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The Pains and Gains of Governor Sanusiís Banking Reforms an unprecedented effect of over-rated professionalism.

By: Ejikeme Nonso Alo
Published October 27th, 2010
Abstract: The banking sector have become one of the most lucrative sectors of the Nigerian economy, this is basically due to its employment rate, and its key role in facilitating financial stability of both small and large scale businesses in the country. However, the inability of the stakeholders within the banking sector to adhere strictly to professional banking ethics has negatively affected the viability of this sector. In other to correct this state of disorderliness Mallam Lamido Sanusi, on his emergence as the governor of the central bank of Nigeria embarked on certain economic reforms. In a nutshell the emphasis of this article would be to critically examine the Sanusiís banking reforms, as well as its implications or otherwise on the Nigerian economy.

The central bank of Nigeria (CBN) is empowered to regulate both the micro and macro-economic policies on behalf of the federal government and has sweeping authority in financial matters to regulate the sector and ensure its sustainability in the long run (Sanni, 2010). An important responsibility of the central bank is to regulate the banking sector as well as act as the lender of last resort

On assumption of office in June 2009, the CBN governor Mallam Sanusi Lamido Sanusi launched a crusade aimed at sanitising the banking sector which was at the edge of collapse going by the result of the joint audit conducted by the banks depositorsí insurance scheme (NDIC). Sanusiís crusade was basically aimed at sanitizing the sector and streamlining the banking industry along the lines of good corporate governance and international best practice (Sanni, 2010). The CBN governor aimed at providing adequate information for both investors and depositors to assist in evaluating the true financial position of the banks. This was done via new disclosure for the banks to make mandatory financial operational and management information in their periodic terms.

The reforms ensured that banks pay greater attention to the design of their international processes and procedures with respect to risk management. In this perspective, the asset management initiative was established in other to ensure that banks operate with international standard. The AMC was an initiative which was adopted by most government around the world during the financial crisis in 2007. The AMC initiative is basically established in other to improve the capital and liquidity positions by taking over toxic assets from banks and stimulate bank lending by equity injection in other to stabilize the banking sector (Sanni, 2010).

In a nutshell (Uwe, 2010), summarizes the four basic pillars of Mallam Sanusiís reforms which includes the following

       (i)  Enhancing the equality of Banksof Banksof Banks

(ii)  Establishing financial stability

(iii) Enabling a healthy financial sector Evolution

(iv) Ensuring that the financial sector contributes to the real economy

The big question is how can Mallam Sanusi achieve these objectives?  The CBN governor held that the reforms in other to achieve its goals must encapsulate a holistic set of strategies  designed to stabilize the banking sector and promote long sustainable growth of the sector and the economy as a whole these strategies include the following

(i)   Fixing the problems of the banks

(ii)        Tighter regulation of the banking sector

(iii)       Adoption of a risk based supervision

(iv)       Effective consumer protection and the reform of the CBN itself

Although the reforms carried out by Mallam Sanusi turned out to be inimical to economic development which will be examine later, it also had certain positive impact which include the following

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Eradication of corruption in Nigerian Banking System :   Sanusiís reforms was aimed at sanitizing the Nigerian banking system with the view of exposing the practices of the bank executives who were diverting depositors funds for their personal aims and objectives (Onwuamaeze, 2010) The discovery of the Apex bank in its litmus test was that most of the banks had non-performing loans. The CBN defined non-performing loans as loans that have not been serviced for three months. The investigations however revealed that most of the banks had bad loans and a total of about 2trillion naira was incurred as dept that was not serviced constantly by borrowers. This was gradually crippling most of the banks. The officers who contributed to the gradual failure of these banks were brought to book to the full extent of the law (Onwuamaeze, 2010).

The rule of law: The arrest of the Bank chief executives justifies the principle of the rule of law. To a large extent all hopes are not lost for this great country. If we can have people like Sanusi in all levels of government across the federation sincerely speaking there will be a change, this is because he did not decide to cover the cases of mismanagement of funds among the board of directors in the affected banks as found in the investigation of the banks, but he went ahead to ensure that the wroth of the law caught up with the offenders who flouted the law. It takes confidence for this radical reform to be implemented in a country that is characterized with corrupt leadership. It also implies that his administration is keen on promoting the principle of accountability not only in the management of banks but also to the depositors who keep their hard earned money in these banks (Onwuamaeze, 2010).

