Nigeria and Liberia’s Central Banks Thread Separate Paths on Micro-Small Medium Enterprise (MSME) Financing

By: Wonderr K. Freeman

The Perspective
Atlanta, Georgia
November 4, 2013


The Central Bank of Liberia (CBL, herein after) and its Governor, Dr. Mills Jones, have been under pressure lately. Its microfinance and SME policy has come under heavy suspicion by the Liberia Senate and other Liberian technocrats. It’s not farfetched to say that most of the senators don’t quite understand that boring subject called economics – the bankers’ “bread and butter”. But senators surely do understand politics when they see it. And as far as they can see, the CBL’s Credit-to-Consumers-Direct MSME policy looks like politics, feels like politics and smells like politics – hence the senatorial inquest. Dr. Jones has insisted that the CBL Act (1999) gives him the mandate to bypass the financial intermediaries and deal directly with the consumers. Wow? Effective and efficient, isn’t it? I guess you can’t separate economists and their efficiency argument.

Fortunately, Dr. Jones is not the only economist on the block. Respected personalities like Senator Kupee (Lofa), Atty. Prof. Wilson Tarpeh are among a host of respected economists that don’t buy in to the CBL Governor’s argument. They seemingly countered that the CBL is effectively undermining the very system it is established to protect and preserve. I’m no economist, but as a lawyer I did check out the CBL Act (1999) and I certainly could not locate the legal basis for the CBL Credit-to-Consumers-Direct MSME policy. According to the Act (Part II, Section 4 [1-10] & section 5[1-5]), the CBL may “provide credit to bank-financial institution on a discretionary basis” – under subsection II 4(3), functions of the Bank. Also, under subsection (II.5.[1]), Powers of the Bank, the Bank is authorized to “supervise bank financial institutions, non-bank financial institutions, and non-bank financial services dealers and brokers”. So exactly where does the CBL get its mandate to deal directly with the Liberian Business Association (LIBA) and the Liberia Marketing Association (LMA)? Well, old Tom would say: this too is Liberia! 

Okay fine, so Dr. Jones opted to “redefine” monetary policy – to implement monetary policy the Liberian way. But what does the Central Bank of Nigeria (CBN hereinafter) have to do with all this? Well, that’s because the CBN has also been promoting the same MSME sector. But Nigeria’s CBN method to finance MSMEs is the exact opposite of Liberia’s CBL.

A point in case is: On August 15th (at the 7th annual MSMEs conference in Abuja Nigeria), the CBN Governor, Sanusi Sanusi, launched the MSMEs Development Fund to “improve access to sustainable and affordable sources of finance by Microfinance Institutions and Microfinance Banks”. Governor Sanusi went on to add “the CBN will not be lending directly to farmers and business…but to “participating financial institutions”. Oops, this Sanusi man must have been reading a different economics book from the one our CBL Governor (Jones) reads! Or perhaps there are no marketing and business associations in Nigeria!

It becoming clearer and clearer CBL Governor controversial loan schemes is all about “2017”, nothing more, nothing less! Of course, the very brilliant Dr. Jones knows that his CBL Credit-to-Consumers-Direct MSME policy not only looks like politics, feels like politics and smells like politics. It is in fact, brazen unvarnished politics. It has nothing to do with the economic empowerment of Liberian entrepreneurs, but has everything to do with the CBL Governor ambition for 2017. And this is very unfortunate, when a policy level institution that is supposed to be neutral start operating based on personal bias. These are the kind of actions that make the ordinary people on the streets to quip: the book people failed Liberia! There is no other country in the world where you will find the central bank lending directly to “marketing associations” and “business associations”. Those advances are ultra vires and Governor Jones should be made to restitute those funds. It is clear that those “loans” are unrecoverable –  ab initio.

The legal, institutional and operational frameworks of the CBL do not allowed it to pursue delinquent local businesses and marketing associations (LIBA or LMA). Moreover, Part IX section (44) expressly prohibits the kind of “romance” between the CBL on the one hand and the LIBA and the LMA on the other hand. The section specifically provides that: 

The Central Bank shall not:  (1) (a) engage in trade or participate directly or indirectly in the… ownership of any financial, agricultural, commercial, industrial, or other enterprises, except to the extent provided in Paragraph … (c) make unsecured advances, whether by loans or overdrafts...

But Liberia is a country where anything goes! I bet Dr. Jones, a very brilliant man, must have done the maths. He must have sum up the costs and benefits of the advances vis-à-vis the realization of his “2017” ambition, and like a true economist, having concluded that the benefits outweighed the costs, opted to go with his plan to dole out public monies to his would-be “2017” associates. But I admonish the Governor, as we say in Liberia, to make “surely-sure” he wins in 2017. If he fails to win in 2017, those political loans could come back to haunt him. Once it can be established, legally, that those LIBA-LMA loans were ultra vires, then Dr Mills Jones may be held personally liable for all losses sustained therefrom. That would be the beginning of his “Grace to Grass” biography or worse still his “My Days @ South Beach” autobiography. Oh sure, we can expect Dr. Jones to cry “witchhunt”. But by then, we all just wouldn’t have time to listen, since he, like a kid and contrary to advice, insisted on “bursting the palm kernel”.

About the Author: Wonderr K. Freeman is a Liberian accountant and lawyer. He currently resides in Pretoria, South Africa. Atty Freeman is currently pursuing studies (LLM) in International Trade and Investment Law in Africa at the University of Pretoria. Prior to his current pursuit, Atty. Freeman studied law at the Louis Arthur Grimes School of Law (2012), Business Admin/Finance at the Cuttington University Graduate School (2007) and Accounting/Economics at the College of Business and Public Administration, University of Liberia (2001). His most recent article (October 2013) The African Union summit on the International Criminal Court: in whose interest,?
© 2013 by The Perspective
To Submit article for publication, go to the following URL: