Economic Confidential, September 2007

INTERVIEW

Monetary Policy Strengthens Local Currency – President CIBN

Recently the President of the Chartered Institute of Bankers of Nigeria (CIBN), Mrs. Juliet Madubueze granted an interview to Economic Confidential's Associate Editor, Tunde Akin on various issues including new provision in CIBN Act 2007, liberalization of accounting profession, the monetary policy amongst others. The interview was conducted before the recent development on the redenomination of Naira.

The naira is expected to exchange at N1.25 for a dollar from August 1, 2008, going by a new policy shift announced by the CBN on naira. What are the implications of the proposed currency redenomination?

The major reason why the policy was adopted was to strengthen the legal tender currency. It seeks to bring back the old glory of the naira. There was a time in this country when if you had N1,000 naira, it could buy 860 pounds. The policy is just aiming towards something like that. Let’s come back to what we were which was a better thing for us. Equally, arrangement has been ongoing for sometime for single currency for West Africa. It is therefore necessary that Nigeria to get ready for that period. One of the pre-conditions of the West Africa’s single/common currency is the stability of the currency of member-countries. Some of the West African countries have already started, and I think Ghana has already started rationalizing the digit in line with the requirement of that single currency initiative. For us, it is a good thing. If we implement very properly, very soon N1 should be able to buy 1.5 dollars, which was what we were buying before more than two decades ago. The naira will now become healthier, not that the value of naira will appreciate to that extent overnight. It is just that there won’t be thousands or millions of naira moving about now. It will be consolidated into the redenomination of the currency, so that inflation will be affected and even the external perception of the economy will also appreciate.

The new government is two and a half months old in office since its inauguration. What is your assessment of the government regarding the steps taken so far?

Is it not too early to assess a four-year tenure after only two and half months? As a person, I like him (the president). I think he has carried himself very well, but in my view it is too early to start scoring specifically. He is still trying to settle down and still appointing people to help him to do the job. I will rather give him a little more time.

Members of the governing council of the institute last week met with the CBN Governor, Chukwuma Soludo. What was the purpose of the visit and also what were discussions like?

The visit was to achieve three different things. One was to once again place on record of our recognition of the primacy of the CBN in the banking industry. Secondly, the visit was to solicit the continued support of the CBN for our institute in all our activities, especially support in the implementation of the new CIBN Act 2007. Thirdly, the visit was to formally present the new Act to the CBN as the apex bank before discussing the Act with anyone else. We did present the new Act to the CBN governor and we did discuss some of the provisions of that Act.

What are the new provisions in the CIBN Act 2007?

The Act has further empowered the institute to be able to control the membership and the knowledge level that is required for the practice of banking in Nigeria. The new Act has also restructured the governing council of the institute to include some new bodies that were not there before. For instance, the National Universities Commission and the National Board for Technical Education are now members of the institute’s governing council. We realised why it is necessary for NUC to be there. The commission’s presence on the council is to ensure that the certificates we offer are of university equivalent. The law has also brought into our council the mortgage and micro finance sectors of the economy. Also, it further requires six managing directors/chief executives of banks to be appointed by the council.

How do you see the new Act and the new provisions, and what do they portend for the banking industry as a whole?

We are happy with the coming of the new Act because it has enlarged the powers of the institute. Remember that there was a time in this country when, apart from religion, banking was seen as the most lucrative industry. Consequently, people rushed into the banking industry whether they have the ability or the flair or the attributes to be bankers or not. So, it was difficult to control behaviour. A lot of people who came in are today not members of the institute. Consequently, the institute was not in a position to control their behaviour or to foster professionalism and ethics in the profession. The new Act has in a nutshell professionalised banking practice. It is not that you can’t work in a bank if you don’t have the qualification. It’s only that now if you work in a bank you must be a member of the institute so that it can oversee the behaviour and the knowledge skills of the practitioners equally. The new Act has stipulated that if you are not a member of the institute you will not be entitled to be appointed or employed to head the Technical Divisions of a bank. Section 29 (7) of the new law stipulates that “No person shall be entitled to be employed or appointed or engaged to head any of the technical departments of a bank unless he is duly registered as a member of the institute.” The institute for now identifies the following technical departments of banks as treasury, domestic operations, foreign operations, credit, inspection, internal control, and risk management. This is very important and helpful in controlling the behaviour and the knowledge level of the practitioners.

