Fitch rating agency last week added its voice to the rising trend of accolades for the banking reforms flagged off by Sanusi Lamido Sanusi, the governor of the Central Bank of Nigeria (CBN). The agency noted that there have been considerable improvements in corporate governance and disclosure levels in the nation's banking industry and attributed it to the banking reforms initiated by Sanusi.

The apex bank's reforms has put risk managers in the banking system persistently on their toes since the campaign was flagged off on August 14, 2009, with the ouster of the managing directors and boards of five banks adjudged to have grossly abused lending rules.

The cleansing exercise, which has now been extended to a total of eight banks, has sent shock waves down the spine of bankers. The reforms, like the consolidation exercise of 2005, have been greeted with mixed reactions.

While some, including the highly rated rating agency, Fitch, see it as a necessary tonic to re-jig a banking system which was becoming notorious for fraud and barefaced flouting of lending rules and sliding precipitously towards systemic failure, others criticise it for unnecessarily raising the risk factor on the nation’s banking system through inept management of the bad news emanating from the audit report ordered by the apex bank.

However, even the staunch critics of Sanusi are shocked by the rot in the banking system that the reform has unearthed. From all indications, it is obvious that Nigeria was postponing the evil day by building its economy around a banking system that its managers would mostly lend depositors' money to themselves, while starving the productive arm of the economy of funds. The reform has exposed a banking system with preponderance for scandalous lending, insider dealings, paper profit and insidious financial engineering of its books. The money market was just waiting for the last straw that could have taken down the entire system. A timely intervention has averted that calamity.

Be that as it may, the gains of the reforms can only be enhanced if the CBN takes appropriate steps to ease the artificial credit squeeze that is beginning to choke the economy into avoidable recession. Banks are no longer lending even to well-rated fund users. Lending, the main business of banking, is now done with tears. You cannot trust the borrower to pay back. At the same time, the regulator's axe is dangling behind you. Ironically, the credit squeeze is by no means the product of a liquidity squeeze in the system. In fact, the system is awash with cash. Depositors now practically beg banks to pick up their funds while the banks grudgingly do so at atrociously low rates.

The only transactions thriving in the money market now are on bonds and treasury bills. That probably explains why what had hitherto been considered junk bonds by some states run by grossly inept leadership now enjoy instant over-subscription.

The reason for the credit squeeze in the money market is the morbid fear that the apex bank has instilled into the spines of risk managers. No one wants to offend CBN examiners who have now become something of demi-gods in terms of determining which facility should be provisioned for, even when it has not matured and could not rightly be classified as non-performing.

There are reports that some examiners would just look at a facility and the business for which it is used to fund and declare that, given the current trend in the affected industry, the loan beneficiary cannot service the loan and should therefore be provisioned for.

The long and short of it is that risk managers have been thrown into confusion as the apex bank is yet to draw up new lending rules. The existing ones are over-stretched. While it is true that only the devil would advocate a lax credit policy in the type of economy we run in Nigeria , the regulator has to consider the peculiar environment that the Nigerian banking system operates. Under normal circumstances all loans should be collaterised. But like one risk manager stressed recently, if the rule is followed rigidly, very few lending would be done. For instance, in the past, if a reliable contractor flashes contract documents signed with the federal government, banks would not hesitate to finance the contract without collateral.

All that ended on August 14, 2009, with the ouster of the gang of five in the banking system. Today, no risk manager ventures to fund such projects because the apex bank does not even trust the federal government to pay the contractor on successful completion of the job. The tendency these days is for banks to be ordered to make provision for such facility even before it matures. That is largely responsible for the credit squeeze in the face of excess liquidity.

The regulator has tightened the noose without taking pains to set down its perceived new credit rules in black and white. The result is confusion with the risk managers opting to err on the side of extreme caution just to avoid the regulator's big stick.

