system that accommodate the Islamic concept of economics
where interest based transactions are gradually being replace by
participatory form of business dealings. In
as much as I am not against the increase in capital for banks in Whether
we like it or not, government is the main business in this country, the
private sector is not developed enough to be independent because the
necessary support needed to have a vibrant economy is not there.
Infrastructure is absent, power is not constant and the purchasing power
of the citizen is nearer zero (over 60 percent of the populace live
below poverty line with 70.2 living under $1 a day and 90.8% under $ 2 a
day.). How can you have a good economy that can support the kind of idea
the Governor has with this kind of statistics. It
is the fault of the banks that they get public sector funds or a
situation where we have more than N400billion as currency outside the
banking sector? Which bank would not gladly have this amount as part of
its deposit liability? Especially since the money would not come with
high interest expenses like the public sector funds that are laced with
layers of interest upon interest Of
all the problems he identified with banks, I cannot see any that this
increment would address sufficiently. It is the weak corporate
government which is not only restricted to the banks or late and
non-publication of annual returns. What of gross insider abuse. These
are all endemic problems with Nigerians whether in the banks, private or
public sector. From his own assessment of banks, 62 out of the 89 banks
as sound/satisfactory is a commendable figure considering that only 11
are classified as unsound. So the problem mainly is from the CBN as
regards its monitoring and supervisory policies not the issue of
inadequate capital base. What
this policy hopes to achieve, in my view, is further strengthen the big
bank and companies, underlining the core essence of capitalism i.e. to
make the rich richer and poor poorer. The policy would enable the big
companies to have access to cheap funds for their operation declaring
huge profit from other peoples money and giving them little in return in
form of interest payment that is far below the expected profit that
would be realized from the use of the fund. On the other hand the big
banks would be satisfied to collect their commissions secured in the
knowledge that the big companies are capable of repaying their
obligation as at when due, since the money is not theirs as they are
only acting as agent of the depositors. It
is the smaller companies and individuals whose savings it is the banks
use that would face problem of securing loan to finance their
activities. Imagine a customer with a requirement of one million naira
approaches a First Bank with a capital base of over N25billion and with
central risk management department at the head office and line of
command that extend to the various branches whose only responsibility is
to mobilize funds but not to grant credit. It would be difficult for the
customer to fulfill all the condition because first he is most likely to
be rated low in the hierarchy , which means that even if he is granted
the loan, the interest rate applicable would be higher because he is
considered riskier. This is apart from the process of going through the
head office to obtain approval for a credit that they will feel is not
worth the trouble considering the amount and the risk involved. In
conclusion, let the smaller banks be.
Market condition will determine who survives and who stays. A
situation where strange bed fellows would be merged together will only
bring confusion and would alienate the very people that he wants to
protect. What I am saying in essence is that I am particularly concerned
with the status of the proposed Islamic bank which many people have
pinned their hopes on, but with this policy it means that our dream is
farther from being fulfilled. |