By the second half of 2010, what is largely suspected to be Lamido Sanusi, governor, Central Bank of Nigeria, CBN’s plot to get rid of a certain class of banks’ chief executives would have gone the full circle. To the already devastated banking industry, pegging the tenure of banks’ chief executive officers, CEOs, at a maximum of 10 years of two terms, came as a surprise.

The CBN said the new policy was aimed at strengthening corporate governance in the banking sector; and ensuring that the banks were not woven around individuals. Shortly after his appointment as governor, CBN, Sanusi embarked on a special investigation of the banks that culminated in the sacking of five banks’ chief executives in the first instance and three others in the second round of the largely controversial audit. Sanusi claimed that the top bankers breached corporate governance provisions but financial experts believe that the sacking of the chief executives may have been premeditated.

At the conclusion of that exercise, Sanusi’s words and actions gave rise to fresh speculations that he may not have accomplished his mission in creating a new set of leaders for the banking industry. Perhaps, for their giant strides in the banking industry and unparalleled popularity, Jim Ovia, chief executive officer, Zenith Bank, and Tony Elumelu of United Bank for Africa, UBA, were rumoured to be among those Sanusi’s hammer initially set out to fall upon.

That speculation came close to being a fact when recently the CBN came up with its new regulation on tenure. Aside from the tenure set for the bank chiefs, the apex bank also decreed that “CEOs

who would have served for 10 years by July 31, 2010, shall cease to function in that capacity and shall hand over to their successors”. Ovia and Elumelu fell in this category. And what many industry analysts consider to be a turning point is the fact that barely one week after the policy was made public, UBA and Zenith announced their succession plans. Close observers of recent developments in the banking industry hailed the moves.

According to a senior manager in UBA, which was the first to appoint a CEO designate in the person of Phillip Oduoza, who has been deputy managing director, the process of making him Elumelu’s successor has been on for a while. “We didn’t need CBN’s regulation to do that and it was clear to many of us that Tony would be retiring soon”, said the manager.

The case of Zenith is not different. The appointment of Godwin Emefiele as managing director designate did not come to many as a surprise. For about 10 years, he has been deputy managing director of the bank. One shareholder noted that “with Ovia’s accomplishments in banking, he can only take a bow, having taken the bank to an enviable height to the admiration of investors and depositors in the bank”.

Similarly, in the days to come, the board and management of Skye Bank are expected to unfold a succession plan in compliance with the directive. To a large extent, this will keep discussion on the desirability or otherwise of the directive on tenure, in low tones. The argument raised against the directive in some quarters was that setting tenure for chief executives of banks amounts to usurping the powers of their boards

of directors and shareholders by a government agency.

Whereas the CBN is empowered by the Banks and Other Financial Institutions Act, BOFIA, to regulate the banks, experts argue that fixing tenure of office for the top executives still amounts to an infringement on free enterprise. Conversely, some financial analysts are rooting for the regulation, insisting that it has become inevitable following gross violation of corporate governance code by some bank chiefs.

For instance, Olusegun Owolabi, managing director, Graceville Investments, believes that the issue of tenure for bank chiefs is an interesting one and a welcome development. “If the rule is introduced to prevent bank CEOs from turning the institution to a family property, it is good. But the intention or reasons of the CBN governor is what I disagree with”, Owolabi pointed out.

There is also the contention that if the regulation is meant to deter bank chiefs from mismanaging the resources of the banks, then 10 years is more than enough time to do so. Owolabi, who is a stockbroker, also pointed out that recent allegations of financial improprieties brought against some managing directors of some of the rescued banks is clear enough indication that time is no barrier to financial recklessness.

Perhaps, it was on that basis that one expert argued that “tenure limitation for bank CEOs makes little difference and corporate governance reforms in the banking sector can be more effective by the adoption of other measures. Tenure limit serves practically no viable reform purpose”.

However, what appears to be the consensus among stakeholders of diverse background

is that the financial system requires stricter regulations, monitoring and enforcement as the CBN, over the years, failed in carrying out this function.

 

Ovia and Elumelu: Announce their successors

Oduoza and Emefiele: To take over from Elumelu and Ovia respectively

Owolabi: Hails the decision

Emefiele: Zenith Bank MD designate