The CBN is not alone in the blame for the artificial credit squeeze currently choking the economy. The federal government takes a good chunk of the blame. Even if the regulator of the money market had set down its new lending rules in black and white and was willing to accommodate understandable cases of uncollateralized facility to some fund users with credible rating, no one in the money market would lend to anyone in Nigeria’s beleaguered textile industry. Besides, the entire manufacturing arm of the nation's economy would remain a risk manager's ‘no-go area.’

Nigeria has four petroleum refineries but none is producing petroleum products. In the last two years, the sum of N54.4 billion has been washed down the drain in the name of turnaround maintenance for the four refineries, yet Nigeria imports 100 per cent of its refined petroleum products needs.

The textile industry pays the highest price for the official sabotage that has incapacitated the nation’s refineries. Low pour fuel oil (LPFO or black oil) is an essential fuel for the textile industry. The product is more or less a waste material from refined crude. If local refineries were working, black oil cannot cost more than N20 per litre. The cost of the imported one is four times what could be obtained at home. Besides unfettered smuggling of subsidised textile from Asia into the country, the astronomical cost of black oil is a major cause of the demise of the textile industry and a disincentive to lending to the industry. That, obviously, is neither the problem of the risk managers nor that of the regulator of the money market. Corruption is to blame for the incapacitation of the refineries and the escalating cost of LPFO, while corrupt customs officials are the backbone of the smugglers that have priced Nigerian textiles out of the market.

No bank wants to touch manufacturing firms with a 10-foot pole because the best of their seemingly bankable projects cannot pass the risk manager's feasibility test when the dearth of infrastructure in the land is factored in. That explains why banks would rather invest in junk bonds than finance bankable manufacturing projects that would create jobs.

While the CBN can sort out its amorphous lending rules in a jiffy and get banks back into real financial intermediation, the federal government has a pretty long way to go in making the manufacturing sector a risk manager's attraction. The launch pad for that must be a relentless campaign against corruption.

Lyndon Johnson, a former American president, once told his campaign team: "I would like to have him inside our tent pissing out than have him outside our tent pissing in."  The U.S. president was apparently warning his team against the danger of having an unnamed potential fifth columnist outside his campaign team.

The philosophy in Lyndon Johnson's warning probably informed last week's decision by acting President Goodluck Jonathan to leave Michael Aondoakaa, Nigeria 's former attorney-general, inside his cabinet. Even the hawks in the cabinet, who pressured the embattled former chief law officer of the federation to swallow his dented ego and apologise to the acting president for an earlier act of rudeness that almost cost him his position in the cabinet, based their argument on the above statement by the late former U.S. president.

Aondoakaa is probably the worst thing to happen to the Federal Ministry of Justice in contemporary Nigeria . He would rather defend alleged criminals than prosecute them. His antecedent is a huge headache for Jonathan.  There are fears that if the clumsy arrangement that gave temporary political powers to Jonathan elicits a flurry of litigations, the attorney-general would play the fifth columnist in his defence of the acting president.  Aondoakaa has done it before.  He threw spanners into the works of the British prosecution team in London handling the case of money laundering against a former governor. When the crown court threw out the matter based on the letter from the attorney-general, Aondoakaa rolled out the drums and celebrated the decision as triumph for the rule of law.

For the 78 days that Umaru Musa Yar'Adua's recalcitrance left Nigeria drifting as a headless body, Aondoakaa narrowed his brief to that of intimidating Jonathan and ensuring that the ship of state remained rudderless.  He donned his wig and silk gown and personally defended his cabal in the litigations seeking to compel Nigeria 's incapacitated president to temporarily transfer power to his deputy.

Aondoakaa was defiant to the end. Even after the shameless acceptance of an ill-defined function in the Federal Executive Council (FEC), he derisively referred to Jonathan as vice president.  Throughout his public outing on that fateful day, he never referred to Jonathan as acting president. Moments after he was deployed to an obscure ministry to continue his campaign against the Nigerian people, the former attorney-general said he did not regret any of the unpatriotic actions he took against the Nigerian people.  Ironically, he accepted to serve under a man he laboured to keep out of the presidency just to be able to fight the system from within.

