Soludo Reflects on Banking Sector Transformation, Says 2005 Banking Sector Consolidation Was A ‘War’

The Anambra State Governor, Professor Chukwuma Soludo, on Saturday disclosed that the 2005 banking sector consolidation exercise was like a war, stressing that he received 19 threatening messages, which forced him to send his children into exile abroad after attempts were made to kidnap them in their school in Kwara State.

This is coming as the Governor of Ogun State, Mr. Dapo Abiodun, said that Soludo was not an accidental central bank governor, adding that Soludo was also a testament to former President Olusegun Obasanjo’s knack for identifying quality staff.

Soludo, who was the governor of the Central Bank of Nigeria (CBN) between 2004 and 2009, revealed these at the launch of a book in Lagos titled ‘Power of One Man: How the Soludo Engineered Consolidation Transformed Nigerian Banks to Global Players,’ which was written by a veteran journalist, Dr. Ray Echebiri.

He said the consolidation exercise of 2005 was a major revolution that transformed the banking sector forever and enhanced its capacity to finance the private sector for national economic growth and development. 

Soludo said: “We went through hell, and three-quarters of my hair disappeared during that period. It was nothing short of a revolution. 

“The organised labour, NLC, the Manufacturers Association of Nigeria, NACCIMA, bank’s labour union – all rose against it. All kinds of things were thrown into that war.

“I remember those days when we spent weeks here in Lagos trying to midwife mergers among strange bedfellows.

“This was the disruptive change, the revolution that has changed the Nigerian banking and financial system forever.

“The major problem of the Nigerian banks was that they needed to capitalise to be fit for purpose. You cannot be talking about private sector-led development without a financial system that can finance the private sector. That for me was like a slogan.

“So, we had a decision to make: Either to go on patching or decide that this house has cracked down to its foundation and needs to pull it down and start from scratch. That was the decision that we faced. We decided that this house had to be pulled down and built from the ground.

“When we raised the capital base from an equivalent of $15 million to the equivalent of $200 million, there was a screaming headline that declared it impossible.

“Some bankers took advertorials declaring it impossible. And the war began,” he explained.

Soludo said former President Olusegun Obasanjo should be appreciated for standing his ground and giving the policy implementation his full support against all odds.

He said: “It was a war and this is where we must celebrate the ‘One-Man,’ (Obasanjo). 

“We had made the statement that the train had left the situation. But what if the president himself, under pressure from all sides, began to call you that ‘this thing is too much. The heat is too much. Everyone is complaining. Can’t we differ this or stretch the time?’

“A chairman of a bank, a professor, approached Obasanjo that this cannot work. But Obasanjo told him that if they cannot merge to meet the capital requirements, then let the bank go.”

Soludo pointed out that “what the policy did was to kick-start a race to the top. What we did was take people who were used to playing in an office space to a football field where they could play the ball as high as possible and run as far as they could go.

“And after playing on that field, if anybody wants to take them back to playing in that tiny office, they will resist it. That is exactly what happened.”

Speaking during the book presentation, Obasanjo, who was the Chief Guest of Honour, identified himself as the “One-Man” because he was the coach who assembled the team of the board of the governors of CBN and handed over the captain’s band to Soludo.

Obasanjo, who was represented by the former Governor of Cross River State, Mr. Donald Duke, warned of the danger of returning to the era when one person, or few individuals, would own a banking institution, insisting that Nigeria must learn from history.

The Governor of CBN, Dr. Olayemi Cardoso, who was the Principal Guest of Honour, said that Soludo took a bold decision for the common good of the country 20 years ago when he announced the banking consolidation exercise on July 6, 2004, “and we are here today talking about that.”

Cardoso, who was represented by CBN’s Deputy Governor, of Financial Stability, Mr. Phillip Ikeazor, said that the lesson from Soludo’s banking consolidation was that it takes bold decisions for the common good for a leader to leave his name on the sands of time.

He said: “The decision taken 20 years ago on banking consolidation was a very bold one. At the time capital was N2 billion but he took it to N25 billion to make the banks robust, resilient, and fit for purpose to grow the economy.

“That is exactly the same reason we are embarking on a similar journey. Incidentally, the current central bank has embarked on another round of banking consolidation because the banks must be capitalised to a level that they can absorb any shock that comes and be positioned to grow the economy.”

Cardoso also commented on the interest rate hikes policy stance of the CBN,

He reminded Nigerians that it would take the country many years to recover if it failed to tame the current galloping inflation allowing it to degenerate into hyperinflation.

“For us as a central bank, we are focusing on our core mandate of price stability, maintaining a stable exchange rate, and of course economic growth. But it is a matter of sequencing.

“It is very important that we do not enter hyperinflation where the transmission of monetary economic tools will become completely ineffective. We must avoid that.

“So, we will maintain an interest rate hike as long as it takes to control and stabilise our galloping inflation. It is important that we tighten and hold on a little while and expect that in no distant future, we will be able to slow down on the rate hikes,” he said.

Speaking during the occasion, the Governor of Lagos State, Mr. Babajide Sanwo-Olu, said that on July 6, 2004, Soludo declared the banking recapitalisation exercise, adding that “we are here today to celebrate and analyse it.”

Speaking in the same vein, the Governor of Ogun State, Mr.  Abiodun, said that Soludo was definitely not an accidental central bank governor.

Abiodun said that the impact of appointing and allowing the right choice to serve in public office could not be overemphasised.

He described “Soludo as an apostle of bank consolidation and restructuring,” adding that “if all those decisions Soludo had made were wrong and disastrous we would not be here today.”

The book reviewer, Mr. Azu Ishiekwene, who is also the Vice Chairman and Editor-in-Chief of Leadership Newspapers, said that the Nigerian banking sub-sector was on the brink of collapse when Soludo assumed office and launched the banking consolidation exercise.

On his part, Echebiri said the occasion was to celebrate Soludo for his courage, foresight, and leadership in guiding the consolidation exercise to a resounding success as well as to celebrate Obasanjo for recruiting Soludo into his administration.

The Chairman of the book presentation and a Professor of Economics, Professor Hoggan Akpan Ekpo, who was also a member of the Monetary Policy Committee of the CBN during the tenure of Soludo, said that the consolidation exercise was the reason Nigerian economy was shielded from the harsh effects of the 2008 global financial crisis.

Dike Onwuamaeze and Kayode Tokede

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