Sanusi’s Clean Sweep

Mallam Lamido Sanusi, Nigeria’s central bank governor, was presented in March with the Global Central Bank Governor of the Year award. He also won the African Central Bank Governor of the Year award, among several other accolades. But Sanusi has remained a highly controversial figure in his country.

In Clean Sweep Ignatius, a story in one of British author (and former politician) Jeffrey Archer’s collections of short stories, a fictitious Nigerian finance minister, who goes by the name of Ignatius Agarbi, better known as ‘Clean Sweep Ignatius’, wins accolades for demonstrating uncommon zeal in singlehandedly cleaning up the rot in the nation’s economy. In the course of his Herculean task, Ignatius tackles the reeking ‘stables’ and ruthlessly clears out the corruption and rot he finds there, hence ‘Clean Sweep Ignatius’.

In a case of reality imitating fiction, Nigeria seems to have discovered a new Clean Sweep Ignatius who shares striking similarities, but purely with the corruption-busting aspects of Archer’s character. Mallam Lamido Sanusi the Governor of the Central Bank of Nigeria (CBN) has indeed won plaudits for his firm resolve to sanitise the nation’s financial sector, which had been in a terrible shape before his appointment in June 2009.

Sanusi’s blueprint for reforming the Nigerian financial system, which was anchored on four key pillars – enhancing the quality of banks, creating financial stability, promoting the evolution of a healthy financial sector and increasing the financial industry’s contribution to the real sector of the economy – it appears, has not gone unnoticed as he has won awards both at home and abroad.

The Banker magazine, a publication of the London-based Financial Times, which commended his efforts in cleaning the Nigerian Aegean stable, has joined the growing list of organisations that have honoured Sanusi. The month of March had a golden halo around it for Sanusi. The Banker declared Sanusi not only the African Central Bank Governor of the Year but also the Global Central Bank Governor of the Year. In the same month, he also emerged as Nigeria’s Silverbird Man of the Year 2010 and to complete the hat trick, he received an honorary doctorate from Nigeria’s University of Jos.

But these international awards did not come easy. At the award presentation ceremony in London, it was noted that Sanusi “showed courage far beyond the call of duty” in spearheading banking reforms that have radically transformed the banking system in Nigeria. Brian Caplen, The Banker magazine’s editor, noted: “The award recognizes those with the courage to take unpopular or difficult decisions in the face of strong opposition or for being far-sighted in terms of getting a decision right at a time when the outcome was unclear.”

In hindsight, Sanusi’s decisions were the correct ones but when he did so initially, he faced an avalanche of criticism and was openly accused of ‘destroying’ the Nigerian banking industry. There were many who said he had overstepped his jurisdiction and others claimed he had ulterior motives. He was strongly advised to reconsider his stance if he wished his career at the bank to follow its designated course.

His highly controversial decisions (at the time) included his takeover of eight banks in the country perceived to be at the verge of collapse due to liquidity problems; the successful prosecution of the chief executives of the banks in question and pegging the tenure of bank chief executives at no more than 10 years – ostensibly to strengthen and to promote corporate governance in the nation’s financial institutions.

Caplen summed up the situation when he said that the Award, introduced in 2004, was designed to recognise those at the helm of affairs of the top financial institutions who often take “difficult decisions in the long-term interest of their countries but often at the risk of short-term unpopularity to themselves.”

The man behind the office

Sanusi was born in 1961 in Kano, Northern Nigeria. An economics graduate from Ahmadu Bello University (ABU), Zaria, in 1981, he started his career teaching economics at ABU between 1983 and 1985, before he made a career switch to banking. He took some break from work to return to school

for his Master’s in Arabic Studies at the International University of Africa, Khartoum, Sudan, before picking a second Bachelor’s degree in Sharia and Islamic Studies.

Done with his educational pursuits, he returned to the banking industry in 1997 when he joined the then United Bank for Africa Plc (UBA), where he quickly rose up the ladder. Sanusi, who before his current appointment as CBN Governor was the MD/CEO of First Bank of Nigeria plc, the nation’s oldest financial institution, appears to be clearly focused in his mission.

