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Tag: banking

  • Standards & Poor’s sees heightened risks in banking

    Standards & Poor’s Ratings Services (S & P) has raised its profile for the banking industry risk by a notch, citing worsening risk scenario in the aftermath of the suspension of the Central Bank of Nigeria (CBN) Governor, Lamido Sanusi by President Goodluck Jonathan.

    In its latest ‘Banking Industry Country Risk Assessment (BICRA) Update’ obtained by The Nation, S & P stated that it moved Nigeria a notch close to its highest risk profiles due to heightened risk of political interference or governance issues. S & P lowered Nigerian banking industry risk profile to eight from seven, two points below the highest risk profile of 10.

    A BICRA is scored on a scale from ‘1’ to ‘10’, ranging from what S & P considered as the lowest-risk banking systems-group ‘1’ to the highest-risk-group ‘10’.

    According to the report, a BICRA analysis for a country covers all of its financial institutions that take deposits, extend credit, or engage in both activities, whether S & P rates them or not. In addition, the analysis considers the relationship of the banking industry to the financial system, and furthermore to its sovereign. For that reason, many of the factors underlying a sovereign rating are important in determining a BICRA score.

    “We lowered the industry risk score for Nigeria to ‘8’ from ‘7’ because of the change in leadership at the Central Bank of Nigeria, which in our opinion highlights a heightened risk of political interference or governance issues,” S & P stated

    The global rating firm however revised its industry risk trend to stable from negative on the belief that the newly appointed governor of CBN, Godwin Emefiele, will continue the regulatory reform process and not weaken the roles of regulators and the government in maintaining banking sector stability.

    The report outlined that the analysis of economic risk of a banking sector takes into account the structure and stability of the country’s economy, including the central government’s macroeconomic policy flexibility; actual or potential economic imbalances; and the credit risk of economic participants—mainly households and enterprises.

    “Our view of industry risk factors in the quality and effectiveness of bank regulation and the track record of authorities in reducing vulnerability to financial crises, as well as the competitive environment of a country’s banking industry—including the industry’s risk appetite, structure, and performance—and possible distortions in the market. Industry risk also addresses the range and stability of funding options available to banks, including the role of the central bank and government,” S & P noted.

    It pointed out that part of the review usually involves an evaluation of governments’ tendency to support private banks, which may also influence issuer credit rating on systemically important banks in a particular country.

    In its main BICRA report on Nigeria, S & P had rated Nigeria’s overall economic risk as eight and banking industry risk as seven on a scale of one to 10. In a breakdown of the risk assessment, S & P scored Nigeria as ‘very high risk’ in terms of economic resilience, ‘intermediate risk’ in terms of economic imbalances and ‘extremely high risk’ in terms of credit risk in the economy.

    The report scored Nigeria’s banking industry’s institutional framework and competitive dynamics as ‘very high risk’ while the industry’s system-wide funding was adjudged to be of ‘intermediate risk’. The report however noted government’s support for the banking industry.

    According to the report, Nigeria’s economic risk was a balance between the country’s considerable natural resources and improving economic diversification and low wealth levels, persistent political risks, and large infrastructure deficiencies.

    “The economy depends, however, on oil revenues, and we consider that there is a strong potential for future asset and equity price bubbles. The main source of economic risk stems from Nigeria’s very weak payment culture and rule of law, poor underwriting standards, and high credit concentrations and foreign currency lending,” the report stated.

    It explained that the economic risk score for Nigeria was based on economic resilience, economic imbalances, and credit risk in the economy.

    The report noted that Nigeria’s strong economic growth and improving diversification were being held in check by oil dependence, low wealth and infrastructure deficiencies pointing out that dependence on oil has been a major catalyst for corruption.

    According to the report, Nigerian economy is expected to expand by about 6.4 per cent per year through 2013-2014, which is strong in a global context. Considerable natural resources support the economy, but the non-oil economy has largely fueled growth for the past few years. Key non-oil growth sectors include agriculture, trade, and services. Positively, this should broaden economic diversification and create opportunities for the banking sector.

    “Nevertheless, we expect the economy, exports, and government revenues to continuing depending on oil in the near term, which exposes domestic economic stability to oil prices. The reliance on oil is also, in our opinion, a catalyst for corruption, political interference, and internal security problems, while the majority of the population has yet to receive any real benefit. Nigeria remains a low income country, with per capita GDP that we estimate will remain below $2,000 over the next two years. Furthermore, there are significant shortcomings in physical, commercial, and legal infrastructure,” the report stated.