Ensuring confidence in the Co-operate banking system: The banking sector is an important aspect of the Nigerian economy not only due to its viability in terms of employment rate but due to the fact that virtually every citizen deals with banks either as depositors or borrowers. Prior to the Sanusi reforms, there was no transparency and accountability in most banks in the country. Loans were given based on sentiments and connections, common citizens who had good business plans and initiative were denied loans from banks.  Despite the recapitalization of banks by the former governor of CBN Professor Charles Soludo, Nigerians were still scared of depositing their monies into most banks due to the memories of bank failure in the country. But as the CBN reforms have been implemented, it implies that there is a new beginning in the relationship between banks and customers. The CBN reforms is geared towards protecting the interest of depositors by ensuring that the right leaders are appointed to lead the banks in other to eliminate all forms of corruption which is asymmetrically opposed to the objectives of the depositors or investors.

 Having examined the objectives as well as the gains of Mallam Sanusiís reforms, it will be intellectually incapacitating and could lead to a state of mental paralysis if i summarize this article without looking at the other side of the coin. Despite the CBN reforms there is still relative weakness in the economy marked by credit squeeze, increase unemployment, depletion of the foreign reserves, high inflation rates, reduced foreign direct investment, dubious gross domestic product figures and poor policy initiative leading to confusion in the financial system (Ighomwenghian, 2010). 

It is with uttermost disappoint that i write this piece. Mind you i am not a sadist, but as a political scientist i was taught to have a critical mind and examine issues from diverse perspectives. Sanusiís reforms either intended or unintended have further crippled the Nigerian economy. As a professional and with the application of common sense i thought that Sanusi would have calculated and weighed the pains and gains of his reforms before its implementation. There is a saying that Ďeverything that has an advantage must have a disadvantageí. It is a well-known fact that the Nigerian political and economic system is built on irregularities and as such an educated economist like Sanusi should have adopted a gradualist approach and not a spontaneous and radical approach which have further plunged the nation into the wilderness of poverty. In other to buttress my point on the aftermath of the Sanusiís reforms i will argue with facts.

The Pains of Sanusiís reforms    

Unemployment:  Prior to the Sanusiís reforms the banking sector was one of the highest employers of labour in the country. However, with the heart breaking reforms orchestrated by Mallam Sanusi Lamido Sanusi, most of the workers of the affected banks are back in the streets begging for daily bread. Most affected banks in this category are Oceanic bank and Intercontinental bank. Oceanic Bank sacked about 1,500 workers while intercontinental bank also sacked close to 3,000 workers. Nigeria as a third world economy is popularly known for its high rate of unemployment and Mallam Sanusi have contributed his own quota by increasing the numbers of jobless youths in the country. The resultant effect of this is the rapid increase in poverty, increased crime rate and criminal acts among the frustrated youths in this category.

Cash Squeeze: Any reasonable economist would support the idea of an effective and easy circulation of money across the various sectors of the economy. Infact this notion is compatible with the liberal capitalist school of thought which advocates for effective participation in economic activities, however as regards to the Sanusiís banking reforms, i wonder how Mr Sanusi wants to make funds  available to the Nigerian business men with his new policy of strict capital control of banks. Presently, due to the aftermath of Sanusiís reforms most banks are financially incapacitated and cannot borrow funds to investors. Most businesses are collapsing due to the fact that the source of their funds are no more, for instance Dangote group of companies had to borrow funds from a South African bank because of the collapse of the Nigerian financial system. According to the manufacturers association of Nigeria (MAN) Sanusiís banking reforms have negatively affected the production rate as well as contributed to the high rate of fuel scarcity, this is because major stake holders within the oil industry need capital from banks in other to properly finance their business. This situation of cash squeeze is detrimental to a developing economy like Nigeria which needs local investments through properly financed SMEs to develope (Akogun, 2010).

The New Executives and the cleansing mission: One Important criticism of Sanusiís reforms is that the calibre of individuals he (Sanusi) appointed to take over the banks was not in any way different from the former bank executives. The new executives who were sent on a cleansing mission of the banks as Mallam Lamido Sanusiís representatives have not in any way lived up to expectation

Take for instance the case of Afribank. The first policy adopted by the newly appointed board of directors in Afribank was to buy an SUV (Sports Utility Vehicles) worth tens of millions of Naira for themselves (Akogun, 2010). Here is a bank that is in distress, and a board of directors appointed by the professionalized Sanusi.

