Nigeria Banking Update

President Umaru Musa Yar’Adua has directed relevant government agencies to take immediate steps to work out a palliative package to cushion the impact of the global economic crunch on Nigerians – but this will not include a salary increase.

Meanwhile, the Governor of the Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, has described as “unfortunate misrepresentations” statements attributed to him that he declared Nigeria as “insulated” and “immune” to the global economic crisis.Speaking with State House Correspondents yesterday, the Special Adviser to the President on Media and Publicity, Mr. Olusegun Adeniyi, disclosed that the palliative directive came after the President was properly briefed following Tuesday’s meeting of the Presidential Steering Commit-tee on the Global Economic Meltdown during which a number of palliative measures were proposed on the short, medium and long terms to mitigate the effects of the global economic crisis on the country.

He disclosed that Governor Adams Oshiomhole of Edo State, at the end of the meeting which was chaired by the Finance Minister, Dr. Mansur Muhtar, was mandated to lead some members of the committee to brief the president on the decisions reached. The presidential spokesman further disclosed that Yar’Adua, after the briefing, immediately directed the CBN and Finance Ministry to liaise with other agencies and do more work on some short-term palliative measures being proposed so that they could be implemented soon.

Shedding more light on the incentive package, he said while salary increment was not on the card given the current falling crude oil price in the international market, the proposed incentives would put smiles on the faces of Nigerians soon and raise the purchasing power of the masses. “What is being worked out is a package of incentives that will ginger production, increase the purchasing power of the ordinary man on the street and help generate employment opportunities.

“In the medium- and long-term strategies, aside infrastructural development, the government is looking in the direction of agriculture through commercial farming clusters and value chain not only for food security but for employment generation. In the oil sector, the local content guidelines are being reviewed as a component of the reforms to give more leverage to our people,” he stated.The presidential spokesman said Muhtar and Soludo would likely get back to the president before this weekend and that measures being worked out would be announced as soon as their details were sorted out.

On the 2009 budget expected to be approved by the National Assembly this week, he said the president had already received the report of the committee he set up to work out the modalities for its implementation, pointing out that with the measures being put in place, a lot would be achieved this year. “In the power sector, the Minister, Dr. Lanre Babalola, is likely to be given a special dispensation by the president with regards to power of spending so that he can complete many of the projects and I think the details are currently being worked out by the Director General of Bureau of Public Procurement, Mr. Emeka Ezeh. “While the economic outlook does not look promising given the price of oil, the president remains optimistic that Nigeria can seize the moment to redirect our economy and begin on the road to prosperity,” he said.

Reviewing the current global economic crisis further, Adeniyi said those criticising the return of huge sums of money meant for the execution of the 2008 budget to the treasury could now see the wisdom of spending only when sure of achieving set targets, comparing it with the past when he said unspent allocations were not returned, yet targets were hardly met. All members, including Governors Babatunde Fashola, Oshiomhole, Bukola Saraki and Isa Yuguda of Lagos, Edo, Kwara and Bauchi states respectively as well as private sector members such as Bismack Rewane, Tony Elumelu and Aliko Dangote were all present at the meeting which proposed some palliative measures on the short, medium and long-term basis.

In a press statement signed by Special Assistant, Media and Public Relations to the CBN governor, Mr. Isaac Okoroafor, media commentators and analysts were said to have misrepresented Soludo’s views.The statement read: “Our attention has been drawn to the unfortunate misrepresentations of the Governor of the Central Bank of Nigeria, Professor Chukwuma C. Soludo’s views on the impacts of the global financial crisis on the Nigerian economy, by some media commentators and analysts.

To put the record straight and for the avoidance of doubt, we have carefully reviewed copies of all his presentations as well as the full transcripts of his public pronouncements on the matter, and can confirm that at no time has Professor Soludo said that the Nigerian economy is ‘IMMUNE’ or ‘INSULATED’ from the global crisis.“We have posted on the CBN Website, full transcripts of Prof. Soludo’s TWO presentations to the Senate on October 21, and December 16, 2008; Interactive session with the Media on the Financial Crisis held in Lagos on October 31, 2008; and Powerpoint presentation to the House of Representatives on January 21, 2009. See also ThisDay Newspaper of November 10, 2008 on the full transcript of Prof. Soludo’s analysis of the cause of Nigeria’s capital market crisis (presented at the ThisDay Town Hall meeting on October 3, 2008) which he attributed primarily to the global crisis.

In these presentations, Prof. Soludo has clearly shown how the global crisis affects the Nigerian economy through the impacts on the capital market and by extension the banks through their exposure to the capital market; collapsing oil price and implications for external reserves, fiscal revenue, and exchange rate; the decline in capital inflows and trade/credit lines to the banks; etc. Specifically, during the presentation to the Senate (which was broadcast live), he elaborated on the possible second round effects on the economy.“Indeed, the CBN’s Monetary Policy Committee (MPC) had, in its meeting of September 18, 2008, taken far reaching measures to proactively inject liquidity in the banking system as part of its strategy to minimize the effects of the global credit crunch on our banks.

Prof. Soludo has also often warned of the likely inflationary impacts of the liquidity injection, and also put forward concrete proposals on how Nigeria can effectively weather through the global crisis including the key legislations which the National Assembly needs to pass urgently.“Prof. Soludo has been consistent in assuring Nigerians about the health of our banks and the safety of our foreign reserves.

At the beginning of the crisis, Professor Soludo had been invited to several fora to answer mostly two questions. First, Are Nigerian banks safe or do they require any bailout? Second, Are Nigeria’s foreign reserves safe? To the first question, Professor Soludo has been consistent in stating that because Nigeria moved ahead of the world to recapitalize and consolidate its banking system, Nigerian banks are robust and strong enough to take losses and that they are protected from the full effects of the global financial system. He has consistently assured that the CBN would take all necessary measures to ensure that Nigerian banks do not fail like their counterparts in some countries. To the second question, he has also consistently reassured that our foreign reserves are safe.“Furthermore, Prof. Soludo has consistently pointed out that some of the ‘shock absorbers’ that could enable Nigeria minimize the full weight of the global crisis include: recapitalized and consolidated banks which continue to post profits and provide credit to the economy at unprecedented rate; higher external reserves than at previous times; lower debt-to-GDP ratio which provides room for greater fiscal expansion; agriculture as the dominant sector of the economy and hence the likelihood that Nigeria could avoid experiencing a recession; exchange rate flexibility to ensure external balance; the ‘excess crude savings’ which could provide some cushion; the liberalized economy and stronger private sector as well as the Government’s economic management.

