Sanusi Reforms: Banks Increase Private Sector Loans By N4.4trn

The private sector is beginning to reap the benefits of the banking sector reforms embarked on by the Sanusi Lamido Sanusi-led Central Bank of Nigeria (CBN) as banks are now focusing more on their core function of funding the productive sector of the economy.

LEADERSHIP investigations revealed that banks have raised their lending to the private sector by as much as 51.8 per cent in in the last 18 months since Sanusi Lamido commenced his reforms on assumption of office as CBN governor in June 2009.

Data from the CBN’s Money and Credit Statistics indicate that banks have extended a whopping N12.9 trillion as loans to the private sector as at December 2011 compared to a total of N8.5 trillion extended as at the end of May 2009 just prior to the commencement of the Sanusi regime and consequent banking reforms.

Recall that prior to the reforms, banks were averse to lending to the private productive sector because of the attendant high risk. The bulk of the credit in their kitty was utilised on insider related credit as well in funding margin trading activities on the Nigerian stock market, which resulted in Non-performing loans (NPLs) taking over more than a third of total banking credit.

Since the commencement of the reforms, banks have systematically increased their intervention in the funding requirements of the private sector as indicated by the data, which showed that over the level of N9.7 trillion at end-December 2010, aggregate banking system credit to the private sector rose by 33.3 per cent, due, largely to increase in claims on the private sector.

Despite banks’ increased lending to the private sector, analysts believe there is still room for the banks to do more since the level, which is less than 50 per cent of banks' deposit still falls short of CBN's stipulated loan-to-deposit level of 80 per cent.

In August 2009, the Sanusi-led Central Bank of Nigeria bailed out Afribank, Intercontinental Bank, Union Bank, Oceanic Bank and Finbank with 400 billion naira of public money, and dismissed their chief executives. He said "We had to move in to send a strong signal that such recklessness on the part of bank executives will no longer be tolerated."

Presently, senior bank officials are still facing charges that included fraud, lending to fake companies, giving loans to companies they had a personal interest in and conspiring with stockbrokers to boost share prices.

Sanusi’s blueprint for reforming the Nigerian financial system was built around four pillars of enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that the financial sector contributes to the real economy.