Central Bank Governor Justifies Action
The
Governor of the Central Bank of Nigeria, CBN, Sanusi
Lamido Sanusi, has defended his actions to inject
N420 Billion and sacking of five bank Chiefs as well
as their management while addressing the House
Committee on Banking.
He told the members of House of Representatives
Committee on Banking, that he took the decision
based on the provision of the CBN Act.
The lawmakers summoned the CBN Governor to explain
his actions, which they described as illegal, saying
his actions contravened the provisions of the
constitution.
Legal Fireworks
Quoting Sections 80 and 162, of
the 1999 Constitution, which deal with revenues to
the Federal Government, Oguefi Ozombachi, Chairman
of the House Committee, said the provisions of the
CBN Act, which Mr. Sanusi acted upon could not
superced the constitution.
In the words of the Committee Chairman, “’any
section of the CBN Act that is inconsistent with the
provision of the constitution is null and void,
illegal and of no effect whatsoever”’.
Resolute
Mr. Sanusi remained convinced that
his actions were in order. He argued that “’ there
was no inconsistency in the action of the CBN, as
the Act, which established it as the lender of last
resort, derives its powers from the constitution”’.
The CBN Act
He cited Section 9 (13, 15-17) of
the Bank and Other Financial Institution Act (BOFIA),
which put regulatory matters like minimum capital
requirement, minimum cash holding, capital adequacy
ratio of banks within the purview of the CBN.
“Where a bank is deficient in any of these, the CBN
may, under the statutory powers, order redress of
the deficiency in any of the ways contemplated by
law as spelt out under Sections 5(1); 13(a), 34(a)
of BOFIA”, said Mr. Sanusi. “the CBN may also
exercise its regulatory function by activating its
power as lender of last resort under Sections 29(i)
(c) and 42(2) of the CBN Act in giving succour to a
distressed bank.” He Said.
Sanusi Analysis
Mr. Sanusi submitted that the
CBN’s intervention was not only consistent with
global trends, but was also a patriotic decision to
stem further erosion of confidence in the banking
sector as a result of its huge exposure to the
capital market.
The CBN Governor explained that the 10 banks audited
had granted over N900 billion loans as at December
2008, representing about 12 per cent aggregate
credit, or 31 per cent of shareholders funds.
“Of this figure, the five banks accounted for more
than 50 per cent of the total exposure, with over
N754 billion, or 10 per cent of aggregate credit and
over 27 per cent of shareholders’ funds, to the oil
and gas industry.
“At its peak, the banks’ total outstanding
commitments under the CBN expanded discount window
stood at over N434 billion. Therefore, CBN’s action
to inject fresh capital into the five banks was not
only within its statutory powers, but done to save
them from imminent collapse, as well as restore
confidence to the banking system,” he said.
Twist
Media reports say it was an irony
that the four-page remarks of the Chairman House of
Representatives Committee on Banking was written in
a letterhead of Rockson Engineering, one of the
companies identified by the CBN as one of the worst
debtors whose non-performing loans sent
Intercontinental Bank to ruins.
Rockson, whose Directors are the wealthy businessman
J.I.A Arumemi-Ikhide and his wife, Mary, owed and
had refused to pay Intercontinental about N37
billion as of May 31.
On Monday, 14 Executives of five banks were
arraigned before a Federal High Court in the
Southwest city of Lagos for financial impropriety.
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