All these lead Prof. Soludo to conclude that Nigeria’s GDP, which is led by the non-oil sector, would continue to grow positively, despite the crisis. However, he is under no illusion about the magnitude of challenges that lie ahead, and how all stakeholders must work harder, together to ensure that Nigeria minimizes the consequences of the crisis and takes full advantage of the opportunities offered by it.“So far, Prof. Soludo has not been proved wrong. The latest estimates from the National Bureau of Statistics (NBS) indicate that Nigeria’s GDP grew by 6.8% in 2008 compared to 6.2% in 2007 despite the crisis, and this was led by the non-oil GDP at 9.5%.

Indeed, there is a consensus global expert opinion that developing countries (especially Africa) would continue to grow positively in spite of the crisis (See ThisDay Newspaper January 30, 2009; and latest version of the IMF’s World Econo-mic Outlook). Furthermore, no Nigerian bank has failed, and our external reserves remain safe.“We have taken pains to clarify these issues because at a time like this (unprecedented in human history), there is absolute need for clarity and effective communication. The Nigerian economy cannot afford any miscommunication regarding the crisis at this time. Both my office and that of Head, Corporate Affairs, Central Bank of Nigeria, remain open to clarify any issues pertaining to the CBN’s pronouncements on these matters.”

Source:This day Newspaper

Some years ago the perception of online banking seemed like a suspicious one and concerns about security and computer glitches were enough to put most people off. But despite these challenges, online banking has become a very useful tool in today’s fast world.
In Nigeria today most of the private and public sector banks are offering this free service to it’s customers in addition to Automated Teller Automated (ATM) and other latest banking services. But you have to be very careful when using this service because online is very vast and nobody can guarantee you 100 per cent security in online based transactions. In the knowledge economy that we live in, almost all transactions are web enabled. But with the continuing success of flagship companies like Access Bank Plc, Oceanic Bank Plc, Zenith Bank Plc etc, more and more of us are choosing to do business over the online. Sophisticated technology means that your information is well protected, and an online banking account offers several advantages over traditional banking anywhere, anytime.

The ease of being able to log on and carry out transactions at any hour of the day or night could be a welcome substitute to visiting the bank on your lunch hour. No queues and no bank holidays mean the customer has even more control over their finances. Plus, your account information is displayed as a clear overview no more riffling through mountains of old bank statements to find the information you are looking for. Because online banks do not have the overheads of running branches, they can pass on the savings to the customer, and offer better rates of interest on your money. Not only do they offer considerably more interest on your current account. Some people believe online banking to be even more secure than traditional methods because you will not have pieces of paper with insightful information lying around, and there is no hazard of your business being overheard by other bank customers. One needs to check if the site is secure whenever conducting transactions online. Never send passwords or account information in emails, and be sure to log out when you are finished your session.

When we talk about safety of online banking we should also look at the downside of it. In the past there have been a few cases of computer glitches revealing customers’ personal information, but these have been relatively minor and as online banking becomes more popular, systems are likely to become more secure than ever before. You do need to make sure your computer’s security system is very good, and that you have privacy for your online banking. Some people may miss the face-to-face contact of their local branch, and most will choose a combination of online banking, phone banking and branch visits. As online banking becomes more established, it’s likely most of us will end up conducting at least a proportion of our transactions online, and you could find switching on to the new banks well worthwhile.

I will also be talking about the pros and cons of the safety of online banking, which is a cost effective way of delivering financial services over the online through the bank's secure site. Online banking, which also refer to as online banking, Home banking or electronic banking, which is basically effective banking, which exists on the online. Even from the point of view of an individual, online banking makes a whole lot of sense to them.

Advantages
First and foremost, there is no need to take the time off and drive to the bank where he/she branch and wait in long, never-ending queues to be attended to. You can do all of your banking transactions online, with convenience greater speed, efficiency, additional services, effective, and accessibility. What I meant by convenience, is banks that are online never close, they are open 24/7 and only a click away. It allows one to transact at ones convenience, from the boundaries of your home or office. Speed in the sense that you process and execute transactions quicker than traditional banks. Also, in the aspect where you can use online banking to be served instantly without having to compete with people before you. While efficiency is very important in online banking you can access all your accounts from one secure site whereby there are electronic records of all your transactions and the chances of errors due to human intervention is minimal.

You no longer need to visit each individual post office. You can do it online with Online banking, without having to fill out and mail checks. Additional services - Free bill payment, rebates on ATM surcharges, credit cards with low rates, free online checking and easy online applications for personal loans and mortgages to name a few. In the aspects of effecting this offer various tools help you to manage your assets more effectively. Also, in accessibility you can access your account from any location and at anytime wherever you are. For most people the biggest stumbling block to online banking is learning to trust it and to be sure whether it is protected. The main concern of the safety of online banking is security, protection of customer's privacy and protection against fraud. However a lot of people are choosing online banking as their number one technique of banking as they appreciate the convenience. The cons aspect of the safety of online banking is that banks website changes whenever they are upgrading their online programmes adding new features in unfamiliar places. In some cases, you may have to re-enter account information. Start up takes time to open, in order to register for your bank’s online programme, you will probably have to provide your ID and sign a form at the bank branch. If you and your spouse wish to view and manage your assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together. Also, in online banking the learning curve is difficult this because the banks website can be difficult to navigate at first. What you need to do is plan to spend some time or read the tutorials in order to become comfortable in your fundamental lobby. The trust thing for many people, the biggest hurdle to online banking is learning to trust it. At this point customer tends to question themselves whether or not did their transactions went through when processing it? Did they pus the transfer button once or twice? The best bet is for the customers to print out the transaction receipt and keep it with your bank records until it shows up on your personal website or your bank statement.

Online banking is becoming increasingly trendy as it is an easy way of providing banking services. There are many advantages and disadvantages of the safety of online banking. One of the best things about technology or the most awful, this depends on our point of view, is the ease with which traditional banking transactions can be conducted. online banking, which emerged on the scene as a new and deceitful banking option has quickly become the most accepted way of banking online here in Nigeria. In fact, it would not be an overstatement to say that most Americans today use online banking instead of traditional banking. Even some of the bigger banks, do not offer traditional banking services anymore, or require charges to those who continue to bank the traditional way.