    S & P stated that ahead of the 2015 elections, political risk will likely increase and could stymied the reform process in the power, agriculture, and infrastructure sectors.

    “We remain more skeptical about real reform in the natural resource sector due to entrenched interests. Generally, we believe the country’s weak rule of law, along with corruption, will act to restrain growth and pose a continuing risk to the banking sector,” S & P stated.

    It pointed out that Nigeria’s restrained expansion understates the potential for high growth and large imbalances.

    “In our opinion, Nigeria could be exposed over the longer term to inherently high economic imbalances, including periods of credit volatility. This is because its wealth—supported by the country’s immense natural resources—is overly concentrated geographically, industrially, and among its population. In our opinion, this leaves asset prices vulnerable to systemic shocks, such as heightened political risk or a sharp drop in oil prices,” the report concluded.

    In the latest BICRA update, S & P also lowered BICRA for Turkey to ‘6’ from ‘5’ as a result of lowering the industry risk score to ‘6’ from ‘5’.

    The rating agency stated that it considered that system-wide funding risks have risen in Turkey, exacerbated by a weakening domestic economy and political developments, as well as sluggish global economic conditions.

    According to the report, there had been unprecedented credit growth in Turkey over 2010-2013, which was partly funded by foreign bank debt. At year-end 2013, net external debt funded more than 25 per cent of system-wide gross loans, versus about 18 per cent in 2010.

    “The Turkish banking system is now more vulnerable to domestic and external headwinds, particularly if they become increasingly pronounced and sustained. We believe that Turkish banks will pay a higher premium for their foreign borrowings in 2014, consequently weighing down their already contracting margins,” S & P stated.

    Although it maintained its BICRA economic risk score of ‘6’ for Turkey, it changed the status from stable to negative.

    “This is in line with our recent revision of the outlook on Turkey’s long-term sovereign ratings. If the economy experiences a hard landing, credit risks would rise and asset quality would weaken for banks,” the report concluded.

    The report also showed a revision in Belgium’s economic risk trend from negative ton stable, citing economic resilience and modest rebound.

    “The Belgian economy has demonstrated some resilience in the past few years, and we forecast a modest rebound in GDP growth in 2014 and 2015. Despite the strong rise in residential real estate prices during the 2000s and the quasi absence of a correction since then, we do not foresee any material negative impact from the property market in Belgium on banks. In our base-case scenario, we foresee a trend toward stabilization in inflation-adjusted property prices by 2015, underpinned by low, single-digit growth in nominal prices,” S & P said.

    According to the report, there could be an incremental rise in domestic credit risk, but at relatively lower level than other Western European countries. Credit risk is also expected to remain contained by very low losses on exposures to Belgian individuals. Although there could be higher losses on loans to small and midsize enterprises, and to a lesser extent on loans to large corporations, Belgian banks are nonetheless believed to have the capacity to absorb greater provisioning for their domestic activities without hurting their financial profiles.

  • The other side of cash-less banking

    The other side of cash-less banking

    Two years after its introduction by the Central Bank of Nigeria (CBN), cash-less banking is still facing some challenges. These are erratic Automated Teller Machines (ATMs), Point of  Sale (PoS) and internet banking downtime. Customers also seem to lack confidence in the scheme, writes COLLINS NWEZE.

    Cash-less banking was two on January 1, but the challenges confronting it when it was first launched in Lagos are still there.

    From non-working Automated Teller Machines (ATMs), debiting of customers’accounts without payment, and poor network in the use of Point of Sale (PoS) terminals, many customers using these alternative banking channels have sad stories to tell.

    Saheed Adeoye, a civil servant, based in Lagos, who was at the Power Holding Company of Nigeria (PHCN), Ikeja Distribution Company, Ogba unit to pay his bill, said it took him more than two days to make the payment because the PoS was not working.

    He said the poor network challenge, which is becoming a daily occurrence, made users to abandon the device and reverted to cash payment. This, he said, led to long queues. “We have a long queue because there is only one person that is attending to us, besides the PoS is not working. There is need to get more people involved in bill collection, and also get the PoS working too. I have been here several times today and was told that the server is down,” he told The Nation.

    Michael Okoye, who was also at the PHCN office to pay his bills, said he was disappointed that the PoS device was not working. “Aside campaigning for the use of alternative channels such as the PoS and ATMs in settling bills, the banks and Central Bank of Nigeria (CBN) need to get the platforms in good working condition,” he said.

    Nigerians, he said, were being denied the convenience and efficiency experienced by other countries in bills payment using alternative banking channels such as ATMs, PoS and internet.

    Central Bank of Nigeria (CBN) Deputy Governor, Operations Tunde Lemo said the apex bank was aware of the challenges, adding that it is working on how to enhance connectivity in the system. The challenges, he said, were not insurmountable.

    Speaking on the theme: “The evolution to the future Cash-less Nigeria: Positioning the Nigerian Payment ad Settlement Ecosystem for Cash-less Reality,” at the 20th anniversary of the Nigeria Inter-bank Settlement System (NIBSS) in Lagos, he said: “We have been talking about how to enhance connectivity and one of the things agreed was to work with some service providers. But beyond that, we looked and decided what else to do, particularly outside of Lagos now that we have rolled out the cash-ess policy to six other states outside Lagos.”

    So far, he said, the CBN has licenced 21 mobile money operators, but the challenge remains how to link mobile money to the Point of Sale (PoS), among other issues.

    “That is a challenge that we are also working on. If mobile phones can serve as a touch point, our transactions would go up rapidly. So, these are some of the things we are looking at, hoping that by next year, as we roll out more PoS machines, we have to see how we integrate the mobile phones into the network because in the hinterlands, the challenges would be more. We hope to roll-out to all the state capitals by the second quarter of this year,” he said.

    Lemo explained that the second anniversary is an opportunity for operators and regulators to come together and talk about how to continue to transform the payment system in the country.

    “Of course we have ratcheted up transactions around electronic payment. We haven’t done badly at all, but there are still a lot to be covered and we have made significant progress in the area of infrastructure provision, particularly led by the cashless programme of the CBN. We believe that if we continue to drive this, then we will make the payment system a lot more efficient,” he said.

    According to him, an efficient payment system is good for the transmission of monetary policy and that is why it is important to us at the CBN. It is also good for financial stability because a stable financial system is seen through how efficient the payment system is.

    “Once a payment system is in turmoil, it affects the financial system. So, a very effective payment system is going to be an effective anchor for the transformation of our economy even as we strive to be one of the 20 biggest economies in the world by 2020,” he said.

    Lemo explained that the cashless policy initiative is a huge success. Two years ago, we had less than 10,000 PoS machines, but today, we have over 150,000.

    “We used to have transactions of less than 100,000, but today, on a daily basis we have between 600 million and one billion and that is just Lagos and one or two other locations. But by the time we roll out across the country, you are going to see a much more transformed payment system and a lot more volume on the electronic payment space,” he said.

    Lemo said the use of mobile phones and PoS terminals in implementing the cashless project remains critical.

    “That is a challenge that we are also working on. If mobile phones can serve as a touch point, our transactions would go up rapidly. So, these are some of the things we are looking at, hoping that by next year, as we roll out more PoS machines, we have to see how we integrate the mobile phones into the network because in the hinterlands, the challenges would be more. We hope to roll-out to all the state capitals by the second quarter of next year,” he said.

    The Deputy Governor said a very effective payment system is going to be an effective anchor for the transformation of the economy even as the country strives to be one of the 20 biggest economies in the world by 2020.

     

    Charges

    Cash-less banking charges on cash withdrawal and deposit transactions started on October 2, last year, in the Federal Capital Territory, Abia, Anambra, Kano, Ogun and Rivers states.

    CBN Director of Communication, Ugochukwu Okoroafor said the policy was meant to reduce the amount of cash in circulation and encourage more electronic-based solutions for payment for goods and services, transfers among others.

    Since the project was introduced in 2012 in Lagos, many commercial banks have through emails, text messages and formal letters been sensitising their customers on the need to embrace alternative payment options.

     

    Banks react

    In an emailed statement to its customers, GTBank said the policy would drive the development and modernisation of Nigeria’s payments system within the Abuja and selected states. It said all individuals and corporate will be encouraged to adopt electronic payment and other banking options.

    The policy, which before now, is only operational in Lagos State in terms of charges, is aimed at promoting the use of electronic-based transactions instead of cash for payments for goods, services, transfers among other services.

    The implementation of the ‘Cash-less Lagos’, as it is known, began on January 1, 2012 and has recorded improvements is the use of PoS, ATMs and other e-payment tools. In Lagos, the service charges/fees did not apply until March 30, 2012, in order to give people time to migrate to electronic channels and experience the infrastructure that has been put in place.

    The policy framework stipulates that cash-in-transit lodgment and cash evacuation services will no longer be available to customers or merchants. For individual account holders, charges on cash transactions will apply when daily withdrawals and deposits are in excess of N500,000 while for corpo-rate account holders, charges will apply when daily withdrawals and deposits are in excess of N3 million.

     

    e-payment firms speak

    Kamran Siddiqi, Visa’s Group Executive, Central and Eastern Europe, Middle East and Africa, has said the cash-less banking initiative is modernising the payment system and creating economic development for the country. He was in Nigeria last year to support Visa’s financial literacy and cashless payments drive.

    “Nigeria is a very important market for us. It is exciting for me to be here to support the progress Visa has made in driving financial inclusion and making electronic payments more accessible to everyone everywhere,” he said.

    He said Visa is dedicated to increasing financial literacy among the unbanked through strategic partnerships and educational programmes.

    “This was the motivation behind the recent highly successful Financial Literacy Challenge with the Co-Creation Hub. It was geared at stimulating the development of innovative web and mobile applications to teach money management skills and support the advancement of financial literacy in Nigeria,” he said.

    He noted that another of Visa’s focus areas in Nigeria and the West African region is to continue to boost tourism and cross border spend. Nigeria enjoyed a 25 per cent increase in spending by international travellers using their Visa cards in 2012.

    Also, international Visa cardholders increased tourism spending from $95.2 million in 2011 to $119.5 million in 2012. Total transactions rose 31.1 per cent from 553 747 to 727 113.

     

    Bankers’ Committee intervenes

    The Bankers’ Committee has also taken the cash-less policy campaign to Ogun State to enlighten the people on the use and benefits of the policy.

    The scheme was extended to Ogun, Kano, Anambra and Abia states as well as the Federal Capital Territory (FCT) on July 1, last year.

    The initiative, which has entered its second phase, saw the CBN and bank officials staging road shows in six delineated zones (Ilaro, Mowe/Ibafo, Ota, Abeokuta, Sagamu and Ijebu-Ode) in Ogun State, to create awareness on how to use different payment channels, such as ATMs, PoS and money transfers.

    According to a statement from the Bankers’ Committee, the six-day activities saw market men and women, Small and Medium Scale Enterprises (SMEs), among others, being educated on how to transact business electronically.

     

  • Banking with tears… Tales from the blind

    Banking with tears… Tales from the blind

    Banking, like football, should know neither race nor colour. But an ugly trend is brewing in banks where the blind or visually impaired are systematically excluded from enjoying banking services due to poor attitude of banks’ staff and obsolete technology. COLLINS NWEZE captures silent grudges held against their banks by these individuals.

    They are neither losing their money in banks’ vaults nor directly told not to come and do simple banking transactions, but the message to them is depressingly subtle but simple: stay away from the banking halls.

    Abiodun Erugbaju, a blind customer of one of the commercial banks in Lagos, shared a personal experience during one of his visits to the bank: “How would you feel when you discover that there are no voice guidance and tactile keyboards on the Automated Teller Machines (ATMs) your bank expects you to use. Or there is no screen reading software in terms of online banking that enables the computer to speak everything that appears on the screen. Or hearing a customer service officer ask a colleague, who will be operating the bank account for him? ‘These, he said, were some of his experiences in banks, almost on daily basis.

    He went further: “Sadly though, the customer service officer was not even asking me directly, she was asking a colleague. When I heard it, I felt bad, and quickly told her that the question was ridiculous. If you want to ask this type of question, you should ask me. Not a third party that does not know about me. She is not my brother or someone that knows me. Asking a stranger who will be operating my account for me is derogatory. Which means I can’t do that even as a Masters Degree holder? I brought out four different ATM cards and told her that the card she has just given me will make it the fifth that I have at the moment. Then, I told her that she had just insulted me by that question,” Erugbaju narrated.

