Nigeria Banking Update

All the 24 banks in Nigeria are strong and therefore do not need any bailout, the Central Bank of Nigeria (CBN) Governor, Prof. Chukwuma Soludo has said. Soludo gave this assurance at the formal opening ceremony of Access Bank office in the United Kingdom. His assurance stemmed from the on-going global financial meltdown, which is spreading like bush fire and has seen several financial institutions like AIG, Lehman Brothers, Merrill Lynch in need of rescue packages, of which the United States of America and United Kingdom governments have coughed out a $950 billion and 500 billion pounds bailout plans respectively.He noted that the European countries are committing over £2.5 trillion to bail out some of their financial institutions, while the global economy is injecting £4 trillion because of “the mistakes made by some people.”The CBN Governor said that even if the need arises for a bail out of the local banks, the apex bank already has a contingency plan and stands ready to support any bank.

All the 24 banks in Nigeria are strong. Our banks (local banks) are making huge profits, declaring bonuses and dividends. Whatever it will take to support our banks, the CBN stands ready. No bank will go under the watch of the CBN. Our banks remain resilient,” he assured. Soludo said that with the rate at which the Nigerian banks are growing, they would soon overtake other bigger banks in Africa within the next few years. He said contrary to insinuations that the banks are not giving out credits to the private sector, the former’s credit to the latter as at last August was some 70.5 per cent on an annualised basis, which had already overshot the estimate for this year. This he said, means that if banks do not give any more credit to the private sector for the remaining two months, the level of credit they have so far given is enough for the economy.

Few days ago at the just concluded World Bank/International Monetary Fund meetings in Washington DC, Soludo had hinted that 11 countries were consulting Nigeria on how to manage the effects of the on-going global financial crisis in their respective countries. He did not however, unveil the names of the countries that have approached Nigeria for such assistance. Soludo, who spoke on behalf of the Nigerian delegation to the meetings, said the 11 countries approached Nigeria with a view to learning how the country was able to take a pre-emptive step to prevent a spill-over of the global financial crises with the banking consolidation exercise. The regulatory induced recapitalisation programme, which raised the shareholders’ funds of banks in Nigeria from N2billion to N25 billion in 2005, reduced the number of banks from 89 to 24. “What the world is doing today is what we ( Nigeria ) did four years ago – the developed countries are now capitalising banks and rescuing banks just like we (the Federal Government) did for Bank of the North. We ( Nigeria ) took a pre-emptive measure. We did not wait for banks to fail before we started recapitalising them. “Before consolidation, the non-performing loans of banks in Nigeria were about 23 per cent, which was close to the trigger point. If we had not done consolidation, many of the banks in the country would have been bankrupt,” he said.

The only way offshore banking would be effective in the country is for banks to have consolidated accounting and reporting system.The Deputy Governor Central Bank of Nigeria, (CBN), Mr Ernest Ebi made this remark in Lagos at a two -day retreat and that the major challenges of offshore subsidiaries of the nation's banks was the minimum standard for the supervision of international banking groups and their cross border establishments.

He added that,apart from having a consolidated accounting and reporting system;there is need to establish Financial Action Task Force (FATF) to help protect the financial system from criminal use for the laundering of the proceeds of drug related and other serious crimes.He however, pointed out that 10 out of 24 banks operating in the country have about 46 branches outside the shores of the nation's banking system.

He stated that offshore banking offered a lot of legal and financial benefits to the depositors and the banks.Some of the benefits according to him, include favourable regulatory and tax environment; expansion of services; infrastructure support; greater returns on investment; security and privacy of investment among others.

He further pointed out that the financial system strategy (FSS) 2020 was designed to make Nigeria Africa's financial hub, adding that the financial regulators are determined to implement a series of initiatives to improve the regulatory framework and infrastructure.He said that with FSS 2020 new areas of services would be identified and developed, stressing that this would in turn attract more banks to locate in Nigeria as well as help existing ones to expand their operations.

Four Nigerian banks -Zenith International BankPlc, Intercontinental Bank Plc, Fidelity Bank Plc and Stanbic/IBTC Plc and two prominent Nigerian bankers – Mr. Tony Elumelu (Group Managing Director, United Bank for Africa Plc) and Otunba Subomi Balogun (Founding chairman, First City Monument Bank Plc) at the weekend in Washington were honoured with awards by The Banker.The Banker Award 2008 organised by African Business Magazine, which was supported by African Development Bank held at the Willard Intercontinental Hotel in Washington at which the African Business and banking communities were well represented.

The Governor of the Central bank of Nigeria, Prof. Chukwuma Soludo and Oby Ezekwesili were star Nigerian guests at the function.Zenith was singled out of the several banks in Africa as the Best Global Bank in Africa. Last year, the bank won the Most Socially Responsible Bank in the continent. UBA, which won last year 's Emerging Global Bank in Africa, had its Group Managing Director winning the African Banker of the Year. Intercontinental Bank on its part won the African Banker of the year award. Fidelity Bank Plc won the Most Socially Responsible bank of the year award, while Stanbic/IBTC won the Best Issuing House in Africa award.Otunba Balogun won the Life Time Achiever award in recognition of his pioneering effort in merchant banking in Nigeria.An elated Otunba Balogun who would be celebrating his 75th birthday in the next few days told the audience that the awards were his birthday gifts.Fidelity Bank won the Socially Responsible Bank of the year award.

It was not an all Nigerian affairs as other African banks were recognised and conferred with deserving award. Needbank of South Africa won the Most Gender Sensitive award while Development Bank award went to the Development Bank of Southern Africa. Standard Bank of South Africa also won Deal of the Year award, while Investment Bank of the year award went to Renaissance Capital. Micro-finance bank of the year award was won by Banque de la Habitat de Tunisia while the Most Innovative Bank award went to Ecobank Transnational, Togo. The Governor of the Bank of Ghana was honoured and recognised with the award of Africa Central Bank Governor of the year while the Finance Minister of Malawi was honoured with the award of Finance Minister of the Year.Zenith Bank Assistant General Manager, Corporate Communication Mr. Timeyin Ejoor was on hand to receive the award on behalf of his bank.

The local banks in Nigeria are presently unaffected by the negative developments in the financial markets of the United States and Europe. The reason is that the crisis is driven by failed financial products that led to the systemic distress.The President of Chartered Institute of Bankers of Nigeria and Group Chief Executive Officer, Intercontinental Bank Plc, Dr. Erastus Akingbola, said that: “As the crisis appears escalating in the world’s leading financial markets, it is natural for financial services consumers and the general public in other parts of the world to be concerned about the possible spill-over effect or impact on the local market.

He said that while the ongoing global financial crisis is a wake-up call for Nigerian banks, none of the 24 local banks is affected by the crisis. While noting that "Nigerian banks are not yet into the kind of exotic products that led to the problems of those institutions abroad.However, the industry operators must be on alert to avoid the type of investments and consumer lending that would put the system on tailspin.

Nigerian Banking industry is also taking the development in the world's financial markets as a wake-up call for refocusing the international expansion because if such crisis occurs in five years time, many Nigerian banks may be affected just like other global players, as they would have been fully integrated into the global markets and therefore should be wake up for a home-grown strategy and attention to risk management principles as business network and volumes grows.

He also said that "the financial crisis is a wake up call on banks’ top executive management, especially the Chief Executives, to have eyes for details and be fully in-charge of the key levers of the business. There is no room for absentee CEOs, but one who is in constant touch with the realities on ground in the running of their organizations.