The Flip Side
We should always have this at the back of our mind that online banking has its own flip side too. There will be security concerns about online banking. Of course most banks have ensured that their online banking services are offered on secure, encrypted sites. But what about in the aspect where scammers always ensure that they come up with more and more ground-breaking ways in which they can try to break into your online banking. Hacker is just one such challenge, where criminal try to steal your online banking username and password, and then log in to your account to make withdrawals. But then again, the error in this case too is that of the trusting human nature, rather than the Online Banking technology. In any case, all banks that offer online banking provide guidelines on online banking safety and common scams that you should steer clear of. Many of the larger banks now have online banking. For instance, Oceanic Bank has it online banking, GTB online banking, and Bank PHB online banking to name a few. Every bank now has some variety of website where you can do your banking transactions. When you think about the positive aspects against the negative aspects of the safety online banking, you will find out that it saves time, money and removes most of the pain points which is related to traditional or conventional banking. And nowadays, Online banking is no longer a luxury. It is a necessary way to transact and do your transactions.

Clearly, the choice of whether or not to bank online depends on many variables. Even if a person can see the benefits, they may be unwilling if they do not trust or have much experience with the online.

On the other hand, people may only sign up for limited services like account viewing. This will save them from safety concerns but will still give them daily access to account activity. If you decide that online banking is right for you, be sure to review the offers of several banks. Each has different fees and benefits that can make a big difference in how much online banking costs you. By comparing deals and educating yourself, you will find an online banking service that suits your needs.

By Bisi Ikuomola,11.12.2008,Thisdayonline

Following cases of unprofessional practices by some Nigerian bankers,the Chattered Institute of Bankers of Nigeria (CIBN),has started compiling list of all bankers in Nigeria to punish erring ones.

The President of the Institute Dr. Erastus Akingbola, said this in Lagos, during a cocktail party organized for media executives.“We want to self regulate and discipline ourselves.We are compiling the names of all bankers in Nigeria so that we can discipline erring bankers.During my tenure,we will continue with the reforms and my ambition is to return the banking profession to the pride of place because we will be strict on integrity”,he said

He said where a bank errs,such a bank should write an apology to the customer and where money is involved a refund should be made with interest.He also revealed that CIBN intend to start a live TV programme tagged ‘the banker and you’ so that Nigerians would have opportunity of voicing their views on their banking experiences.He said it will also be a platform where the CEOs will also react to queries directly from the banking public.

On arbitrary charges by some banks he said,while the CIBN cannot dictate to each bank how it should operate,it is a competitive market place so the customers have a choice of changing banks if they feel their banks is unfair to them.

On the capital market,he reiterated that the market is at its ebb and would be rising anytime soon.He also assured that, Nigerian banks are healthy enough because banks’ investment in the capital market is not more than 10 percent of their total investible funds, about N60 billion of all the banks’ capitalization.

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.

FIRST Bank of Nigeria Plc yesterday, extended its services to France as its United Kingdom subsidiary; FBN Bank (UK) Limited opened a branch in Paris, France.

The inauguration of the Paris branch was witnessed by officials from the apex bank regulator in France,Ban du France, Nigerian Ambassador to France,ambassadors of other Francophone West African countries and directors of First Bank of Nigeria Plc.In his speech,the Group Chairman of First Bank,Alhaji Umaru Abdul Mutallab,said the launch of the Paris Branch was another unique opportunity for the Bank to provide excellent banking and financial services for the global community, especially the West African_French business community.

He said "As the relationship between the governments and citizens of Nigeria and France become increasingly strengthened, it is only logical that well-meaning institutions, like First Bank Group, be in the vanguard of providing the vital machinery for fostering the growing relationship," Mutallab said. He explained that the Bank's foray into France is indeed very strategic, in view of its relationship with other Francophone countries in the West African sub-region.

"It is for this reason that our Bank, the first Nigerian financial institution to take such initiative, is grateful for the support of the French Government, especially the French Monetary Authorities for the opportunity to establish in Paris," he said.

Mutallab added that First Bank's strategy of internationalization started in 1982 when the Bank established its London Branch which enabled it to gain a foothold in one of the world's leading financial centres.

"In keeping with our determination to play a greater role in international trade flows from Nigeria to the rest of the world and vice versa, our London branch transited into FBN Bank (UK) Limited, Nigeria's first full fledge subsidiary in the UK, which commenced operations effectively November 01, 2002 and as you can witness, has been performing creditably well," he said.

The Group Managing Director/Chief Executive, First Bank Nigeria Plc, Mr. Jacobs Moyo Ajekigbe said the Paris Branch will be a window for African corporate organizations in France. He said the attraction of the new branch is the ability to bank the Francophone countries in West Africa.

"The message is that we promise our customers the best of services anywhere in the world, for our shareholders, we promise the best of returns in form of good dividends on their investments and to the government, we promise to remain good corporate citizens," Ajekigbe said.

The Chairman of FBN Bank (UK), Mr. Oba Otudeko, said that the branch would serve as a platform for international trade between African countries and France. "Our intention is to provide a platform that will link Africa trade with Paris and other parts of Europe. We are going to do very well because we have set out very well.

Our promise is to give excellent services as we have done in UK," he said.

Giving more insight into the what to expect from the Paris branch, the Managing Director, FBN Bank UK, Mr. Peter Hinson, said the Bank has been the leading Nigerian bank in the UK and would extend the same quality of services to France. "We have grown to be a leading Nigerian bank in the United Kingdom. We needed to expand and we worked closely with the Bank Du France to open in Paris. We will serve the financial needs of Sub_Sahara Africa," Hinson said.

The Executive Director, Business Development, FBN Bank (UK) Limited, Mrs. Christi Fashogbon, explained that the Bank has operated as a full fledge subsidiary in the United Kingdom for over five years and decided to solidify its relationship with both Anglophone and Francophone economies, hence the establishment of the new branch. She said the Bank has good knowledge of both UK and African which would be translated into good services to customers.

A highly elated Nigerian Ambassador to France, Mr. Gordon Bristol, said he was delighted to have one of the leading banks, First Bank to open an office in Paris. "We are going to do everything within our powers to ensure that FBN Paris succeed here.

Mobile Banking refers to provision of banking and financial services with the help of mobile telecommunication devices.The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information.

M-Banking in Nigeria or in some instances SMS Banking etc. is term used for performing balance checks, account transactions, payments and others transaction services via a mobile devices. Some mobile Banking applications in Nigeria use preprogrammed configurations settings.Mobile Banking in Nigeria started from the transaction based activities whereby Bank customers are Notified via sms when transactions are conducted on their account or via Atm.This is a one way event and only for informational purposes only.GT Bank was on of the earliest Banks to provision this service to customers.That was the early days on Mobile Banking in Nigeria.