    He said that these things are happening because majority of banks staff lack the needed awareness and competence to attend to people with disability.

    According to him, in developed countries, internet and telephone banking services are developed to enable customers who are blind to use them just as easily as anyone else adding that in Nigeria, the barricades thrown up against them by the banks are increasing by the day.

    He said although the Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi has consistently advised banks and financial institutions to provide ATMs that are accessible to and independently useable by individuals who are blind, the banks to do not heed to the pleas.

    “So, for me, those are the major problems. For instance, I cannot use any ATM here because they are not audio-enabled. People with physical challenges like those on wheel chair are not always able to access most ATMs because of the way they were built. They have to climb stair cases to make use of them.”

    He said most of the blind customers don’t have access to internet banking and usually depend on other people to transact for them, against global best practices. But by providing screen readers, banks would be making it very easy for them to navigate and transact businesses online without necessarily getting assistance from others.

    He said although Sanusi is rounding off his tenure, but the CBN can institutionalised policy in collaboration with people with disability to share ideas on how these things can be fixed.

    “There has to be some kind of needs assessment on the part of the CBN. The regulator needs to conduct some needs assessment on persons with disability as it concerns banking and this forms whatever policies they will make afterwards.

    We appreciate some of their initiatives which are quite thoughtful, proactive and innovative but then, there is a need for a stakeholders’ dialogue on these issues,” he said. According to him, sitting back and making policies without talking to those directly affected will do no one any good.

    Erugbayi contended thatthe United Nations conventions on persons with disability instituted in 2006 has enabled them to engage stakeholders with the policy instrument. One of the provisions of that document, he said, is that national governments should domesticate the policy through an act of parliament and set up agencies, on disabilities that will look into these issues. This, he said, led to the establishment of Lagos State Special Peoples’ Law which is now being used to engage operators in different sectors of the economy on how they will domesticate the provisions of these laws on their policies.

     

    “We are also pressuring the Federal Government to enact the National Derivative Act. So, a lot of advocacy is going on all over the country, but it will just take some time before it will begin to materialize,” he said.

    Executive Secretary, Disability Policy and Advocacy Initiative (DPAI), Dr. Adebukola Adebayo who is also blind, supported Erugbayi’s argument saying the banks need to provide software tools that would enable them use internet banking facilities. He said the ATMs are not well equipped for the blind.

    “The ATMs are not equipped to give me my account balances, buy air airtime, pay utility bills among other services,” he said.

    For him such inadequacies have discouraged him from using the banks adding that bank notes are not reconisable to the blind.

    “Look at the polymer notes we are using now. I don’t know how to differentiate between N5, N10, N20 and N50. They all have same textures and features as far as I am concerned. They are all the same. If the CBN wants to create the needed features, it can do it. But the bitter truth is that they do not even think that some people are disabled. We are the ones affected, but some of them may be disabled one day. Challenges can visit anybody just like rain can fall at any time without announcements,” he said.

    Adebayo who banks with Zenith, Access and Diamond banks said he has not noticed any improvements on the attention and services they give to him or some of his friends that are blind.

    “These banks forgot that even some of their directors can have accidents, even if it is domestic accidents and face similar problems we are facing today,” he said.

    According to the World Health Organisation (WHO), 285 million people are estimated to be visually impaired worldwide with 39 million blind and 246 have low vision. Also, about 90 per cent of the world’s visually impaired live in developing countries, 82 per cent of them blind and aged 50 and above.

    Mrs Rita Boyo said there are so many things she wanted the financial sector to improve on. She said she cannot use the ATMs because of difficulties in accessing the keys adding that banks should put some signs on the ATM that identify the numbers on the keypad and well as the notes.

    “I was at Wema Bank the other time, and I had to call the security man to assist me with my account number. And you know the account number is supposed to be private but I have to disclose it just to get the transaction done. I also do same with my ATM Personal Identification Number (PIN), which is not supposed to be. Even the cheque books can be done in a way that it becomes easier for us to use. We also need to identify the notes. There are cases that the bus conductor will tell you that the note is N100 when actually it is N200 or even N500 and they will take the balance,” she disclosed.

    Boyo said although she has not been a victim of ATM fraud, many of her friends have been defrauded by the very people they trusted with their ATM cards and PINs.

