Alhaji Umaru Ibrahim is the Managing Director/Chief Executive of the Nigerian Deposit Insurance Corporation. In this interview with NGOZI AMUCHE, he advises that commercial banks should increase their capital base in order to overcome Nigeria’s economic challenges. Excerpts:
Tell us how the Nigerian Deposit Insurance Corporation engenders confidence in the financial system towards poverty reduction and economic empowerment?
Being a part of the financial safety net, the Corporation contributed to poverty reduction, as it focuses on deposit guarantee and protection of depositors’ interest. As at December, 2015, the Corporation’s insurance coverage was over 90 percent of the 67 million depositors in deposit money banks, whose deposit liabilities amounted to N17.5 trillion, while the total sum of N165.5 billion, belonging to 8.4 million depositors of microfinance banks and N73.71 billion, belonging to 0.73 million depositors of primary mortgage banks were also covered by over 95 per cent.
What were your fears when you recently advised commercial banks to recapitalise?
The economy is going through turbulent times. So, in order to mitigate the effects of the challenges facing the economy on the banking sector, the banks need to beef up their capital bases. Other issues, such as rising non-performing loans and strain in liquidity, were some of the challenges confronting the banks.
The economy is going through turbulent times. So, in order to mitigate the effects of the challenges facing the economy on the banking sector, the banks need to beef up their capital bases
Although we would continue to ensure that the banking system remains sound and safe, we also need to advise them on what to do to weather the storm. The banks are facing liquidity issues; unemployment is also affecting us globally, dwindling revenues and profits, high expectations of quality services from depositors and high expectations from investors.
A lot of banks also need to recapitalise, and we know what it takes these days to raise fresh long-term capital. All these are daunting challenges that not only our own banks are facing, a lot of banks globally also face same challenges. Here, we are talking about high interest rate, in some parts of Europe and the United States; they are talking about negative interest rates.
That is, you pay the banks to keep your money and they don’t give you anything in return. It is obvious that for any individual or organisation to survive, one has to do a lot to overcome this very turbulent moment.
For us, in the area of supervision and regulation of insured financial institutions, it is very necessary that we follow the dynamics, and continue to do everything possible to ensure that the deposit money banks, the primary mortgage banks and microfinance banks continue to be reasonably creative and innovative in their products and services, so that they would be able to weather the storm.
For a very long time, you have been at the forefront of ensuring that financial inclusion is a successful scheme, what are the challenges?
Epileptic power supply still pose a major threat to financial inclusion, especially as banking services are being offered electronically.
The Point of Sales terminals, as well as the Automated Teller Machine terminals, need constant electricity supply to function effectively, or else, their roles in a cashless economy, as tools of financial inclusion, will be depleted. With banking operations requiring constant electricity supply to function well, banks are now operating on generators.
This extra cost is transferred to customers, who are made to pay through their noses. The effect of this is high interest rate, exorbitant Cost of Transaction, among others. This, in its rightful sense, discourages some of the people who ordinarily should be captured into the banking system.
What are you doing about the high level of financial exclusion in the country, put at about 46.3 per cent or 39.2 per cent of the adult population?
It is our desire to ensure that in line with the National Financial Inclusion Strategy, which is aimed at reducing the percentage of adult Nigerians lacking access to formal banking services from 46.3 percent in 2010 to 20 per cent in 2020; we pledge our willingness to play a crucial role in ensuring that small savers are protected.
We shall continue to partner with all stakeholders to propagate the objectives of the NFIS to reduce the percentage of adult Nigerians that do not have access to financial services.
Was this part of the reasons why you canvassed for agent banking framework in 2012?
Of cause, it is part of our reasons. This is because a banking agent was a retail outlet, contracted by a financial institutions or mobile network operator, to process client’s transaction.
The agent banking has the potentials to grow access to banking facilities in the country, especially for the uneducated and those in rural communities. Another measure that could be adopted to promote financial inclusion in Nigeria is the promotion of all-women microfinance institution.
For instance, evidence from Kenya has shown that such institutions have the potential to promote easy access to credit among rural women, especially at the group level. It could also be used to mobilise large quantum of savings among these group of people. Despite various initiatives taken by the government and regulators to enhance financial inclusion, it still has several challenges. Some of the challenges include uneven distribution of micro finance banks in the country.
What is the non-interest banking framework, which was recently introduced, all about?
With the introduction of noninterest banking practice in Nigeria, the Corporation released a framework, which extended deposit insurance scheme to the customers of non-interest banking institutions.
The guidelines for the extension of the DIS coverage to noninterest banking institutions have a ceiling of up to N500,000.00 per depositor. A non-interest bank is a financial institution that provides fund management, financing, investment and other banking services that are ‘shariah’ compliant and available to all Nigerians.
NDIC has contributed to financial education by publishing various pamphlets which include: “Basic Knowledge on Banking and Deposit Insurance,” and “This Little Piggy,” among others, in order to inculcate banking habits and financial management in the youths. Some of these publications were translated into three major Nigerian languages.
What is your take on the crashed Mavrodi Mundial Movement, MMM, otherwise called Ponzi schemes?
There is nothing else we can do as a regulator, except to offer prayers for the victims of the recently crashed Mavrodi Mundial Movement. We warned them earlier, and we told them the danger in it. The Corporation would not relent in calling on Nigerians, sensitising and enlightening them on the dangers of patronising wonder banks. Apart from the MMM case, there were some new cases of the emergence of the wonder banks in recent times in places like Enugu, Kaduna and Plateau states.
For us, we already told Nigerians that MMM was not recognise, it is illegal, but some insisted that it is legal, all hands must be on deck to educate the public, today it is MMM, and tomorrow it could be YYY.
It is worrisome to note that despite repeated advice, many unsuspecting members of the public are still falling victims to the mouth-watering interests being offered by these illegal fund managers. For the avoidance of doubt, these illegal funds managers or ‘wonders banks’ are neither licensed by the Central Bank of Nigeria nor under the NDIC deposit insurance coverage. Members of the public are therefore advised to patronise only banking institutions that display the NDIC sticker: ‘Insured by NDIC’ in their banking halls or entrances.
What is your assessment of the current usage of the mobile money banks in Nigeria?
I can say it is successful. But there is the need to ensure that fraudsters do not take advantage of the gradual increase in the use of mobile banking in the country. Members of the bankers’ committee were doing everything to also ensure that mobile banking channels in the country are well secured.