Nigerian Banks are now deploying full fledge banking via the Mobile Phones with array of services which were only possible in the Banking Halls before. Zenith Bank, UBA , GTBank, Diamond and Intercontinental Banks are the fore runners of this innovation.Despite the watch and see attitude that some very leading Banks are taking about Mobile Banking in Nigeria, mobile remains the only and most available feasible means to provide mass market alternative to Branch Banking in Nigeria. The internet has only a penetration rate of 6 percent in a population of 140 million but mobile technology is close to 50 percent penetration with prospects for growth.Mobile devices are the most promising way to reach the masses and to create a tie-in among current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow.

Deployment of 3G in coming months will also enable Banks to offer more robust Mobile Banking technologies.Key challenges in developing a sophisticated mobile banking application are Interoperability.The single reason for is the manner in which mobile phone applications evolved over time, device manufacturers focused on particular standard and and this led to a proliferation of applications .The Financial Regulator CBN should look in this issue at this early stage so that Mobile Banking ecosystem can be robust with National standard that cuts across all Banks. Bank specific Mobile Banking platforms is akin to having each bank deploying its own ATM Technology which other bank customers cannot access.

Interoperability can also help to evolve a standard that will enable low end phones which are currently excluded, to do Mobile Banking. Some countries like India and South Africa are already using some standards like R-World and USSD.Application distribution for Mobile Banking is another area where some Banks are facing Challenges. While some forward looking Banks are overhauling their gateways and reducing their reliance on Mobile Operators settings to enable customer’s phones, Some Banks are actually asking that Customers come with regular Operator settings which in many instances might not be correct configurations settings..Operator settings are not really meant for critical operations since most of the settings are used for entertainment based activities. Nigerian Banks that are looking at competing at this sector must look beyond operators settings which might not be correct, delayed in arrival,may not come at all and not regularly updated. Some Mobile operators do update like every three months while some do not at all.

For wap and Gprs based Mobile Banking applications, mobile network coverage will also be an issue.As part of their marketing strategies, one will expect that by now, customers do not need to visit local Branches to download Banking applications. Over-the-Air (OTA) Settings should be readily available online and some innovations can even come to play by Banks deploying Bluetooth application machines in Shopping malls and some strategic places where customers can visit and download Mobile Banking applications for free or for a fee..This will increase the addressable market of the Banks offering Mobile Banking exponentially in Nigeria.

by Emmanuel Okoegwaleemmanuel

THE Central Bank of Nigeria (CBN) restated its stance on preventing foreign banks from acquiring Nigeria's largest banks or allowing them to own more than 10 per cent equity in such choice banks.It however said,foreign banks with investment interests in Nigeria were free to apply for a licence to establish banks provided they were prepared to operate within the stipulated banking regulations.

The apex bank said the clarification had become necessary with recent commentaries in the media in respect of insinuations recently by the Mayor of London, Mr. Alderman Lewis, during his visit to Nigeria last month that the Nigerian government was not opening up its banks for foreign competition. But the CBN Head of Corporate Affairs, Mr. Festus Odoko, who issued a statement yesterday, faulted the London Mayor's submission.

According to the CBN, the policy introduced last year by the apex bank was in part to protect the Nigerian economy from being hijacked by foreigners and secondly to encourage the establishment of foreign banks in the country.

The position of the CBN has been that foreign banks and/or investors are allowed to establish banking business in Nigeria, provided they meet the current minimum capital requirement of N25 billion and other applicable regulatory requirements for banking licences as prescribed by the CBN.Such foreign individuals or institutional investors could also invest in existing Nigerian banks. There is, however, a condition that no single foreign individual/institutional investor should acquire more than the share of the single largest Nigerian individual/institutional investor in any bank, provided the aggregate shareholding of the foreign investors do not exceed 10 per cent of the total capital of the bank.

Also, foreign banks could acquire or merge with a local bank existing in Nigeria.Such a foreign bank, however, according to the CBN policy, must have operated in Nigeria for at least five years and established branches in at least two-thirds of states of Nigeria (excluding the state capital), provided the foreign bank/investors' shareholding arising from the merger/acquisition should not exceed 40 per cent of the total capital of the resultant entity.

The policy also states that the existing shareholding structure of Nigerian banks in which there are foreign interests in excess of 10 per cent might subsist but such foreign interest should not exceed the current level. The CBN concluded that she is acting in the interest of all stakeholders, particularly in view of the critical link between ownership and control of commercial banks and economic development.

Recent experience shows that foreign banks have been reluctant to expand branches across the country and operate only in few metropolitan cities. Again, the structure of their loan portfolio indicates concentration in favour of multinationals.

THE Central Bank of Nigeria (CBN) identified the absence of an effective national identification system as one of the factors working against the desire of banks to lend money to
Nigerians and the problem must be urgently addressed according to Prof. Soludo.He made this known during his presentation at a national seminar on 'Banks and National Economy: Progress, Challenges and the Road Ahead' put together by the apex bank,he noted that the banking and telecoms sectors were the fastest growing in the economy. He maintained that the sectors were driving the emergence of a new economy and growth.

He mentioned that finance alone will not see Nigeria to Financial Systems Strategy (FSS) 2020 - a vision to make Nigeria one of the 20 biggest economies by 2020 - as other ingredients of economic growth which will depend on an accelerated reform in other sectors.The CBN boss also stressed the need to fast track other reforms, particularly infrastructure, security, judiciary, education, among others.He said that credit to the private sector grew by 51.2 per cent in 2007, while that of SMEs grew by 9.8 per cent in 2007.

The paper looked at the progress so far with respect to the contributions of banks to the Nigerian economy, post-consolidation, the challenges faced by them and the prospects in the medium to long-term. Drawing attention to why lending rates are still high in the country, he pointed out that the cost of funds for banks was still high.He said in a risky business environment, banks price risks differently for different borrowers. There is also uncertainty about future inflationary trends. Poor infrastructure means that banks' operating costs are very high. The high overhead costs of banks also affect emoluments while financing of budget deficits crowds out the private sector.

He wants the government to continue to maintain macro stability through low price inflation, calling on the National Assembly to amend the Banks and Other Financial Institutions Act before it. To fast-track markets/institutions for efficient credit system, Soludo called attention to the need to fast-track legal and institutional reforms. Speaking on the need to mainstream a commercial court system throughout Nigeria, the CBN governor said this would help to dispose off commercial cases fast and efficiently.

And to reduce cost of funds for banks, Soludo identified the need to address the problems in critical infrastructure like power, transport, ports and water. Others, according to him, are the need to implement mortgage and consumer credit, deepened and mainstream microfinance system, continued strengthening of regulatory and supervisory capacity and capacity building for bank staff

The Central Bank of Nigeria (CBN) announced that it would publish the names of debtors of those community banks that have closed shop or failed to meet the minimum capital requirement for conversion to microfinance bank. Director, Other Finance Department of the CBN, Mr. Sam Oni made this known in a circular titled ‘Notice to Debtors of Community Banks’, he said the apex bank has began compiling the list of debtors of these community banks, which would be purblished in all widely-read newspapers. He added that those whose name appears on the list would be blacklisted and not be allowed to hold directorship or management positions in any financial institution in Nigeria.

The list would be forwarded to the Economic and Financial Crimes Commission (EFCC) for prosecution. All debtors whose names appear on the list shall be blacklisted and shall be unable to hold directorship or management positions in any financial institution in Nigeria.Similarly, a comprehensive list of all the debtors shall be circulated to the twenty four (24) commercial banks and other financial institutions, as this may adversely affect their ability to access any other financial services. He noted that “this would serve as final notice to the debtors to pay up all outstanding indebtedness, with the accrued interest, on or before 15th February, 2008, failing which appropriate legal and other regulatory actions shall be taken against them”.

It would be recalled that the CBN, had on December 15, 2005, launched the Microfinance Policy, Regulatory and Supervisory Framework into the nation’s financial system.Under the regulatory guidelines, Unit Microfinance Banks were authorised to have a minimum of N20 million capital base, while the State Microfinance Banks were required to beef up their capital base to the tune of N1 billion.By the end of December 2007, 600 out of 761 community banks successfully converted to microfinance banks, while the licenses of the remaining 161 community banks that were unable to scale through the recapitalization exercises were withdrawn by the CBN. In addition, 117 comprising 40 final licences and 67 approval-in-principles (A-I-Ps) were granted new investors respectively

The Central Bank of Nigeria (CBN) has begun the process of outsourcing the currency distribution and processing function to the private sector to enable it focus more on its core mandate.By implication, the CBN will be disengaging from the handling of currency and their movement from one point to another across the country.Indications to this effect came at a recent meeting of the Bankers’ Committee when the committee’s chairman, Prof. Chukwuma Soludo, dropped the hint.He told members of the committee to prepare their minds towards the new dispensation as the apex bank planned to devote time to its core mandate of formulating and implementing monetary policies for the economy.

Currency is issued to deposit money banks through the branches of the CBN, and old notes retrieved through the same channel. Currency deposited in the CBN by the banks are processed and sorted to fit and unfit notes in line with the clean note policy. The clean notes are re-issued while the dirty notes are destroyed.The CBN had similarly ceded its deposit taking function, in addition to others such as its medical, educational, among others.On July 1st, 1959 the Central Bank of Nigeria issued the Nigerian currency notes and coins and the West African Currency Board notes and coins were withdrawn.It was not until 1st July, 1962 however, that legal tender status was withdrawn from West African Currency Board. In 1963, Nigeria became a Republic, and this eventually led to the changing of the bank notes in 1965 to reflect the country's new status. The notes were again changed in 1968 following the misuse of the country's currency notes, during the civil war.

In 1973, Nigeria adopted a truly national currency in decimal form instead of the pounds, to replace the imperial system which she inherited from the British colonial administration. The pounds and shillings were changed to Naira (N) and kobo (k), and four denominations of notes were issued as follows: 50 kobo; N1; N5 and N10. In response to rapid economic growth made possible by the oil boom, N20, and N50 note denominations were added in 1977 and 1991 respectively. Considering cost effectiveness and expansion of economic activities, higher denomination notes were issued. These are 100 Naira (1999), 200 Naira note (2000). 500 Naira was released in April, 2001 while the 1000 Naira note was released in October 2005.On February 28th 2007, as part of the economic reforms, N50, N20, N10 and N5 banknotes and N1 and 50K coins, were reissued in new designs. While a new denomination N2 coin was introduced.The new naira notes were issued to make them more secure, make them last longer in circulation and look cleaner, reduce the cost of replacing dirty notes, and to ensure that the new currency notes are now smaller in size and would easily fit into wallets.

The Central Bank of Nigeria (CBN) has attributed the appreciation of the naira since the second half of year 2007 to the sustained foreign exchange inflows engendered by the favorable macroeconomic environment. It also attributed strengthening of the naria to the investment climate as well as high rates of return in domestic financial markets.

The MPC, after expressing satisfaction with the performance of the economy, also decided to leave the Monetary Policy Rate (MPR) unchanged at 9.5 per cent, and to continue the use of Open Market Operations (OMO) for liquidity management and appropriate exchange rate policies. The apex bank’s disclosure was contained in communiqué 54 of the Monetary Policy Committee (MPC) issued after its meeting held in Abuja yesterday. The communiqué was signed by the CBN Governor, Prof. Chukwuma Soludo.The MPC restated its commitment to ensuring continued monetary and price stability through the pursuit of appropriate monetary and exchange rate policies.The MPC noted the steady appreciation in the Naira exchange rate, particularly in the second half of 2007. In January, 2008 the Naira exchange rate appreciated further and the weekly Dutch Auction System (WDAS) rate stood at N116.81/US$1 as at end-January.The Committee recognised that inflows could continue as they were in December and January.

However, it felt that the exchange rate would settle down at a reasonable level once the uncertainties in the global economy are reduced as a result of the monetary and fiscal actions being taken by industrialized economies.On inflation, the MPC noted with satisfaction the improvement in inflation outcomes in 2007 compared with the previous year. It said from 8.5 per cent at end-December 2006, the year- on-year (headline) inflation closed at 6.6 per cent in 2007, approximately 2 percentage points lower. “The decline in inflation in 2007 was attributable to the restrictive stance of monetary policy, complemented by considerable fiscal restraint and favorable climatic conditions for food production in some parts of the country”, the MPC said.

The communiqué, however, said inflation in December 2007 was in contrast to inflation rates in the months of December 2005 and December 2006. The committee, therefore, expressed its concern that given the rise in food prices in December 2007 and the overall global and domestic outlook, it will be necessary to ensure that inflation in 2008 is within single digit.The Committee noted that credit to the private sector maintained an upward trend in the last quarter of 2007. It said credit to the private sector grew by 96 per cent which is unprecedented in Nigeria’s history.

