'Bank Reforms Good, But We Must Be Wary Of Eroding Confidence In Our System-Utomi'

Professor of Entrepreneurship and Director of the Centre for Applied Economics at the Lagos Business School ((Pan African University), Prof. Pat Utomi, agreed that the on-going reforms in the Nigerian banking system by the apex bank is a good initiative but stressed that it should be carefully carried out so as to avoid complicating the issues in a bid to correcting them. He spoke to JUMOBI ADEGBITE. Excerpts.

How would you assess the on-going reforms in the Central Bank of Nigeria?

AS you know, the process of reforming the country is very dear to me. I believe that any process that strengthens our institutions in the direction of reforms is a direction that must be supported by all. My take has always been on how the Nigerian economy could be a sustained performance, and this depends on how we strengthen several institutions among which is the financial system. So, every attempt to strengthen it should be welcomed by well-meaning people.

Of course, there would always be matters of differences in style and general thrust of reform initiatives. What is important, at this point, is to always bear in mind the capacity issues in the system. There is need for us to ensure that we have capacity to sustain whatever we are doing without creating circumstances that are worse than what we are trying to solve. This is a delicate balance in political issues that I think many countries have been challenged with.

I would like to state a particular example of a great policy student, Daniel Patrick Moynihan - a professor in Harvard University and a former Senator in the United States of America, who preceded Hilary Clinton in the U.S Senate. When he was a professor at Harvard, he used to make a point about the need for care to avoid Heterogenic Policy. Heterogenic is a term used in medicine, where a doctor tries to treat a disease and the treatment itself becomes worse than the disease, which eventually, leads to the death of the patient. In other words, the patient dies as a result of the treatment and not the disease. This is usually what happens to our policies. Public policies, therefore, need to be sensitive to the possibility of Heterogenic complications. Taking a cue from this, I fully support the goals and thrust of making the system more transparent and predictable - the foundation upon which stability is built.

However, we must not give the impression that entrepreneurial banking should be feared, as it could frighten people out of being entrepreneurial, and consequently lead to lesser wealth.

The most important thing behind reforms is the motive of the lenders and borrowers. When there is a motive of tracking the intention to abuse the system, such system must have adequate arrangements to deal with it strictly. Undoubtedly, banking business is risk-taking and there are going to be risks that would fail. It, therefore, becomes imperative for us to understand that the fact that a loan went sour is not a crime of its own.

If we make people believe that a wry loan is a crime, then, no real entrepreneur will dare a loan, and no growth would take place. That is why we should have capacity development issues to enable regulators ensure that what is going on is not abused, and that the risk appetite is within some context. Without this, some people, of course, could be wild in the kind of risk they take.

One reason I was very thrilled to see Lamido Sanusi become governor of Central Bank, is that he came from a risk management tradition and that he would do things that would emphasise a greater focus on risk management. I am, therefore, not surprised that he has done this because it is the direction I thought he would go.


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