Aondoakaa is a typical Nigerian politician.  He would rather tag along as the first lady's handbag carrier than lose his position in the corridor of power.  Jonathan must be very careful. His cabinet is loaded with fifth columnists who would do anything to keep their positions after their ignominious defeat by the indomitable spirit of the Nigerian people.

One of such reactionary elements in the team is Rilwanu Lukman, the gerontocrat serving as minister of petroleum.  At the heat of the intractable fuel scarcity in the land, Lukman defied Jonathan's directive to stay back home and battle the self-imposed crisis.  He flew to Vienna for end-of-year revelry. Lukman is at the root of the current intractable fuel crisis in the land. The crisis has persisted because Lukman is determined to frustrate Odein Ajumogobia out of the system as minister of state for the downstream sector. His support for Mohammed Barkindo, the  managing director of the Nigerian National Petroleum Corporation (NNPC), has emboldened the GMD to defy, with impunity, Ajumogobia's  instructions on how to end the fuel crisis.   The minister of state was the only one who openly admitted that inadequate supply was at the root of the four-month-old scarcity. NNPC and the Pipelines and Products Marketing Company (PPMC) were locked in a game of endless buck-passing.

The in-fighting between Lukman and Ajumogobia is so relentless that, at the heat of the crisis when Ajumogobia summoned a meeting of stakeholders in the downstream sector in a desperate bid to tackle the crisis, top officials of the Department of Petroleum Resources (DPR) and the PPMC, which is the downstream subsidiary of the NNPC, openly boycotted the meeting. At the end of the day, no stakeholder of substance showed up at the meeting.  Authoritative sources within the NNPC contend that everyone acted on instructions from above.

A week later, a similar meeting at the instance of Lukman was attended by the who’s-who in the downstream sector.  Ajumogobia's appeal to banks to fund the importation of petroleum products has fallen on deaf ears because it lacks Lukman's backing.

After keeping fuel, an essential commodity, out of the retail outlets for four months, Lukman should be shown the way out of the FEC before he even has time to carry out his empty threat against the corrupt men he installed in the NNPC.

Rilwan Babalola, the minister of power, may not belong to the cabal that sought to perpetrate the rudderlessness that Yar'Adua imposed on the country.  However, he too has proved his incompetence at tackling the nation's perennial power problem. Babalola’s response to the eternal darkness on the land has been an odd combination of lies and timid buck-passing. He elatedly declared in November 2009 that the nation's archaic power-generating plants had attained a daily all-time high of 5,000 megawatts of electricity.  The story was still making the rounds in the press when the engineers with the Power Holding Company of Nigeria (PHCN) insisted that their generating capacity only inched up to 3,700 mw.  It turned out that Babalola was deliberately misleading the nation by announcing the installed capacity of the power plants rather than their actual output.

His ministry has missed the self-imposed December 2009 deadline for attaining the magical 6,000mw of electricity and the federal government is currently prevaricating on a new deadline for the elusive target.  The ministry blames inadequate gas supply for the failure.  Unfortunately, the gas that we cannot harness to fire the gas turbines that would generate electricity is being flared away at the Niger Delta with calamitous consequences on the environment.

With stringent political timeline for Jonathan, and an increasingly impatient populace that has waited endlessly in darkness, Babalola is obviously not the man to end the darkness in the land. In fact, with Babalola at the Ministry of Power, there is no light at the end of the tunnel.

Jonathan has inherited a cabinet that could at best be rated second-eleven.  The cabinet is studded with non-performers who were just invited to the FEC to represent the diverse, selfish interests of the ruling party.

That obviously is not the cabinet that could transform a fraudulent banking system into something that could stop lending to its directors and release funds for the financing of the type of mechanised farming that would reduce Nigeria’s shameful dependence on imported food. The current cabinet lacks the political willpower to purge the country of the endemic corruption that has kept it as a key exporter of crude oil and a gross importer of refined petroleum products.  That probably explains its ignominious cling to the indefensible lie that nothing was wrong with the system coasting along as a headless body.