The consolidation exercise in the banking industry opened up a lot of unprofessional conducts by bankers regarding mismanagement of depositors’ funds. In the new Act, what are the provisions with respect to sanctions and penalties of for unprofessional conduct?

We do have a Disciplinary Tribunal embedded in the Act. But, I must warn that the institute can’t do it alone. To begin with, there must be a formal report of misdemeanor by a banker. Our investigation panel will look at such issues and where the accused is found guilt there are stipulated sanctions. I must also tell you that the Act has not empowered the institute to prosecute anybody. Section 14 (8) of the CIBN Act 2007 provides that “A person whose name is struck off the register in pursuance of a direction of the Disciplinary Tribunal shall not be entitled to be registered again, except, in pursuance of a direction in that behalf and a direction under this section for the striking off of a person’s name from the register prohibits him from making an application for membership or restoration of his membership until after the period specified by the direction that his name should remain struck off, and if he makes an application during the currency of the prohibition such an application shall be invalid.”

How many have so far been sanctioned and penalized by the Tribunal?

The Act was signed into law in April and we presented publicly the Act on August 14 during the presentation to the CBN governor. So, I won’t be able to comment on whether anybody has been sanctioned or not. Like I said, I envisage a difficulty in the institute alone doing that because to begin with somebody has to make a report. Somebody has to complain and in most cases it should be the bank which will report an erring staff. But by the nature of banking, most banks don’t want to wash their dirty linen in public. Even though we have a lot of respect for the media, we as an institute will not jump on somebody merely because of a publication. There must be a report of that action to the institute and we will take it up from there. In the past, there has been not necessarily serious infringement because banks are naturally reluctant to tell depositors that there were loopholes in their banks. We do have to work seriously in persuading the banks to come forward with reports of misdemeanor by bankers as also in persuading the law enforcement agencies to forward up. But, the institute does not have a power of its own to delist or de-register somebody. Recall what I said earlier that you have to be a member of the institute to participate in banking practice. So, if you are de-registered you cannot practice that profession anymore until you purge yourself of disloyalty.

The new Act has been publicly presented. What is the Institute doing with respect to the implementation of the provisions?

We have already constituted a 12 member-Implementation Committee headed by the institute’s First Vice President and also Group Chief Executive Officer of Intercontinental Bank, Erastus Akingbola. The committee comprises people who are not even bankers or members of the institute because we want as many people as possible to contribute into achieving a road map with that Act. They are yet to finish their work. The committee has a deadline of November 30 to complete their work.

You have only eight months remaining to handover to a new president of the institute. You were confronted with some challenges when you were elected over a year ago, how have you been able to address these challenges and which are you yet to overcome?

I did make specifically four promises in my acceptance speech. The first one was the pursuit of this Act because I believe it will empower the institute to go further. That has been done. I also promised that we will try to expand our membership base. Most of the individual bankers are not members of the institute and I must say that we are forging ahead in that area. Now, we are having chapters of the institute in various banks. We have people in all the banks that are making sure that the membership base is increased. We hope to do more on that. I did also promised that our banking certificate will be listed in the government’s scheme of service. At the moment, owing to a misunderstanding of what our certificate is all about most ministries said they don’t need bankers. But, we are still pursuing it and the Heads of Service, after looking at our syllabus, have given us an approval-in-principle. We have not received a formal approval that it will be listed. It is being delayed because of the dispute over the level at which they will be listed. My fourth promise was that I will go after our Abuja property, which then Federal Capital Territory minister had reviewed the right due to the fact that we did not develop the property with the period specified. That is an area which I can’t beat my chest now to say I have done very well, simply because the minister who made all the promises is no longer there. So, it looks as if we are starting all over again. But in the other three areas, we are facing them squarely and making progress. There is another challenge of getting especially the senior bankers in the system who are not members of the institute, to come in not just to pay their dues but also for them to really get interested. This is because their interests will rub off on the junior ones, and we are working on that. Towards that, the new Act compels us now to have at least six managing directors/chief executives of banks on our council.

