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Was
the decision by the central bank (CBN) to meet with stakeholders of the
banks it rescued last year a climb down by the regulator? Ever since
the apex bank’s dramatic intervention, August last year, in support of
about eight banks that according to it were in dire financial straits,
there has been considerable pushback from shareholders of the affected
banks against the CBN. Having identified massive erosion of capital,
and poor governance amongst others as a major problem with these
institutions, the apex bank was right to take action promptly to
forestall any risks that these banks might pose to the entire banking
system, including through the appointment of interim management teams
to steer the banks in the right direction.

It was obliged too
to consider mitigants to possible second round effects of its actions,
up to putting in place guarantees for all interbank transactions.

This way the
monetary authorities ensured that the resulting loss of market
confidence from its intervention did not lead to a situation in which
its best efforts in support of the industry was stymied by a turning
off of the taps that control lending between the banks, or result in
the pricing of higher risk premia into all transactions with the
concerned banks. Once the banks were out of intensive care, however, it
became harder to argue the CBN’s corner in respect of its conception of
the way forward. There were costs to be borne, no doubt, and the
central bank had put a prince’s ransom on the table. Bad management had
been punished through their ouster, and the subsequent prosecutions in
court. A number of shareholders had lost their shirts. But to the
extent that we all favour market solutions to the most difficult of
national choices, talk about proceeding with the garage sale of these
banks in spite of their shareholders apparent discomfort was always
uncomfortable.

Of course, there
were doubts as to how easily the central bank could have sold these
institutions. How was it going to square the “welcome mat” laid out for
foreign interest in these institutions with the plethora of court cases
by shareholders whose gruntlement had been sorely affected by the CBN’s
seeming high-handedness in proposing solutions to their investment
without consulting them?

The central bank
thus confronted a major governance challenge in the way of its plans
for sanitising the financial services sector. It only just addressed
this dimension of its work, when it appeared to secure the buy-in of
concerned shareholders last week. Sadly, this governance deficit is a
national one, cutting across every sector of the economy. At a forum
last week, discussion turned on the mechanisms by which the country
came to be saddled with the excess crude account (ECA). And I heard
folk contend that “we” had agreed to this device in order to protect
the country’s fiscal space from the volatility of oil prices in the
international markets. As noble as this goal sounded, it was inevitable
that the question.

“Who were the ‘we’
who reached this agreement?” should be posed. Evidently, neither the
Nigerian people, nor their representatives were part of this process.
Because if “we” were, it would have been slightly more difficult to
raid the ECA with the impunity with which it has been attended in the
last one year. Alas, at this talkfest, there was this fancy
representative of the World Bank (or was it the IMF’s) poverty
reduction department who was persuaded that the signing of a memorandum
of understanding between the Obasanjo administration and her principals
on the working of the ECA was evidence of “our” having agreed to this
concept. The biggest difficulty with our attempts at democratic rule,
and one which most western country counterparts of our governments
inexplicably ignore, is not just that massive rigging and related
malfeasances weigh heavily on the extent to which the eventual office
holders may lay claim to represent any section of the electorate. It is
that the strategic decisions proper to the board (the people’s
representatives – “the legislatures”) of corporate Nigeria are
regularly taken by management (members of the federal executive council
that is).