The Presidency by Prince Emeka Obasi
Business Hallmark August 2 – 8, 2010

Welcome Speech by the Publisher of Business Hallmark, Prince Emeka Obasi, at the Inaugural Business Hallmark Round Table on the “CBN Reforms and Future of the Banking Industry” on Friday 30th July, 2010 at the Golden Gate Restaurant, Ikoyi, Lagos.

Distinguished Senator Nkechi Nwaogu, Chairman Committee on Banking, Governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, Chairman of the occasion, Dr. Obadiah Mailafia, respected discussants, eminent Special Guests, our colleagues in the mass media, distinguished ladies and gentlemen; I am very pleased to welcome you all to this inaugural Business Hallmark Round Table.

About 18 months ago when we set up Business Hallmark, the issues of banking sector challenges had not become as demanding as they are today. Yet even then, we were prescient enough to realize that the sector had structural difficulties which posed a serious challenge to the economy as a whole.

Mr. Chairman Sir, we were perplexed by what we perceived as a rather sanguine disposition of the CBN under the previous regime to what was clearly an obvious danger. But the CBN was not alone. The Fiscal Managers at the Ministry of Finance, the National Assembly, with due respect to our most distinguished Senator here, and what was worse, even the mass media, all failed to see and respond to the looming crisis. The reason for such wide scale failure has continued to be a subject of great amazement to us at Business Hallmark.

Ladies and gentlemen, we wish we could crow. But the issues are too serious for self-adulation. I recall that as far back as August 2008, we had published a front page editorial in our former publication, National Mirror, raising alarm over the poor state of the national economy and calling on the Federal Government to declare an economic state of emergency.

The core logic of that editorial was that the stock market bubble had run ahead of market fundamentals and stock prices lacked rational values. It is elementary economics that under such a market situation, a crash was a historical inevitability. But apparently, there was a merry party in full swing and the revelers did not brook any interference.

Even when the global economic crisis began to manifest in the USA and Europe, the monetary authorities insisted that Nigeria was isolated and thus immune from its ravages. Instead of acting decisively to rein in the credit binge, they dithered and created a discount window which merely postponed the day of reckoning. Worse still, they asked banks to merely restructure huge margin facilities without making due provisions for them in their balance sheets.

Indeed, we were appalled. At that point, we had no doubt that the industry was headed to turbulence. The problems of the industry predate the stock market bubble. Mr. Chairman Sir, as you would recall from the various discussions we had at the Hilton Hotel Abuja in early 2008, I have always located the problems squarely at the feet of the Banking Consolidation policy.

I have always argued that the consolidation policy was a wrong diagnosis of the problems facing the banking industry at the time. Its basic premise, that low capitalization was the core problem inhibiting banking stability and growth, was patently wrong. With due respect Sirs, I am convinced that poor or improper regulation and other macroeconomic challenges are actually the real problems affecting the industry.

In a frontier economy with poor regulatory regime, consolidation programmes can merely heighten risks. In Nigeria’s particular example, it created a stock market bubble which was fed by manipulation of stock prices and overvaluation of assets. The market, as the primary determinator of prices, was rendered redundant. The genie was let out of the bottle. Consequently, the primary objective of the policy, i.e. growing stronger, bigger banks that are too big to fail, was defeated.

At any rate, the concept of “too big to fail” is a well-known industry fallacy as the examples of Barings Bank, Northern Rock and the legendary Lehman Brothers typify.

Mr. Chairman Sir, we believe that in a market economy the market will determine the size and strength of each operator and allocate shares accordingly. A regulator can at best enhance the system by carefully articulated and measured policies that do not affect market dynamics. Anything to the contrary would amount to force-feeding the system which, even in human anatomy, often results in constipation.

Ladies and gentlemen, I have gone into this background to explain Business Hallmark. Our deep concern for the economy and consequent disappointment, especially with the mass media’s lack of sufficient concern with economic policy enunciation and implementation, provided the intellectual validity for us. We discovered, very sadly, that many of our colleagues do not properly understand economic issues and that even the few who do, sometimes doze off on the watch.

There is yet another concern, which is even more challenging: the large-scale indifference of the average Nigerian to economic issues. In other words, the palpable financial ignorance among the populace. It is therefore the core objective of our newspaper to educate Nigerians on wealth creation, wealth management and financial awareness. In pursuit of these, we have deliberately chosen to remain robust and on the other side of the divide.

Mr. Governor Sir, that would explain what some have termed our harsh attitude to you and the CBN. Indeed, it is our deliberate editorial policy not to cohabit with either operators or regulators. We are in bed with the people, the readers, whose interests we have chosen to serve wholly.

Nevertheless, we must commend you, not only for your strength of character and dogged determination, but also for standing out to be counted at a time the conventional wisdom was to the contrary. Your good self and Rev. Canon Agbetuyi were among the few who spoke out against the permissive exuberance of the consolidation mania. You warned against the non-provision for delinquent margin facilities, when the CBN asked that they be adjusted in 2009. You did ask, “after 2009, then what?”

Agbetuyi’s widely celebrated response to the issue must rank as an outstanding industry footnote. Yet, your intervention now, as the Governor of the CBN, has created a fresh wave of controversy. As you well know, we have taken positions in some aspects of your intervention policy, but today is not our day in court. This day belongs to you. You are the man in the arena. We have created this platform and invited this distinguished audience to listen to your reform programmes and assess their efficacy in restoring health to our industry. In Drs. Adedipe, Owoh and Oluba, we have an erudite cast of discussants to further elucidate the points you will make.

Mr. Chairman, before I conclude, let me say that the entire staff and management of Business Hallmark newspaper are appreciative of the CBN Governor’s acceptance of our invitation. Given our hard editorial stance on some aspects of his reform agenda, a lesser man may have opted to stay away. But Sanusi did not. He is a great man, a true warrior-Prince, one who does not shy away from engagements. His passion, commitment and patriotism offer refreshing assurances that for Nigeria, despite the challenges of the moment, the long-term prognosis is not entirely dismal.

Let me also commend Senator Nkechi Nwaogu, who is also an industry person. Under her leadership the Senate Committee on Banking has played crucial roles in ensuring greater financial sector stability. She contributed immensely in the quick passage of the Assets Management Bill (AMCON). Her presence here, despite her various other commitments, is a further testimony of her abiding interest in the industry.

Distinguished Senator, Governor, ladies and gentlemen, I welcome you all to this event.

Thank you.