Over the weekend, the CBN Governor gave a speech on what went wrong with the banking system in Nigeria. You can download the paper below. He listed 8 main factors namely, macro economic instability caused by large and sudden capital inflows; major failures in corporate governance at banks; lack of investor and consumer protection; inadequate disclosure and transparency about the financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management process at the CBN and weaknesses in the business environment in the country.

Vanguard Newspapers has a brief account of the speech:

The Governor, Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi has revealed the details of the four pillars of banking reforms at the pre-convocation lecture of the Bayero University, Kano, weekend.

In a paper titled, “The Nigerian Banking Industry: What went wrong and way forward”, Sanusi challenged the academics for their absence in the discourse on the banking crisis which he considered tragic because it “has been left to journalists of varying degrees of sophistication, and to faceless agents and charlatans”.

He therefore challenged the intellectuals to take advantage of the opening salvo fired by the CBN to lead what he said “could potentially be a revolutionary battle against the nexus of money and influence that has held the country at ransom for decades”.

Discussing what went wrong, Mallam Sanusi said “eight main interdependent factors led to the creation of an extremely fragile financial system that was tipped into crisis by the global financial crisis and recession”.

He gave the factors to include: macro economic instability caused by large and sudden capital inflows; major failures in corporate governance at banks; lack of investor and consumer protection; inadequate disclosure and transparency about the financial position of banks; critical gaps in regulatory framework and regulations; uneven supervision and enforcement; unstructured governance and management process at the CBN and weaknesses in the business environment in the country.

Turning to the reform programme of the CBN, and in obvious reference to opponents who claimed that the CBN has no strategy or there is no roadmap to the reforms; the Governor said, while the U.S had just set up a committee to undertake a study of what went wrong over there, after achieving some stability; in our own case, “we commissioned a detailed study with the involvement of the CBN and external resources to diagnose the problems and come out with solutions” which he said culminated into the formulation of the blue print or roadmap for the reforms.

Mallam Sanusi reiterated that the blue print for reforming the Nigerian financial system in the next 10 years is built around four pillars of enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that financial sector contributes to the real economy.