‘Regulators must embrace proactive approach against banking crisis’
A book titled ‘Banking regulation in Africa: The case of Nigeria and other developing economies’, has revealed that regulators must pay closer attention to having a proactive approach to the act of regulation, rather than adopting a reactive measure for the instances of a banking crisis or failure.
Indeed, the author, Dr. Folashade Adeyemo, provided a detailed historical analysis of Nigeria’s banking regulation trajectory, including the creation of Nigeria’s first banking Act, Bank Ordinance in 1952, induced by the Paton Report, the deregulation of the Nigerian banking sector under the then President Babangida in 1986; the banking consolidation in 2004, which saw a substantial development to the Nigerian banking system; and the introduction of the Banks and Other Financial Institution Act 2020.
In the early chapters of this book, Adeyemo provides a holistic examination of banking regulation in Africa by specifically exploring the banking regulatory architectures of South Africa and Kenya, acknowledging that both have evolved over time.
Similar to Nigeria, South Africa has an apex bank (South African Reserve Bank), and two other regulators: the Prudential Authority and the Financial Sector Authority. In the case of Kenya, this country has a fragmented framework as it comprises several regulators, each having its distinct responsibility. In comparing all three African regulatory models, it is noted that there are distinctive qualities which may be broadly categorized as important and necessary features of an effective regulatory model.
She argues that it is imperative for the Nigerian regulators to cultivate a clear commitment to the ongoing improvement of the regulatory framework for a sustainable and viable economy.
Adeyemo also raises the important question of ‘who regulates the regulator?’ She acknowledged that countries that have apex banks should be able to discharge their regulatory and supervisory duties independently. However, in the case of Nigeria, and particularly given the CBN’s poor track record of effectively discharging their responsibilities, it may be prudent for the Nigerian regulator to submit itself to monitoring by an international body to ensure it provides an adequate, satisfactory and improved regulatory environment for banks, she suggested.
In the concluding chapters, Adeyemo also contends that in light of Nigeria’s historical romance with banking failures and crisis, the very special nature of banks, coupled with the detrimental judicial pronouncements as seen in the case of Savannah Bank and Liberty Bank, the time has come to create a specialist court to deal specifically with Nigerian banking law mattes. The proposed court is expected to function similarly to the court established by the Failed Banks (Recovery of Debts) and Financial Malpractices Decree 1994.