    Ejiro Okotie, Coordinator, Nigeria Association of the Blind (NAB), said a lot advocacy needs to be done on the financial system. She said her experiences with her banks were not encouraging. “For instance, if I don’t fill my pay slip before I walk into the bank, getting someone to do it for me is going to be a challenge. Another problem is access to the bank. Some of us move with the guide canes which cannot pass the electric doors installed at the entrance of the banking halls,” she said.

    Continuing, Okotie said sometimes, she had to drop her cane behind, or talk to the security personnel to disable the entrance door before she can go in with the cane. She regretted that many of the banks do not have alternative doors for persons with disability to go into the banking halls without inconveniencing others.

    “I also think there should be at least a customer care person that should be sorely responsible for attending to persons with disability including illiterate persons. I always need someone to help me type my PIN when using ATMs. We need ATMs that can talk so that the needed confidentiality will be available for the blind,” she said.

    Speaking further, she advised banks to train their staff to render disability-friendly services, especially for the blind. “If you give me all my bank statements in prints, I have to get someone to read it to me. But if they have the necessary facilities in place to make sure that information are put in accessible format, life will be made a little easier for us,” she said.

    Okotie said on many occasions, she had to return to the bank to make corrections because the security personnel that helped her filled the teller got it wrong adding that such occurrences could be eliminated with improved commitment by the banks.

    Julius Kamya, Executive Director, African Union for the Blind, a Ugandan working in Lagos and Nairobi, Kenya also recounted his experience with Barclays Bank, Uganda when his request for a $7,000 salary advance loan was declined.

    “I applied for a loan and they said your organisation did not qualify when we did the qualification sampling. Then I said no problem, I am not qualified, but one of my staff who is not disabled applied for the loan and got it. I am the chief executive officer of the organisation where she works, how come I was not qualified? What is the problem so that I rectify it and not make other staff lose when they apply?

    “They said I was just not qualified. Then I said, can you put what you are telling me in writing? The bank said no. Then, I contacted my lawyer who wrote them. They sensed there was big trouble when I kept writing them, up to three times. They gave me the loan. I was contemplating dragging them to court, before they responded. They just sensed I was on the move,” he said.

    Kamya, who spoke while attending a conference in Lagos, said there was need for continuous advocacy for persons with disability, especially the blind. He said challenges faced by the blind differ from bank to bank, but the issues have to do with discrimination, poor customer services and outright denial of banking services.

    “Some banks don’t think that I am eligible to have a bank account. Some banks do not accept thumb prints thereby excluding the blind that may not be able to sign with a pen. Sometimes, it may have to do with ignorance by the staff of the banking institution. Some banks even think that as a visually impaired person, one is not entitled to a loan. There are also issues around bank notes not being accessible to blind users who will not be able to differentiate one currency from another. I have seen these practices in Lagos, Kenya and Uganda,” he said.

    According to him, governments at all levels need to be consulting with disabled persons when making policies that affect their lives and finances. “We have a slogan that says ‘Nothing for Us Without Us’ meaning that we are the better advocates for ourselves. So, we need to be part of whatever policies that are designed for us. There is also need for more sensitisation in the banking sector so that their staff look at us as human beings,” he advised.

    At the conclusion of a one-day public policy dialogue on inclusion of persons with disabilities in government policies and programmes oganised by Nigeria Association of the Blind (NAB) in partnership with Disability Policy and Advocacy Initiative (DPAI), in Lagos, the convener of the programme, Olufunke Osindele said banks are not doing enough to ensure that people with disabilities are included in the financial system.

    She said banks should make messages about their products and services available to the blind in a manner they can understand them. She called on stakeholders to work towards ensuring the effective inclusion of people with disabilities in empowerment programmes that would have positive behavioural change on their relationship with their banks.

    Osindele said the exclusion of Persons With Disabilities (PWDs) from the design, planning, implementation, monitoring and evaluation of government policies on key issues that affect their lives are highly disturbing.

    She said there is also need to include PWDs in national and state strategic plans and other relevant policy documents on banking operations, telecom and reproductive health, which she said, constitute major concern to stakeholders.

     

    Position of the Law

     

    Different state governments across the 36 states of the Federation and the Federal Capital Territory (FCT) Abuja have all indicated interest in inaugurating the Special Peoples’ Law within their jurisdictions.

    Lagos State has been able achieve this feat with the inauguration in June 2011, of the Lagos State Special People’s Law championed by the Lagos State Office for Disability Affairs (LASODA).