In the case of bank PHB, it was interesting to find out as reported by the guardian newspaper that the new bank executive chairman, Mr Cyril Chukwuma have in three months of being in charge spent $120,000 on offshore allowances. He was reported to have cut his own salary by 18% while the least staff in the bank had a cut of 30% each (Akogun, 2010). This is totally against the principle of equity in management because ordinarily the biggest earners should get the biggest percentage cut.

Forced Loans: The Sanusiís banking reforms have been criticized for breaching the professional banking rules, this is because Sanusi illegally forced the banks to agree to the loans which were given to them. The 450 billion Naira loan was illicitly forced on the banks. Firstly, although these banks were in financial predicament but ideally these banks did not need this large sum of money. According to financial experts and analysts, what the banks needed was merely 100 billion naira only. However Mallam Sanusi went ahead to force the banks to collect such loans to be paid back in seven yearsí time and with 11 per cent interest. With the financial predicaments which these banks are facing and the high level of uncertainty in the Nigerian business environment how sure is the CBN governor that these banks can pay back these loans with 11 per cent interest? Under an ideal banking system, there must be a mutual agreement between the giver and the collector. The terms and condition must be accepted by the two parties, but Mallam Sanusi instead of adhering to these rules imposed his funds on the fragile banks. This simply implies that Sanusi is also guilty of breaking banking rules just as he has accused the eight chief executives.

Sentiment and Personal Vendetta: It is obvious that Mallam Sanusiís actions are not void of sentiments and personal vendetta. The big question that Sanusi have failed to answer is that why was some banks treated with fairness and others were not. Take for instance Wema Bank was given the opportunity to recapitalize while spring bank was not.

In ETB, for instance Mike Adenuga Jnr. Was initially sacked but when he promised to inject the sum of $150million he was reinstated in the bank. On October 23, 2009, the CBN governor in the NESG policy dialogue held in Lagos held that that the five bank managers deserved to be tied and fuelled to death. This nasty and silly statement was made by a man who calls himself a professional in utter disregard of the rule of law. Through this statement one would see that Sanusiís objectives were not just only to cleanse the banks but is motivated by other factors. Also, on the 17th of November 2009, Mallam Sanusi held that they have traced 45 to 60 shops in Dubai belonging to one of the banks chief executives. However, there is no constitutional provisions that prohibits Nigerians from spending their money outside the country, Sanusiís utterances and actions implies someone who is after personal vendetta than ideal banking sector reforms.


From the fore-going, Mallam Sanusiís banking reforms was well appreciated by majority of Nigerians but from a more critical point of view the aftermath was disastrous and had a reverberating effect on economic development in the country. However my candid advice to the CBN governor is that he should start brain storming on the way out of this economic mess. Apparently it is a well-known fact that these banks violated banking rules and manipulated depositorís funds for their personal goals, however Mallam Sanusi should have adopted a more strategic solution to the issue of dept accumulation, instead of taken a radical step that now affects the economic stability of the nation. If i were in Sanusiís shoes i will simply established a Credit Regulation Institution (CRI) which will regulate the loans issued by these banks in other to curtail excesses and the existence of non-performing loans. This agency would ensure that before loans are issued to business men, the individual in question must have cleared his dept to a reasonable extent. It would also ensure that loans are issued out based on the contribution of such business to the Nigerian economy. The institution would also be backed up with law enforcement agency in case such individual cater away with the funds made available to them. From my own point of view i donít think that Sanusiís war against banks is needed, it was simply an issue that needed the application of common sense. Here i rest my case!!!!


Akogun P. (2010) ĎSanusiís Reforms Angels to the Rescue?  Retrieved on the 26th of June 2010, avaialable Online at

Olatunde Sanni (2010) ĎAnother look at CBN Reformsí Tribune Nigeria 29thh march 2010

Uwe John (2010) ĎCBN Unveils face of banking reforms retrieved on the 26thh of June 2010 available Online at www.     Phase-of- Banking ĖReforms/page

Onwuamaeze Dike (2010) ĎPains and Gains of Sanusiís Reformsí retrieved on the 26th of June 2010, available online at -com-content$task=view$id=18448itemid

Ighomwenghian K.( 2010) ĎThe Pains of Sanusiís reformsí retrieved on the 26th of june 2010  Available online at allafrica// /stories /201006020474html?page=2

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