Prof. Segun Ajibola is the President, Chartered Institute of Bankers of Nigeria. In this interview with JOSEPH UMUNNA, he outlines the true state of Nigerian banks, their challenges and the way forward. Excerpts:
What is your take on the clarion call made by the Nigeria Deposit Insurance Corporation for all banks to recapitalise?
I agree with the NDIC on the call for recapitalisation. When the previous recapitalisation was fixed at N25 billion by the Central Bank of Nigeria, the exchange rate of naira to a dollar was between N80 and N120. This was 12 years ago; which authoritatively puts a question mark on the present capital base of the banks that is considered low, based on the dollar value.
Presently, the dollar rate is between N305 and N360, which means the value of the capital base of the banks has gone down considerably, and we are talking of a global market where the Nigerian banks also operate, to finance dollar-denominated transaction.
Another factor is the challenge facing the Nigerian economy at the moment, which has escalated non-performing loans in recent times. The statutory benchmark is five percent but most of the Nigerian banks are running on 12 per cent or more, and that has eroded their shareholders’ funds.
Another factor is the challenge facing the Nigerian economy at the moment, which has escalated non-performing loans in recent times. The statutory benchmark is five per cent but most of the Nigerian banks are running on 12 per cent or more
Considering the claim by the Federal Government that the nation is technically out of recession, how would you assess the state of the banking industry?
Things are getting better now because the economy has improved. It was worse last year, when inflation was very high, running close to 20 per cent. The banks could not lend to anybody because it was like nothing was happening. The price of crude oil also was at the lowest ebb. The recession battered banks so much last year.
But with the improvement, we have seen from the economy coming out of recession, and with the value of the naira becoming more stable as at today, the economy is more stable and better. The banking sector is a beneficiary of that improvement.
We can sustain this momentum with continuous beefing up of our foreign exchange reserve, driving down inflation and making provisions for more infrastructural development, to attract local and foreign investors.
What are the challenges your members are facing within the economy?
Our members have been at the receiving end of the challenges facing the banking industry. Some lost their jobs while others have to make do with less attractive offers and of course, we also had to contend with the problem of ethics and professionalism in the industry. These issues that I have highlighted have been affecting the quantum of performance of our corporate members.
Recently, it was revealed in the CBN’s end-of-first-quarter report for this year that banks borrowed heavily. What is the implication of this on the economy?
I don’t have authoritative figures yet, except all we have been reading. But all I can say is that, banks also took some major steps in supporting and refinancing the economy. They are heavily exposed to the energy and oil and gas sectors. All these, put together, had an impact on the size of the balance sheet of banks and the inability of the balance sheet to accommodate all the transactions I have talked about. For the banks, borrowing from CBN again is a confirmation of the need for such banks to beef up their capital base. It means that there are gaps in their balance sheets, which need to be covered, either by debt or equity. It is much cheaper to cover it through equity and not debts. Today, if the figures we are all reading are correct, it means those gaps are being covered by debts; that is, the borrowing from the apex bank and the call for the recapitalisation of banks become justified.
What is CIBN doing to curb the increasing rate of illegal deductions by commercial banks from depositors’ accounts?
The CIBN is the secretariat for bankers’ committee, sub-committee on ethics and professionalism; and these are the kinds of issues that come up before the committee. As at today, through the effort of the committee, several billions of naira have been recovered and refunded by banks to the
customers.
CIBN is at the centre and its mandate is to promote and sustain ethics and professionalism in the banking system. Issues of this nature are expected to be reported to CIBN and the matter is brought before the committee while we await their response and recommendation. The moment bankers’ committee endorses the recommendation, it becomes implementable, especially when the bank is found culpable.
However, on the issue of illegal deductions, we need to be more circumspect, especially when it comes to screening offer-letters, because, at times, some of these things are well coached or written in the offer letter but the customers don’t take them as important until there are issues and they become contestable.
Bank customers should be careful when signing documents. When it comes to the question of contract, bank customers should be sure of what they are signing because these are the documents that have to be tendered before the sub-committee, to ascertain whether they were overcharged or not.
Apart from the hidden charges indicated in the offer letter, how do customers tackle other charges like excess maintenance and short message service charges?
When these charges hit your phones and they are not clear or understandable, the customer has the right to write or protest to the committee and he would be given accelerated hearing.
