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Thứ Hai, 12 tháng 8, 2013

From SAP to soludoism - BusinessDay

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Modern banking started in Nigeria in 1892 as the ubiquitous colonialists needed greater financial muscle to oil their predatory business interests. For a century, most developments in that sector were very mild: the rapid establishment and mass failure of indigenous banks[WEMA Bank is the last man standing], introduction of banking regulations, the birth of the CBN, decimalization and change of currency, and the regular alteration from tight to loose monetary policies.

The CBN was mostly managed by former commercial bankers-and every bank MD aspired to that post- while players in the field were categorized as foreign and local, government and private owned or commercial, development and merchant banks. The Big 4-FBN, UBN, UBA & AFRIBANK-bestrode the landscape while the others managed with the crumbs. There was no competition and all aspects of banking operations were regulated. But SAP changed all that!

The Structural Adjustment Programme of 1986 introduced the troika of deregulation, privatization and commercialization. It impacted on all aspects of our economy and national life but its impact on the banking sector was the most revolutionary. In deed, SAP irreversibly transformed the Nigerian banking sector. All aspects of operations were deregulated especially interest rates money and foreign exchange markets. Bank licensing was also liberalized leading to an unprecedented bank glut: the number of banks increased from 45 in 1985 to 120 in 1991, with 29 banks licensed in February 1991 alone! The number of regulators, regulations and other financial institutions also increased [BOFID, Money Laundering & Failed Bank Decrees, Prudential Guidelines, Mortgage & Community Banks]. Competition became chaotic as the old banks were striving to retain their spheres of influence while the new ones were trying to prove that new brooms swept cleaner. A lot of unholy deals and practices also surfaced and before long, we had the bank distress that left many Nigerians distressed up to the present day. So overwhelming was the impact of SAP that Nigerian banking history was automatically divided into two parts: before and after SAP

But that was before Soludo came on board. Soludo was the first double outsider[neither a commercial banker, nor a central banker], a professor and a professional economist to manage the Central Bank of Nigeria. Those involved in change management will readily tell you that only an outsider can introduce cataclysmic changes into any system or organization and that was what Soludo has done! Barely one month in the saddle, he released his strategic 13-point agenda top on the list of which was a new minimum capital base of N25bn and that was when some banks were still battling with the extant N1bn. The number of banks fell from 89 to 25[and now 23] and there were quantum leaps in all available banking sector statistics: assets, capital base, deposits, loans and advances, profitability and overall size. The banks embarked on rabid expansion and diversification [trying to be all things to all men] invaded the international banking landscape as players or fund raisers, attracted tremendous DFIs and foreign credits, got involved in big-ticket financing and started featuring in various global ratings of banks based on size and other indicators. They also took competition to dangerous levels including the obnoxious de-marketing and several obviously self-induced, phony awards.

Other developments in the banking sector during the Soludo era included the new CBN act, the contagion effect of the consolidation on other parts of the finance industry, the appointment of foreign reserve managers and money-market dealers, the micro-finance revolution, the establishment of credit referral companies, the post-consolidation code of corporate governance and the FSS 2020 strategy. Indeed, the Nigerian banking sector is so different from what it was in 2004 that there are no bases for comparison. And as it was in the case of SAP, banking history in Nigeria has, for now, been again automatically partitioned into two: before and after Soludo!

But it does not mean that all has been well with the industry in the past 5 years. The unwholesome tempo of competition and the desperate urge to make the numbers, the unbridled diversification and expansion, the oligopoly situation in which 5 banks control about 50% of the industry, the crises in WEMA & SPRING banks which put consolidation on trial and the unparalleled growth of the banking industry while the real sectors they were serving were becoming increasingly kwashiorkor-ed, the margin loan crises, the quality of assets and even the veracity of the profits being declared-which the CBN itself threatened to probe-, the ever-rising interest rates and poor reporting and disclosure standards are all causes for worry.

As for Soludo himself, he came, he saw, and while it is too early to say whether he conquered, he made an indelible mark! He made a good use of his intellect and age was on his side. It must be admitted that his last days in office were not his best. The global economic crises had to be managed and the devaluation of the naira and other panicky measures were responses to that development. Of course, after the sad naira reconstruction and AFC incidents, it appeared that he became more cautious and less of his usual self. There is only one sin for which he should go for confession: his initial assertion that Nigeria was immune from the global crises. That was not justified under any circumstances. If he also invited banks to the launching of a hospital project, then, there is a moral baggage for him in that. He also appeared not to be able to build consensus or consult effectively. The consolidation was a little bit militaristic while he did his vision 2020 alone-as if the CBN could move on without the polity and the economy. I am also not comfortable with this paradigm that once our banks have big capital bases, huge deposit bases and large deposits bases, then, all is well.

How does one classify Soludo as CEO? A 1996 study by Farkas & Wetlaufer classified CEOs into 5 based on their overall orientation as those who adopt: the strategy approach, the expertise approach, the human asset approach, the box approach and the change approach [the Way CEOs Lead; Harvard Business Review, May/June]. On this yardstick, Soludo will be graded as a strategy oriented leader; those who believe that their most important job is to create, test and design the implementation of long term strategy extending in some cases into distant future Soludo spent the 5 years strategizing, visioning about a great future and marshalling steps on how to get to that future. That was evident in the consolidation of the banking industry, the strategic agenda for the Naira, the FSS2020 and most of the programmes and policies that characterized his tenure.

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