Sterling qualities

In some circles, he is seen as a national hero; in others, he is often castigated for initiating the reforms that caused so much turmoil in the Nigerian financial sector in the second half of 2009 and up to the present time. But one of his sterling qualities, which even the most rabid of his critics cannot fault, is the courage of his convictions. It takes steely resolve to challenge the status quo in Nigeria. The deftness with which he executed the policy left no one in doubt that there is indeed a new broom that is determined to sweep away the sordidness in the nation’s financial houses.

Nigeria’s top banking chief executives were not the only ones to be shaken out of their complacency; the reforms affected thousands of bank employees who lost their jobs. Virtually all the other sectors of the economy have groaned under the impact of the reforms as funding from the banks slowly dried up and asphyxiated many small businesses. The long fuel queues that plagued the country for several months towards the end of 2009 and up to the first quarter of last year were also attributed to the reforms which made it difficult for importers of petroleum products to secure credit facilities from the banks.

Undeterred by the criticisms that trailed his reform exercise, Sanusi is in the processing of handing over some of the troubled banks to new owners, whose names were made public in March. According to reports, some of the new suitors include First Bank ofNigeria, which is said to be interested in acquiring Oceanic Bank, one of the eight troubled banks, while Access Bank has merged with Intercontinental Bank. Union Bank of Nigeria, another of the affected banks, has signed a Memorandum of Agreement (MoA) with the African Capital Alliance Consortium to invest $750m for its recapitalisation. But shareholders of the financial institutions are kicking against the sale of the banks. However, this may have come a little too late, as the process is almost concluded.

Perhaps no other CBN Governor has courted as much controversy as the current incumbent. Unlike his more suave predecessor, Professor Chukwuma Soludo, who was accused of romancing openly with bank chief executives during his tenure, Sanusi appears to be more businesslike in his approach. That is perhaps why he successfully demystified some bank chiefs hitherto considered ‘untouchable’ by virtue of their close association with the key players at the corridors of power.

In August 2009, he fired five bank chiefs over infractions ranging from poor corporate governance to corrupt enrichment. He struck again in October when he sacked three more chief executives of Nigerian banks over similar issues, bringing the tally to eight. This earned him many powerful enemies and few friends. But like Clean Sweep Ignatius, he has remained steadfast in his resolve to pursue his reforms to a logical conclusion. The Asset Management Company (AMCON), which he set up to manage the bad loans of the affected banks, has finally taken off, overcoming the resistance of opponents.

He is the first governor of Nigeria’s central bank that has fired indicted bank chief executives and ensured that they face legal censure. Perhaps his rare courage is strengthened by the support he has so far enjoyed from the Presidency, coupled with his status as the grandson of the 11th Emir of Kano, one of the most powerful monarchs in the country.

Taking on lawmakers

Like Ignatius, Sanusi, who is almost two years into his five-year tenure, rattled the nation’s lawmakers last December when he questioned their pattern of spending the national budget. Many feathers were ruffled at the National Assembly following his declaration that the lawmakers’ salaries and emoluments account for 25% of the government’s recurrent expenditure.

His remarks, which sparked a huge debate in the country, caused the lawmakers, who did not find this revelation of their spending amusing, to summon him to Abuja to defend his allegation.

At a public hearing on the matter, convened at the instance of the enraged Senators, Sanusi resisted strong attempts to hector him into admitting that the figures were inaccurate. Members of the Senate committees set up for the purpose failed to browbeat him during a brutal questioning session. They also could not extract any form of apology from him. He even offered to resign if he was found to have committed any infraction, insisting that he was quoting from the figures he got from the Budget Office.

After taking turns to maul Sanusi, who was cheered on by spectators, the lawmakers reluctantly let him go, even though the issue remained largely unresolved.

Sanusi has no doubt proved his mettle in a society where it is not easy to challenge the status quo. But there are battles ahead. For instance, shareholders of the affected banks are likely to go to court over the sale of the banks.

The outcome of the Presidential election in April may also determine the future of the reforms. However, one thing is certain and that is the fact that the banks have emerged stronger from the ashes of the reform. The impressive financial results that some banks posted recently perhaps indicate that Sanusi’s reforms are indeed working.