CBN didn’t break any law - Sanusi
didn’t break any law - Sanusi.
The Central Bank of Nigeria (CBN) yesterday cleared itself of any wrong doing in disbursing N620 billion to bail out eight distressed banks in 2009.
Also, the Governor of the bank, Lamido Sanusi, insisted that the apex bank did not err when it donated over N175million to victims of bombings, the education sector and the Southsouth Economic summit as part of its Corporate Social Responsibility (CSR).
The banking watchdog had bailed out 10 banks following the outcome of a stress test, which showed that the lenders were undercapitalised, lack governance and posed a risk to the economy. With the exception of Wema and Unity Banks, the managing directors of Union Bank, Oceanic, Intercontinental, FinBank, Equatorial Trust, spring Bank, Afribank and Bank PHB) were removed and replaced to shop for investors.
Sanusi, who appeared at a public hearing organised by the House of Representatives Committee on Banking Currency, noted that the definitions of loan and expenditure must be understood by the lawmakers.
The committee queried the CBN over the legality and exclusion of the National Assembly from its spendings, adding that the Legislature was responsible for appropriating money for Ministries, Departments and Agencies (MDA).
In response, Sanusi said: "If I lend some money and it is paid back with interest, is that spending? It is ‘celebration of confessed corruption and not criminality’. It is not the same as the Ministry of Finance giving money and spending it.
"All these interventions are loans. The first misconception is to confuse lending with spending".
Quoting copiously from the CBN Act, he asked: "Where did the CBN get the power to lend the money? It is from the CBN Act the power was given by the parliament."
He said the laws empower the CBN to invest in debentures, which it did through the Bank of Industry (BoI) where it intervened in several sectors of the economy such as aviation, agriculture, Small and Medium Enterprises (SME)’ "using powers given to us by this parliament.
"That is not an expenditure, sir; we did not spend the money. The money loaned to the banks have been paid back and the surplus had been returned to the treasury, the records are with you.
"As long as loans are not expenditure and we are empowered to grant loans, then the legality of our action on this is not questionable.
"When the Ministry of Finance uses its balance sheet, it needs appropriation because it is spending from the Consolidated Revenue Fund (CRF), but when the CBN is spending, it is from the proceeds of its investments and loans or printing money and both are covered by the CBN Act.
On the legality of the bailout funds to banks, Sanusi absolved the CBN of any involvement in the disbursement of the N620billion grant to some distressed banks.
"The CBN was not involved in any bailout of banks in Nigeria. The involvement of the CBN in the rescued banks was limited to its statutory role as the lender of last resort and in the context of providing liquidity to the system when banks were facing liquidity challenges and meeting their obligations was proving difficult, " he said.
According to him, the CBN simply provided loans to the banks, which the enabling law, CBN Act 2007, Section 42 (2) empowers it to do, adding that the bank was only carrying out its duty as the lender of last resort.
"If the Central Bank does not lend money to banks or governments, then you don’t need a Central bank. To lend money is why we exist".
Besides, the injection of the N620billion into banks was a loan to be repaid at a premium from the proceeds of the recapitalisation of the banks, Sanusi added.
On the involvement of rescued banks, Sanusi also absolved the CBN of any blame, pointing out it was the Asset Management Corporation of Nigeria (AMCON) that bailed out the banks.
"AMCON was a product of the parliament and it was AMCON and not the CBN that put in the capital. The CBN did not put in money in any Keystone, PHB or whatever. AMCON did it by issuing of bonds guaranteed by the Finance Ministry, which was also covered by the AMCON Act.
"We injected N500billion into the banks because of the situation that was badly affecting the economy and it was targeted specifically at some sectors in order to jump-start the sick banks and get to the borrower for it to affect the Gross Domestic Product (GDP).
"That intervention was to me not only legally right, but also economically smart and I don’t see anything that was wrong with that,"he explained.
The lawmakers, citing donations to bomb blast victims in Madalla, Niger State and Kano, questioned the rationale behind unrestrained donations in the name of corporate social responsibility (CSR).
The CBN boss said there was nowhere in the laws setting up the CBN where the bank was prohibited from embarking on such ventures.
The Executive Director of AMCON, Abbas Jega, said N1.742 trillion loan was injected into major sectors of the nation’s economy and that 87 per cent of the revenue was raised by bonds issued by the Corporation.
In his presentation, Abraham Nwankwo, Director General of Debt management Office (DMO) said AMCON got the Federal Government’s guarantee for the N1.742 trillion for three year tradable bond in pursuant of section 26 of the AMCON Act.
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