Looking at the banking industry after the consolidation exercise, the 2006 CBN Annual report rated the existing 25 banks in the following categories: sound (10), satisfactory (12) and marginal (three). There are fears that the industry is not yet free from the distress syndrome that was the situation before the exercise?

There is no way any banking industry in the world will ever be free of distress. We are talking of money and money creates all sorts of problems. Now you are talking of only three banks in marginal position, before the consolidation when they were 18 in that position 14 were already dead. Now we are talking of only three. In view of my position in CBN, I try not to comment on specific banks because it will give a wrong impression and secondly, it will be releasing information that is available to me from another privilege source. But, I want you to believe in the CBN governor. The position in the industry today is much better than it has ever being in Nigeria. We even have a Nigerian bank now among the first 500 banks in the world. We didn’t have one among the first 1,000 banks two years ago. In the next few years, there will be many more Nigerian banks with the first 500 banks. The rating is not done by us. I believe that the consolidation is a good thing and it has not ended. It is an ongoing exercise. What has ended was the regulation-induced consolidation, now we find some banks trying to consolidate on their own. There are also mergers and acquisitions still being discussed by banks because they have seen the benefits of being bigger and stronger.

About two decades ago, nobody foresaw the liberalisation of the accounting profession. Then, it used to be the Institute of Chartered Accountants of Nigeria, and now there are two or more professional accounting institutes. How prepared is CIBN for the competition that may come from other banking institutes?

It is a free world. Thank God for the Nigerian Government because it realises that duplicating the regulation of banking practice in Nigeria will not augur well for the industry. But, much as we all realise it, maybe one day some people will come out and say they want an institute. They have to prove themselves worthy of it. We thank God we don’t that problem because we only want one institute. If anybody wants to have another banking institute tomorrow, with the way the legal system works now he will have to work very hard to prove why. The CBN is regulating the institutions, the Nigeria Deposit Insurance Corporation is regulating the institutions and the CIBN is supposed to regulate the members, I mean the people. Anybody else who wants to go ahead and establish another industry, I believe has an uphill task to prove why another regulatory body is required.

In spite of moves by the Bankers’ Committee to eliminate robbery attacks on the banks, it has not been successful. There has been rising rate of robbery attacks on the banks. What can be done?

Security in the land cannot even be the CBN’s responsibility. We are trying in conjunction with the CBN to doing a few things. One for instance, we are trying to do public enlightenment on dud cheques. If there are no dud cheques, people will begin to accept non-cash payment. People will start accepting cheques, a paper instrument or plastic instrument in payment. And even if the cash is not there, do you see any armed robber going to a bank to carry away the cheque books? How will the armed robber used them? That is just one aspect. The Bankers’ Committee, which is headed by the CBN governor and includes other operators in the industry, has a committee on bank’s security. But, what the committee can do is to protect themselves from the robbers and not to stop the robbers. Provision of general security doesn’t come within the purview of the bankers. CIBN is trying to educate people to stop taking of cash and accept alternative means of payment, which will discourage the robbers. If banks are able to transact business without holding so much cash, the robbers will stop going there. The media should help us in the public enlightenment against dud cheques, which have forced people to insist on cash payment and forced banks to hold so much cash, which attracts the robbers.

The economy and the banking industry have undergone reforms in the last three years to better reposition them. How much of reforms have taken place in the CIBN?

Reforms are ongoing issue. When you see anything not working well, you see how to make it better. Even when you see anything working well, you also try to improve on it. The CIBN, for instance, is reforming and is even upgrading its technology base regularly. We do a lot of public enlightenments, lectures and seminars to get people to know the new way of doing things. But of course, the problem we have, like others, is that there are so many variable that we don’t control like power. I will have liked to start any reforms any where from the energy sector. But, those variables within our power and control we are trying to look at them constantly.