Ask anyone in a random survey about the profession they find most trustworthy. The answer would most probably be: “bankers, of course”. They are ranked only behind people in the medical profession in some surveys. Journalists, estate agents, mechanics, insurance brokers, politicians and the like are generally despised, if not loathed, by the general public for understandable reasons.
Let us face it: we walk into the bank, leave our hard earned cash in their custody and simply walk back out. We get statements of our monthly or quarterly transactions from the banks and without even bothering to peruse, we file or throw them away, believing in their intrinsic truth. Now, the same revered institution is now being accused of a grand larceny by the Nigerian Senate.
Last Thursday, a Senate committee was said to have “discovered N30tn forex fraud in 10 years by banks”. It would be recalled that this column was devoted to banking malpractice in the foreign exchange saga on Tuesday last week. The Central Bank of Nigeria policy of handing the banks millions of US dollars for onward distribution to end users was castigated in the column as being akin to putting a vampire in charge of a blood bank.
Indeed, harsh words were used in the article to describe the banks’ position on this subject. For that, a few notable discordant voices made their feelings known through my inbox. I was accused of being too harsh on the banks, but, judging by the Senate’s reaction two days later, the piece now seems rather mild. In fact, it appears to have struck a chilling chord. The swift Senate reaction, whether galvanised by the column or just a mere coincidence is gratifying anyhow. Their action will be most appreciated by the public at large.
That said, the Senate’s interest in this matter needs to go deeper than it is currently contemplated. The banks have been directed to respond to the Senate’s “queries” within the next three weeks. The regulatory authorities; CBN, Ministry of Finance and that of Budget/National Planning have also been summoned to appear before the Senate Committee next month alongside the chief executive officers of the commercial banks.
For a start, the multiple layers of supervisory/regulatory functions over the issue of foreign exchange are anomalies that need to be rectified. Right now, there are too many overlaps in the functions of the CBN governor, minister of finance and that of the budget/national planning. All three are effectively acting out the role of the minister of finance, which should not be the case. The ambiguity was, most probably, not intended when the Presidency created the ministry for budget/national planning with a substantive minister in charge. It was created for political expediency, but it has robbed the ministry of finance of a key responsibility in the management of the country’s finances. Can anyone imagine Dr. Ngozi Okonjo-Iweala, the minister of finance under Presidents Olusegun Obasanjo and Goodluck Jonathan, being minister of finance today and having no responsibility for the budget or the so-called national planning?
The current minister of finance, Mrs Kemi Adeosun, is equally a woman of substance with a formidable intellect in her own right. Her outward modesty belies a steely determination in her, as could be attested to by those around her. She is being put in the shadows of the CBN governor and the minister for budget/national planning through no fault of her own. In my view, she should be the face of the Muhammadu Buhari administration when it comes to financial matters of general importance in this country. The forex issue is as much a political as it is an economic matter. Mrs Adeosun should be the person taking the lead on it; not the governor of CBN, who, though eminently qualified, ought to be confined to his barracks.
The forex issue is not a new phenomenon in our economy; it has long been accepted as part of our inevitable decline, except that the accelerated rate of this decline in the recent months has highlighted the urgency of the problem. The other side of the forex saga is the chronic interest rate that is stifling the manufacturing sector, especially as it affects the small and medium-sized enterprises. Why would any bank commit any money into the capital markets to help boost company shares, if they can find other people to lend to at the prime rates of 20, 30, and 35 per cent?
At a time when other countries keep their interest rate as low as five per cent and even much further down, our banks are touting their loans to small and medium-sized companies at the exorbitant rates of 20-30 per cent or more. The bulk of these small and medium-sized enterprises are then forced to operate in the shadows, using loan shacks for their borrowing requirements and the parallel market for their foreign exchange needs. What is needed, therefore, is not some Senate hearings that will be subsumed by politics. It is not too difficult to imagine how many of our representatives are directly or indirectly funded by bankers and how many of them have substantive financial interest in the banking industry themselves.
Furthermore, the Senate Committee proclaimed that as much as N30tn forex fraud has been committed by the banks in the last ten years. This amount is staggering if not incredulous. That figure translates to N3tn forex transaction per year. Now then, how much is the country’s total forex capacity in a year?
The point of the above question is simply that, taken at face value, the Senate’s charge of N30tn fraud would mean that the entire forex transaction in the country’s economy in the last 10 years has been fraudulent! It is an astonishing, if not outlandish claim. Nonetheless, the banks stand accused for this and other reasons enunciated in last week’s column. This should be beyond politics for the sake of everyone. Consequently, only an independent commission of experts and other stakeholders can do a thorough job of unravelling these sinister issues of forex and crippling interest rate in the economy. It is a job not to be left with the experts per se. Economic matters are far too important to be left with economists alone.