The integrity of the naira appears to be a major issue of concern to the apex bank, and this is understandable. For quite some time now, the CBN has been promoting campaigns aimed at enlightening the public on how to handle the naira. This is against the backdrop of the observed rough handling of the currency by most Nigerians. The bank is particularly worried about the way members of the public spray and march upon the naira at social functions. In the bank's view, this amounts to abuse and derogation of the currency.Ironically,despite the campaign, the culture of abuse seems to persist. The CBN is serious in its desire to stop the practice and there is now a legal framework to enforce the campaign and punish offenders.

It is now an offence punishable by a jail term of not less than five years for offenders and the establishment of commercial courts to enhance quick adjudication and dispensation of justice in such matters.Our low level of development and the harsh economic environment is to blame for the way and manner the naira exchanges hands. The menace of thieves and pickpockets compounds the problem. It is inconceivable and unnecessary for the CBN to think that it could change an age-long social behaviour using coercive law. The spraying of naira notes at parties has become an aspect of the people's self-expression in many parts of the country. Most Nigerians grew up with it. A new piece of law is probably not the solution to this.

Five years ago, the Dollar and the Euro were about the same in value. However, the picture is not the same anymore: One American Dollar is now worth about 0.71 Euros, or 0.49 British Pound. The Dollar has weakened by about 35 per cent against the Euro and by 25 per cent against the Japanese Yen. Thanks to the economic downturn in the U.S. made worse by the subprime crisis. Even against the currencies of other emerging economic powers like China and Japan, the dollar has been ebbing.

This may not be a pleasant time for Americans, with higher prices on almost everything imported from abroad. As the dollar loses value, it buys less and less from manufacturers in other countries. This effect is more pronounced when it comes to European imports: For instance, a pair of eyeglass frames from an European designer that cost about 150 euros — or $192 — in 2006 would now go for $211 because of the soft dollar.

The continued weakening of the dollar has begun to raise fears of the dollar losing its reserve currency status to another currency, the Euro. This fear may be well founded given the disposition of some countries to the proposition. To such proponents of adopting another currency in place of the dollar as the reserve currency, temporary protections like artificially low prices and contracts in American currency can't go on forever if the dollar keeps weakening.The subprime mortgage financial crisis of 2007 was a sharp rise in home foreclosures, which started in the United States during the fall of 2006 and became a global financial crisis within a year. The crisis began with the bursting of the housing bubble in the U.S. and high default rates on "subprime", and other adjustable rates. The mortgage lenders that retained credit risk (the risk of payment default) were the first to be affected, as borrowers became unable or unwilling to make payments. Major banks and other financial institutions have reported losses of approximately U.S. $130 billion as of January 25, 2008. Due to a form of financial engineering called securitisation, many mortgage lenders had passed the rights to the mortgage payments and related credit/default risk to third-party investors via mortgage-backed securities (MBS).
Individual and institutional investors holding MBS faced significant losses, as the value of the underlying mortgage assets and payment streams declined and became difficult to predict.The number of people getting kicked out of their homes for missing loan payments is rising.

Dollars’ Share of Global Reserves
The dollar's share of global foreign-exchange reserves fell to a record low of 63.8 percent in the third quarter as demand for U.S. assets waned after the collapse of the U.S. housing market, according to International Monetary Fund data. It accounted for 65 Per cent three months earlier. The euro's share rose to 26.4 per cent from 25.5 per cent. IMF quarterly figures go back to 1999, the year the euro was introduced. The U.S. currency has dropped 11 per cent against the euro and 13 per cent against the yen in the past year. It has declined in five of the past six years. Soros made $1 billion in 1992 betting against the pound, forcing the British government to abandon a peg to a basket of European currencies. He was also the biggest financial backer of the failed effort to deny President George W. Bush a second term in office. The euro has gained 55 per cent against the dollar since Bush entered theWhite House on Jan. 21, 2001.

From the 1980s we had the belief in the magic of the marketplace, and the authorities were so successful that they started to believe in this market fundamentalism,'' he said. “That's gone too far.'' In times of crisis, ``they suspended the rules and they bailed out the banks. That created an asymmetric incentive system, a moral hazard, that allowed the expansion of credit.'' Rising defaults on U.S. subprime mortgages sparked a rout in the credit markets last August, leading banks to cut money for consumer lending, hurting the U.S. economy's main engine. The Fed yesterday lowered its benchmark rate in an emergency move for the first time since 2001 after stock markets tumbled from Hong Kong to London amid signs the world's largest economy is sliding into recession. Soros has used past appearances in Davos to predict the dollar's decline.

In January 2004, he said the U.S. currency would drop for a third year. It then fell 7 percent, according to a Federal Reserve trade-weighted index of the currency.Comments by ExpertsAn American commentator, Michelle Tsai opines that global companies will see their U.S. businesses shrink — not because they are selling fewer products, but because $1 million in sales is worth less than it used to be. Businesses will need to recoup their losses at some point by raising prices.
According to him, if oil companies had to raise prices for that reason, the effects would be felt throughout the U.S. economy. Eventually, if too many things start costing just a bit more, he argues that the U.S. could have inflation hit her economy.Billionaire American investor George Soros said the fallout from the U.S. subprime crisis will bring about the end of the dollar's status as the world's reserve currency. “The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency,'' Soros said in a debate at the World Economic Forum in Davos, Switzerland.

Now the rest of the world is increasingly unwilling to accumulate dollars.''Stephen Roach, chairman of Morgan Stanley in Asia, said in Davos that while he remains a “dollar bear,'' the U.S. currency's slide may be reversed in the first half of this year as other economies in Asia and Europe are hurt by the U.S. slowdown. A Nigerian economist, Mr. Bismark Rewane, said the possibility of the U.S. Dollar losing its reserve currency status is remote. According to him, since oil is priced in Dollar, it will continue to enjoy the reserve currency status.Rewane who is the Chief Executive Officer of Economic Derivatives, said adopting another currency will not solve any problem since there is nothing fundamentally wrong with the reserves accumulated by nations.Specifically, he said the call by Venezuela that the Dollar should be rejected as the reserve currency should be understood within the context of the disagreement between the U.S. and the Venezuelan authorities.

The Central Bank of Nigeria (CBN) has set fresh hurdles for foreign banks desirous of merging with or acquiring any of the existing local banks in the country.Under the new regulation being considered, any foreign bank coming into the country to take a banking licence and wants to merge with or acquire any of the local banks must have operated in Nigeria for a minimum of five years and if a group of foreign institutions decides to invest in any of the local banks, the aggregate investment must not be more than 10 per cent of the latter’s total capital.
In a situation where a single foreign investor invests in a local bank, such investment may not exceed the holding of the largest Nigerian shareholder.Also, to qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a spread of two-thirds of the states of the federation. This, in a nutshell, means that the foreign bank must have branches in at least 24 out of the 36 states of the federation.

