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By Chukwuma Umeorah
Governor, Central Bank of Nigeria (CBN), Olayemi Cardoso, has recognised the 2005 banking consolidation led by Professor Charles Soludo, as a cornerstone for the enduring success and resilience of Nigerian banks.
Speaking at the unveiling of Ray Echebiri’s book titled: “The Power of One Man: How the Soludo-Engineered Consolidation Transformed Nigerian Banks to Global Players” held in Lagos at the weekend, Cardoso emphasised the significance of this reform in transforming the banking sector and affirmed that the current leadership of the apex bank was building on the foundation laid.
The event, held In Lagos on Saturday marked the 20th anniversary of the reform that revolutionized the banking industry. Cardoso, represented by CBN’s Deputy Governor, Financial Systems Stability, Phillip Ikeazor, noted that the consolidation increased the capital base of banks from N2 billion to N25 billion, thereby enhancing their capacity to finance the private sector and long-term projects and contributing to the growth of the economy.
“The 2005 consolidation laid the groundwork for the success of Nigerian banks. It was a bold step that not only strengthened our banking sector but also positioned our banks to compete globally,” Cardoso stated. “Today, Nigerian banks are more robust and capable of withstanding economic shocks, thanks to the foundation laid by that reform.
“That is the same reason that today we are embarking on the journey to further strengthen our banks through the current recapitalization. Why would you think this is a quantum leap is the best at this time? If you compare the bank assets to GDP in Nigeria and you juxtapose with similar economies in Africa, you would realize that we are way behind,” he revealed.
Cardoso added that it would further strengthen the banks to the level where they will be able to absorb any shocks that come and position them to be able to grow the economy.
“Remember that when the current administration came in, there was unification of FX rates and removal of fuel subsidy and the impact on the economy, particularly the manufacturing sector is beginning to manifest and would continue over the next few years.”
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Addressing concerns of inflation, Cardoso hinted that CBN may hold interest rates for a longer period of time. He however, clarified that the CBN was focused on its core mandate of price stability to prevent the nation nose-diving into hyper-inflation, “Because if that happens, the transmission of monetary policy tools will become completely ineffective. That is why it is important that the CBN tightens and maintain the interest rates for a little while. But we would start slowing down on the rate hike in no distant time,” he explained.
Former President Olusegun Obasanjo, who was represented by former Cross River State Governor Donald Duke, called for a synergy between fiscal and monetary policies to further stabilize and grow the economy. Obasanjo stressed the importance of having representatives from the CBN involved in fiscal policy formulation to ensure comprehensive and effective economic strategies.
“The consolidation initiated by Soludo was a courageous and necessary move. It has significantly contributed to the stability and growth of our banking sector,” Obasanjo said. “However, to sustain this growth, there must be appropriate consultations between fiscal and monetary authorities.”
Speaking earlier, Lagos State Governor Babajide Sanwo-Olu also lauded Soludo’s efforts. He urged the CBN to take decisive actions to stabilize the economy, particularly in managing interest rates and inflation, to alleviate the pressures faced by the private sector. “The private sector is currently experiencing tough times due to various economic challenges. The CBN must take swift and effective measures to stabilize the economy,” Sanwo-Olu said. “Learning from the past reforms can guide us through these turbulent times.”
In his remarks, Professor Soludo recounted the challenges faced during the 2005 consolidation including death threats and personal attacks on his family, but expressed pride in the achievement and urged the current CBN leadership to remain resolute in their efforts to recapitalize the banks to keep pace with the expanding economy.
“The success of the 2005 banking reform was driven by our collective determination to put the nation’s interest above self and ethnic sentiments,” Soludo said. “As our economy grows, there will be a need for larger banks capable of supporting multinational projects. We must continue to dream big and work tirelessly to achieve these goals.”
The book by Ray Echebiri provides a comprehensive account of the events leading up to the 2004/2005 banking consolidations.
