Naira Depreciation; New Capital Base Not Enough – Soludo

Former governor of the Central Bank of Nigeria and governor of Anambra State Professor Chukwuma Soludo has commended the recapitalization move of the banking industry even as he said with the depreciation of the naira, the new capital base which takes effect in 2026 is not enough.

This is as he, alongside the governors of Lagos, Ogun and Kwara states as well as former President of Nigeria, Olusegun Obasanjo bemoaned the high interest rate which according to them stifles the much needed economic growth of the country as the launch of “The Power of One Man” a book on the 2004 banking sector consolidation written by Dr Ray Echebiri in Lagos.

Soludo, who had championed the banking consolidation which saw the number of banks in the country reduce from 89 to 25, said the 2004 recapitalisation exercise had paved the way for the growth of the Nigerian private sector.

Noting that there cannot be a private sector led development without strong banks, Soludo noted that while the consolidation had cost him the safety of his family, it had changed the course of the Nigerian banking industry and the infinite possibilities of the country.

Commending the CBN on the recapitalization which sees international banks’ capital base rise by more than 10 times, he noted that policy makers in the country must be ready to pay the price and must be “self sacrificing” without “serving personal interests”.

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Meanwhile he said the current benchmark interest rate of nearly 30 per cent has made it difficult for not only the private sector but also the public sector to grow. The governor of Lagos State Babajide Sanwo-Olu, in his remarks at the launch, lamented the current economic conditions, saying the public sector is struggling under the weight of rising interest rates.

With the benchmark interest rate at 26.25  per cent, the Lagos State governor said “it is tough for the public sector at this time and we don’t know how we will survive this interest rate regime. It could be recalled that President of the Dangote Group, Aliko Dangote, had criticised the Central Bank of Nigeria’s decision to raise interest rates to nearly 30 per cent.

The foremost entrepreneur also advocated for policies that safeguard domestic industries and cultivate them into indigenous champions capable of generating jobs and fostering prosperity in face of current global economic woes.

On his part, former President Olusegun Obasanjo who was represented by the former governor of Cross River State, Donald Duke, said the high interest rate will further stifle growth and development in the country.

Obasanjo who was the Chief Guest of Honor at the book launch noted that policy makers ought not to fight inflation at the expense of growth. Noting the high returns at the Treasury Bills Market, he said an interest of over 20 per cent at the TBills end of the market will only drive investments away from critical sectors towards the money market.

Obasanjo who spoke through Duke also urged the CBN to ensure that ownership of banks are well diluted with one individual not having more than five percent shareholding in one bank. According to him, this poses an institutional risk.

He noted that whilst the CBN under the leadership of its former governor, Sanusi Lamido had limited the tenure of bank chiefs, he said they had “played smart by half” by transitioning to holding companies to still be able to have controlling powers over the banking institutions.

In his review, senior vice chairman and editor in chief of LEADERSHIP Newspaper Group, Azu Ishiekwene,  said the book “The Power of One Man – How the Soludo-engineered Consolidation Transformed Nigerian Banks to Global Players” documents the events of the 2004 banking consolidation and serves as a historical record that could guide the present and perhaps shape the future.

He notes that it is easy to forget what happened before the consolidation of Nigerian banks in 2004/2005, “just as we forgot the era of failed banks, which landed the country in serious trouble, as the mistakes of that era were repeated.

“Echebiri’s effort in this book to help us remember is not the last time we will remember, only to forget. But if ever we find ourselves in that dark place again – which we almost did not too long ago, and I’m not sure we are completely out – then it would not be because we had not been warned.”

Noting that the Soludo era consolidation may not have been as successful if it hadn’t profited from the boom in oil prices, which allowed investors to channel excess liquidity into investment in shares, Ishiekwene said “without underestimating the zeal, focus and vision that executed the consolidation, the boom in oil prices is just one example of how benevolence sometimes helps heroes crack their palm kernel.

“This book’s title, concept or theme does not necessarily raise the binary question of the value of Teams vs One. Or the fact that sometimes in life, serendipity, teamwork, and the strong backing of political leadership at the highest level are critical to success. The book shows, however, that sometimes, to succeed and to succeed outstandingly, one must be prepared to blow against the wind.”