With this development, the two foreign banks in the country, Standard Chartered Bank and Nigeria International Bank – excluding Stanbic Bank which has since coalesced with IBTC Chartered Bank – are not qualified to acquire directly or through their parent company any bank in Nigeria.While Standard Chartered Bank and Nigeria International Bank, which opened shop in Nigeria in 1999 and 1983, have scaled the first hurdle (having operated in Nigeria for a minimum of five years), they, however, do not have the requisite number of branches. Standard Chartered Bank has just 12 branches, while Nigeria International Bank has 13.

The banking watchdog would soon launch a new framework on foreign ownership of Nigerian banks.Soludo who spoke at the “Nigeria Meets the World Summit” organised by THISDAY, had hinted that owing to growing foreign interest in the Nigerian banking sector, the apex bank would soon roll out a framework that would restrict foreign ownership of banks in the country.“We are coming up with something pretty soon. We will work out a framework on the issue of the structure for our banks whereby we shall be a bit reluctant towards foreigners taking over our top ten local banks which constitute about 71 per cent of the banking sector,”

He said foreign investors preferring to invest in existing banks with the structures and branches in place could only do so in smaller banks that do not make up the top ten.Justifying the need to roll out a new framework at the 11th edition of a seminar organised for finance correspondents and business editors in Enugu last November, Soludo noted that foreign ownership of local banks had drawn back Nigeria’s economic development.He explained that the decision of the CBN was premised on what it had observed in terms of the relationship between ownership and control of the nation’s financial system and economic development.

He clarified the issue by saying that we had repeatedly said we are limiting foreign ownership in banks. We are currently working on the policy and before the end of the year, we will come up with a clear policy. It does not have much to do with corporate governance but has to do with the empirical evidence about the relationship between ownership and control of the financial system and economic development of a nation especially at the level of our own economic development,” he had said.

He explained then that the Central Bank was not preventing foreign banks from investing in the economy, stressing that what the regulatory authorities would not allow was the acquisition of any local bank.“Foreign banks are allowed to come into Nigeria and set up shops. If they meet the N25 billion requirement, we will give them a fresh licence but if they want to take over some of the existing ones, we will be reluctant to do so,” he had said.

Inter-bank offer rates (NIBOR) were on the increase last week inspite of the statutory allocation for the month of December by the Federal Allocation Account Committee (FAAC).
But the FSDH Weekly attributed the tightness in the market to huge withdrawals amounting to N187.40 billion from the system.Analysts say they anticipate that the tightness in the market during the week may ease as maturing bills worth about N34 billion and the effect of the December allocation from the Federal Allocation Account Committee (FAAC) are expected to be felt more in the system.Consequently, we expect inter-bank rates to drop marginally during the week," said FSDH.

The 7-day NIBOR increased throughout the week, in spite of the December allocation, to close at 10.33 percent, from the previous week's figure of 8.92 percent.The 90-day NIBOR on the other hand, dipped marginally towards the end of the week, closing the week at 13.10 percent, from the previous week's figure of 13.13 percent.At the 91-day Treasury bill auction, a total of N5 billion worth of bill was offered, N4.18 billion was subscribed, and total allotment was N4.18 billion at a discount rate of 8.5 percent, a 9basis point increase from the previous week's rate of 7.6 percent. A total of N5billion worth of matured bills was repaid into the system; this resulted in a total inflow of N815million into the system.At the 182-day Treasury bill auction, the CBN offered a total of N100 billion worth of bills, while they sold N100 billion. A total of N4.87 billion worth of bills was initially allotted, while N95.34billion was underwritten by Money Market Dealers (MMDs). The discount rate applied was 8.75 percent up by five basis point from the previous week's figure of 8.25 percent. A total of N10 billion worth of matured bills was repaid into the system. This led to a total outflow of N90 billion from the system.

At the secondary segment of the government securities market, bills worth N115billion with tenor days ranging from 48-318days were offered. Out of which a total of N16.5 billion worth of bills was initially allotted while a total of N98.5 billion was underwritten by MMDs. A total of N17 billion matured bills was repaid, leading to a total outflow of N98 billion from this segment of the market.The bills were issued at discount rates ranging from 8.50 percent to 9.93 percent from the previous week's range of 7.50 percent to 8.50 percent.

There was no action at the foreign exchange auctions last week, probably due to the public holiday declared during the week by the Federal government. The marginal rate in the sale of the foreign exchange was N116.80/$1 same as the previous week. The value of the naira remained stable in the parallel and official markets while it depreciated marginally in the inter-bank market. In the parallel and official markets, the value of the naira stood at N120/$1 and N116.80/$1 same as the previous week's figures respectively. In the inter-bank market, the value of naira depreciated very marginally by 1kobo to close the week at N118.09/$1 from the previous week's figure of N118.08/$1.

At the foreign exchange market, it is expected that the value of naira will continue its steady appreciation as a result of the county's favourable balance of payment position, and the lower demand pressure on foreign exchange as a result of the yuletide season.

The community banks according to the CBN, were discovered to have closed shop and consequently, are to be liquidated. It would be recalled that the federal government launched the micro finance and regulatory policy for Nigeria on December 15, 2005.

The new policy created two categories of micro finance banks - MFBs licenced to operate as unit banks and MFBs licenced to operate within the four walls in a state. Community banks were therefore given 24 months to recapitalise and convert to MFBs in line with the conversion requirements of the CBN. As the deadline for conversion lapsed, and the affected CBs failed to forward the necessary statutory returns to the apex bank as earlier directed, the CBN had issued what it called "last warning "To the chairmen and directors of the failed CBs to within 21 working days from the date the first request was made, make the returns to the appropriate quarter in CBN.The returns information, which should be provided by the CBs as at the last date of their operation, should cover:
• statement of the assets and liabilities;
• comprehensive and verifiable list of depositors showing their name, addresses and the amounts in their favour;
• list of all debtors including their addresses and the amount owed to the CBs; and
• list of its assets (movable and fixed).
Out of the 750 CBs, which operated in the country hitherto now, only 407 have successfully transformed and registered by the CBN as MFBs.

