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We battled hard to push banking recapitalization to success – Gov. Soludo

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Banking sector consolidation a dangerous war, my family went into exile - Soludo

Chukwuma Soludo, the former Central Bank of Nigeria (CBN) Governor and Governor of Anambra State, characterized the 2004 banking consolidation as a revolutionary and war-like situation.

He made these remarks during the launch of the book “The Power of One Man- How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players” written by journalist Dr. Ray Echebiri.

Soludo, who was the special guest of honor at the event, emphasized that the consolidation was a significant revolution. He mentioned that many people viewed the exercise, which increased banks’ capital base from N2 billion to N25 billion, as an impossible mission.

On July 6th, 2004, the CBN announced the recapitalization of the banking sector from N2 billion to N25 billion, effective from 31st December 2005. The initiation of increasing the bank’s minimum capital base to N25 billion in 2006 led to a remarkable reduction in the number of banks from 89 to 24

Soludo said the CBN team, went through hell at that time because the organised labour, Manufacturers Association of Nigeria, and even the labour unions in banks kicked against the exercise.

“I remembered those days we spent weeks here in Lagos trying to midwife mergers, strange bird fellows. I remembered the hours we spent reconciling various bank directors and their irreconcilable differences. We are trying to celebrate the possibility that is Nigeria and that this country is a country of infinite possibilities. This is disruptive change and the revolution that has changed Nigerian banking and financial system forever,” he said.

Soludo said the apex bank, then wanted a private sector-led economy and therefore took a decision that this house has to be pulled down and rebuild afresh.

“And so when we raise the capital base from the equivalent of $15 million to the equivalent of $200 million, which was about a 14 percent increase, everybody thought it was impossible. Even some bankers taking advertorials that it was impossible but the way began. And this is where we must celebrate one man on the issue of leadership. We were determined to get it done but what if the President himself under pressure from all sides canceled the policy because they couldn’t meet $15 million in two years and now you have $200 million in 18 months,” he said.

“For me actually, the story will be told of what we went through together with the formidable team at the Central Bank to get this done. And for me, the major message of today, July 6, is that it is a revolutionary day for the banks. What the policy did was to kickstart what I called a race to the top”.

Also speaking, the Lagos State Governor, Babjide Sanwo-Olu, advised the current leadership of the CBN to seek wise counsel to ensure that the ongoing banking recapitalisation exercise succeeds.

He said: “We are at a point where the current CBN and the leadership are also going through a similar exercise- banking consolidation and increment in share capital of banks. We should not walk away from the tough decisions. You can imagine N25 billion then and today we are talking about N500 billion, you can see how the envelope has moved, how the challenge of our country and our economy has moved and how we are still grabbling with some of the issues and some of the problems that Prof. Soludo saw then”.

Sanwo-olu said the country has moved on but some of those challenges of Soludo era are still here.

As an ex-banker, he described this time “as an moment for the current leadership of the Central Bank to use this small gathering to test the temperature and the blood pressure of the system and do the right thing. You are on the right track of doing the right thing. We hope that you will hold on, complete the task, and be able to stand tall”.

On his part, CBN Governor, Olayemi Cardoso, who was represented by Deputy Governor, Phillip Ikeazor, said “Soludo has been very close to the Central Bank, he is in touch with the Governor and he is in touch with us the Deputy Governors and his wise counsel is very much appreciated”.

Ikeazor said the decision Soludo took 20 years ago on banking consolidation was a very bold one at that time where the banks capital base of N2 billion was raised to N25 billion.

“That is about 12 and half times. Incidentally, the current management of Central Bank has embarked on another round of banking consolidation. Why was it necessary then, Prof Soludo wanted to make the banks robust, resilient, and fit for purpose to grow the economy. And that is exactly the reason why we are embarking on a similar journey today,” he said.

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“I think by coincidence, if you check the amount of the minimum capital levels that we required, it is pretty similar because international banks are moving from 50 to 500, which is 10 times, similar to Soludo’s 12 and half times. Our national banks are moving from N25 billion to N200 billion. When you do consolidation, you would look at the microeconomics headwinds, the microeconomics conditions on the ground and of course apply your stress test,” Ikeazor added.

“And when you apply your stress test today, which I’m sure all of the big banks have done, they would have second-guess where the capital levels are going to land. If you compare the bank assets in Nigeria today and compare it with similar economies in Africa, you can see that we are way behind.”

He said the ongoing recapitalization of banks is also to strengthen the financial system and make it robust to be able to meet the expected headwinds.

Other dignitaries at the event were Chief Guest of Honour, Chief Olusegun Obasanjo, former president of Nigeria, who was represented by former Governor, Donald Duke; Ogun State Governor, Dapo Abiodun, former Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Hogan Ekpo, and Senior Vice Chairman/Editor-In-Chief at Leadership Media Group, Azu Ishiekwene, who reviewed the book.

 

 

 

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