Limitation of the tenure of chief executive officers or other top officials of banks in Nigeria by the Central Bank of Nigeria will not improve corporate governance in the sector, an analyst has said.

Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said to expect that limitation of tenure would reduce governance abuse was a ”misplaced assumption”, adding that a key question to ask was how long it took to accomplish substantial malpractice. He said, in a paper delivered during the January Lagos Business School Executive Breakfast Meeting, that there was no substitute for a robust banking supervision process to protect depositors and shareholders.

According to him, ”The CBN, like many other global regulatory bodies, is intensifying the regulatory regime of the banking system. Mainly in response to the findings of the stress test and the global trend, it is rewriting some rules.”He said the United States recently proposed to segregate the provision of retail banking and investment banking, adding that it also sought to ensure that depositors‘ funds could no longer be used for proprietary trading.

But in Nigeria, Rewane said, ”The CBN has limited the tenure of managing directors of banks to two terms of five years each. Usually the prerogative of shareholders, this is an unorthodox move taken to ensure proper corporate governance. ”The question remains, can governance abuse and substantial malpractice still not be accomplished in six months?”

Bismarck also observed that there was a lull in business activities in January after a moderate boost in December, adding that political uncertainty, caused by President Umaru Yar‘Adua‘s absence was taking its toll on the economy. According to him, ”Foreign and local investors are delaying investment decisions amidst political impasse; Credit squeeze, fuel scarcity and banks‘ massive lay-offs also had adverse effects on business activity.

”Value of cheques cleared in Lagos declined to N1.03tn in January from N1.27tn in December. This could be partly attributed to the effect of the new CBN policy limiting cheque payment to N10m. ”Monthly Federation Accounts Allocation Committee allocation disbursed in January declined by 2.4 per cent to N370.3bn, from N379.4bn in the previous month.”

The managing director also said that the annualised growth rate of private sector credit was 26.10 per cent below the indicative benchmark of 45 per cent. He added that the sub-optimal monetary growth indicated the need for the continuation of an accommodative monetary policy stance.

(Source:Punch)