Analysis on the proportion of failure by state wise in the country reveals that Ebonyi and Zamfara states recorded the least number of one each, followed by Niger, Kaduna and sokoto states having two failures each. The highest number of 14 failures each occurred in Edo and Delta states. This failure figures do not however represent equal levels in each state of the federation as there are clearly some states with less than 10 and others with more than 120 community banks prior to CBN conversion policy deadline.

Meanwhile, this last request by CBN serves as the last warning to all chairmen and directors of the affected CBs as failure to respond appropriately within the specified period shall make them liable for persecution in the court of law.

Often the critical roles which banks play in fostering economic development does not seem to be appreciated and this would explain why you do not see too many reviews of the developments in the banking sector as part of the usual end of year reviews. But yet banking should be the lubricant which oils the wheel of economic progress. If there are any complaints, if there are any surprises; it would be the fact that banks appear to thrive while the rest of the economy is in a tail spin. Witness the huge profits which banks have been declaring defying happenings else where in the economy. It would also appear that developments with the regular banks have captured the centre stage while momentous development in the other segments of the financial sector in being treated with scant regard. No one seems to be talking about the important developments with Community Banks ( CBs ) which are expected to convert to Micro Finance Banks by the end of December, 2007.

The Central Bank has served notice of its intention to publish the names of all CBs that have obtained either provisional approvals or final licenses as microfinance banks by December 31, 2007. It is reported that 145 community banks have ceased operating across the country and the CBN has asked such banks to remit to it the statement of their assets and liabilities, comprehensive and verifiable list of depositors and a list of all debtors which is a tall order of a request as most of the affected CBs have stopped operations many years back. The affected banks are in the throes of having their operating licenses effectively withdraw. It would be recalled that when the CBN introduced the Microfinance Policy on December 15, 2007 that it specifically targeted the micro and small scale businesses which are marginalized from the perspective of their ability to access institutional credit from the regular banks and if we appreciate the importance and impact of this category of businesses for the development of an economy particularly for an economy with a large informal sector like Nigeria, the developments in this connection would easily qualify as a major and momentous one for the economy in the year under review.

The other major developments at the level of the regulatory institution that is worthy of mention in this review would be attempts made to restructure the national currency. First was the introduction of coins to complement the currency structure and the experiment with alternative quality of paper for the production of the notes to explore the possibilities of underwriting their greater durability. The coins are yet to make the desired entry as there are not too many coins seen in circulation. I recall that in a paper I did after the introduction of the coins, I did observe that the coins would be used if we adopt an approach which would make their use based on specific needs, i.e. if we can configure vending machines, and sundry other payments such as payment of charges for packing at car parks that would be accessed based on the use of coins. There is no way the banks will have the clout to compel any customers to accept coins otherwise! The other development was the land breaking attempt at currency redenomination. Unfortunately the Country was denied the benefit of that experiment which for all you know could have had salutary effects on the economy particularly from the perspective of making the Naira the currency of reference in the west Africa sub region. One is not oblivious of the enormous challenges this could have entailed but we must accept that often limits and ceilings are imposed by our collective aspiration and imagination. After all the banking consolidation exercise which today has many fathers was vehemently opposed on introduction and but for the political support could have been aborted at birth! As I argued then in the paper a published following the announcement of the redenomination scheme; if Ghana could introduce currency redenomination successfully, why not Nigeria? I think that a kiss of death has been administered to this policy and I am not one so naÔve as to talk about its suspension.

The other development worthy of mention is the endless return to the Stock Exchange by banks to recapitalize. It would be recalled that following the arguments which raged post consolidation that most of us argued that regulatory mandated recapitalization might appear an aberration, it was what was actually needed at the particular point in our banking experience and that after that further recapitalization would be market induced. This prediction has been borne out today. It is true that the CBN dangled a carrot before banks by indicating that banks with minimum level of capitalization, the equivalent of one billion dollars would be allowed to partner with the CBN in managing the nationís foreign reserves. But even if that was not the case competitive pressure would have ensured that this trend was experienced. The consolidation exercise would seem to have leveled the playing field for the banks. But the fact remains that in the public mind such leveling has not really occurred. Witness the unprecedented development with regard to the recapitalization outing of the First Bank of Nigeria whereby for the rights issue the over subscription was of the order of 140 per cent and for the public offer it was of a whopping 750 per cent. Evidence of the face, if any was ever needed that public confidence is still very much reposed in the Elephant! The First Bank also did something unprecedented as it resolved and announced its decision to pay interests on an annualized rate of 5 per cent over an identified period of time. It must be observed here that there are some bogus claims by the banks regarding their performance. In my limited experience as a shareholder of some of the banks; they claim to pay dividends but I never get to receive them in the manner promised to support such claimed payments!

But it has not been smooth sailing with some of the post consolidation banks. Some of the problem cases have been duly advertised with all the muck. For instance, the Sterling Bank development which is now under interim management is a case in point. But some of the untoward happenings you get to hear through the grapevine. Some people who are still closet antagonists of the Central Bank for its capital offense of recapitalization which has pulled the rug from under their feet and taken them off their comfort zones came out blazing on all fours with all the base sentiments in full display. I just wondered how people thought such a massive exercise which was done within a tight schedule could have been prosecuted without glitches. One of the major surprises of this development has been the surprise depth which the capital market has shown even if one has heard of some sharp practices in this regard. There were also some banks which made passionate attempts to increase their size through the process of mergers. While some successes have been recorded in this connection; the most notable of this is the Stanbic Bank/IBTC merger. There were some glaring failures such as the much touted Eco Bank/ First Bank merger. The banks have now embarked on aggressive network expansion. There is hardly any nook and cranny of the country you will not find bank branches. Some of the banks have been quite aggressive in this regard and have recorded significant presence. One of the most aggressive in this regard as every one would attest is Zenith Bank. There has also been a considerable attempt made at leveraging on automation to augment the quality of service offering. Unfortunately there have been some negative developments with the operations of ATMs. We hear some of the banks have been casualties of fraud and that is some instances some customers who have tried to use their cards without success have had their accounts erroneously debited. The banks have also been quite aggressive in floating subsidiaries. Most banks now operate as financial supermarkets. Some of the advertisements have also been quite catchy and creative. So also the payoff lines; “in your best interest” “you are welcome” etc. I hope the CBN has not abandoned its statutory responsibility of vetting some of the ads that make claims which one feels should be substantiated in the interest of the banking public. We hope that as progress is made with driving the rate of increase in the rate of inflation downwards that it would reflect in cascading level of interest rates for the greater health, growth and development of the national economy.

By Boniface Chizea