Tinubu: Every Commitment to Clear FX Backlog Will Be Fulfilled

·      Sanusi says president shouldn’t be petroleum minister, insists NNPC must account for dollar inflows

·      Opposes removal of AMCON levy

·      Declares banking sector regulation a necessity

·      Chike-Obi: era of regulations without consultation should end

·      Cardoso: regulation key to sound financial system, reduction of operational excesses

James Emejo in Abuja

President Bola Tinubu yesterday assured that every commitment by his administration towards resolving foreign exchange (FX) backlogs through injection of funds into the market would be fulfilled.

Speaking at the opening of the 2023 Bank Directors’ Summit in Abuja, Tinubu said funding of liquidity in the FX market, even though a short-term solution, remained critical for the economy at the moment.

The summit was organised by the Bank Directors Association of Nigeria (BDAN), with the theme, “Emerging Issues: Navigating the Complex Balance Between Regulation and Compliance.”

In his remarks, the 14th Emir of Kano, Muhammadu Sanusi II, said the idea of the president doubling as petroleum minister was not good enough, as it hindered constructive criticism of the oil industry.

Nigeria has adopted the petroleum minister’s role for the president as an unwritten tradition since the inception of the Fourth Republic in 1999.

But Sanusi said that was bad for the industry that formed the mainstay of the country’s economy, as it created a situation where, “Nobody can talk; they say you are attacking the president.”

Commenting on the current fiscal and liquidity change, Sanusi doubled down on his call on the Nigerian National Petroleum Company (NNPC) Limited to give account of the dollar inflows from its operations.

The former Governor of Central Bank of Nigeria (CBN) also rejected calls for the removal of AMCON levy. This followed a request by Chairman of BDAN, Mr. Mustafa Chike-Obi, that the federal government should put a stop to the AMCON Levy because it had exerted heavy cost on the industry.

The incumbent Governor of CBN, Mr. Olayemi Cardoso, said regulations were crucial for maintaining compliance and curtailing excesses in the banking sector.

Tinubu, who was represented at the summit by Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, insisted there was “no reason to feel that the indications that were made earlier had changed”, adding, “It just takes time.” He said the government was doing everything in its power to try to attract funds that would shore up liquidity in the FX segment.

There had been concerns by stakeholders that the government appeared to have reneged on its earlier commitment to inject between $7 billion to $10 billion into the FX market to clear the existing backlogs that impaired investors’ confidence in the economy.

But Tinubu said it was only a matter of time before short, medium and long-term funds would be mobilised across the spectrum.

He stated that overregulation of the banking industry could be counter-productive and stifle innovation, and added that there was need to strike a balance between regulation and overregulation.

The president said, “The regulator must partner with the industry to promote innovations that drive financial access, and banks must embed integrity and transparency into our culture and technology systems.”

Sanusi, in his own comments, said the concept of the president doubling as petroleum minister was not a good idea, stressing that it hinders constructive criticism of the oil industry.

He also emphasised the need for NNPC to give account of dollar inflows from its operations, querying, “Where are the dollars? Ask NNPC.”

Sanusi said that was the same question that cost him his job as CBN governor, adding that he would continue to demand answers until NNPC was properly reformed or “till I die”.

He said the current fiscal challenges resulted partly from the inability of revenue agencies to account for their stewardship transparently in order to reduce revenue leakages.

The former CBN governor particularly blamed the central bank’s overdrafts on the federal government through “Ways and Means” for the country’s high inflation and FX woes.

He queried the National Assembly for reneging on its oversight functions and allowing the previous administration of the apex bank to exceed the five per cent lending threshold to the government without first amending the law.

Sanusi described NNPC as the opaquest institution in the world, stating that to achieve FX stability “you must follow the money as we asked in 2014”. He said so much attention was being focused on the CBN, and no one was demanding answers regarding N11 trillion subsidy payment without accountability.

He criticised the ongoing advocacy by the banking industry for stoppage of AMCON levy.

Under the Asset Management Corporation of Nigeria (AMCON) Act, banks are required to contribute an equivalent of 0.5 per cent of their total assets, plus 0.5 per cent of all contingent assets as of the preceding year-end to AMCON sinking fund in line with existing guidelines. 

But the non-refundable contribution, which is for 10 years effective 2013, and with no ownership interest, had been the subject of controversy in recent times. While, on the one hand, government actors called for increase of the levy, the banking sector advocated its stoppage.

But, the former CBN governor said, “I don’t support the removal of AMCON levy.”

He said the government had spent a lot of money to bail out banks in 2005, adding, “If we had not bailed those banks, all of you would have gone underground”. He explained that CBN pumped in N50 billion during the bailout and hoped to recoup the money from the banking sector.

Sanusi argued that taking the levy off the banks could pass the burden to taxpayers. He also said any move to remove the independence of CBN and subject it to political manipulations could be dangerous for the economy.

He stressed that the CBN Act remained one of the best laws in the world, and added that the solution was not in changing the bank’s law, but ensuring its implementation.

Sanusi challenged the boards of banks to pay more attention to stopping loans from going bad and improving risk assessment. He said as the first line of defence, the boards must focus on the quality of risk management, set the guidelines, and follow up.

Sanusi said the boards should be up and doing, and decried a situation where the management teams called the shots for the former. He warned that jettisoning regulation could lead to the collapse of the banking sector, as recently witnessed with the Silicon Valley Bank in the United States, where lax regulations were fingered. 

Sanusi said trust and integrity, among other things, remained crucial in the banking industry.

Cardoso, in his contribution, said regulations were crucial for maintaining compliance and curtailing excesses in the banking sector.

Represented at the occasion by CBN Director, Payment System Management Department, Chibuzo Efobi, Cardoso said given the sophistication of banking operations, aided by technology, CBN regulations were key to ensuring that only fit and proper persons were allowed to hold banking licenses.

Chike-Obi had earlier restated the commitment of the banking sector to partnering with the federal government towards achieving economic growth. He urged the CBN to always consult the banking industry in crafting its policies, adding that the “era of regulations without consultation should end”.

He said the central bank should initiate regular meetings with bank directors.

Chike-Obi said the AMCON levy tended to be unsustainable and should be reconsidered. He said something needed to be done to make pension funds yield something higher than inflation.

Equally speaking at the summit, Vice President Kashim Shettima emphasised the critical role of the banking sector to financial stability and growth. Shettima believed the banking system would get stronger through the various regulations.

He said regular dialogue was required to ensure bank profitability and sustainability.

The vice president, who was represented by his Special Adviser on Economic Affairs, Dr. Tope Fasua, said he was confident that the central bank under the new leadership had committed to an elevated level of professionalism and focus, creating more space for enhanced intermediation in the credit space for commercial merchants.