    Sections 13 and 30 of the law stipulate that persons with disability have the right to express their opinion and receive information meant for the general public through any means of communication of their choice. The government and corporate organisations should always make the information available in accessible formats such as sign language, Braille, and other methods to these special people. Also, it mandated that within five years, corporate organisations must employ properly trained personnel who can attend to their customers/ clients with disability.

    Also, section 25 sub section two of the law directed that persons with disability shall be given first consideration as much as possible at ATM points, banking halls, bus stops among others.

    However, as laudable as these provisions are, implementation has been a challenge.Adebayo said although similar laws have been inaugurated in others states within the Federation, implementation of such laws have been a problem. He said none of the banks have been questioned over the implementation of any part of the law.

     

    CBN react

     

    Special Adviser to the CBN Governor on Sustainable Banking, Dr. Aisha Mahmood disclosed plans by the bank to institute nationwide Biometric Solution for the financial system which she said would be a game changer for financial inclusion including addressing the issues raised above.

    Speaking to The Nation on the matter, she said the CBN has been making steady progress on how to get more people into the financial system, including people with disabilities.

    “The Biometric Solution Project of CBN to start in 2015 will authenticate banks’ customers, Point of Sale (PoS) terminals and ATMs and hence, is a game changer for financial inclusion,” she said.

    Mahmood said the facility is also expected to help those who are not educated to use biometric to be part of the financial system. She said the CBN is concerned about challenges faced by the blind, which prompted a directive to banks to build wheelchair-friendly branches and also have blind persons within their workforce.

    She, however, admitted that the CBN is yet to commence monitoring the level of compliance in most banks. “We are really concerned about the plight of this set of people and that’s why we are taking these steps. Banks are currently making inputs into the sustainable banking principles before we start implementation,” she said. The biometric solution is expected to promote the use of thumbprint as major means of identification in banks and ATMs.

    However, the project will take a few months, after takeoff, to go round the country and register customers of deposit money banks (DMBs) before it gets to the microfinance banks.

    When contacted, CBN Director, Consumer Protection Department, Mrs Ummar Dutse said she was aware that banks have been asked to build more accessible branches that would allow people with disabilities enter the banking hall easily. She however, refused to provide more details on what her unit is doing to enhance financial accessibility for the blind.

     

    Banks speak out

     

    FirstBank’s spokesperson and Head of Marketing and Corporate Communication, Mrs. Folake Ani-Mumuney, said the bank is deepening its retail dominance with the launch of innovative products and services, tailored to suit the changing times and ever growing customer base.

    She said the bank has started building wheelchair-friendly branches and will continue to take steps to get more people, including the blind, into the financial system.

    According to her, the lender has already installed biometric ATM in many of its branches, adding that with that feat, what is needed to open an account is simply the customer’s fingerprint.

    Also, the spokesman for Skye Bank, Bolarinwa Rasheed, said his bank is following up with regulatory demands and is complying. He said the blind like every other special people receive priority in his bank.

    The Head of Media, United Bank for Africa Plc, Ramon Olanrewaju, said the lender is taking steps to ensure that every of its branches have facilities for the disabled.

    “I can tell you that those on wheel chair or blind are well taken care of. There are security gates which they have to pass through. We try as much as we can to ensure that they get adequate attention,” he said.

    Findings also showed that some private operators are worried on how to help banks wriggle out of the quagmire. SIBS International, a Portuguese firm, said it has begun technology transfer to the Nigeria Inter-Bank Settlement System (NIBSS), a key stakeholder in e-payment market, so as to help banks achieve seamless e-payment plans for the country.

    Managing Director, SIBS International, Pedro Hipolito said during this year’s Card, ATMs Expo held in Lagos that his firm has already entered into partnership with many of the local banks to strengthen their information technology.

    He disclosed plans to import multifunctional ATMs with biometrics that can cater for the blind within the population and handle currency recognition, acceptance, and recycling, paying routine bills, fees, and taxes, printing bank statements, adding pre-paid cell phone / mobile phone credit among others.

     

    Financial inclusion statistics

     

    In a circular to banks released on Tuesday and titled: National Financial Inclusion Strategy (NFIS), Sanusi said Nigeria lags behind some of her peers in Africa when it comes to provision of financial services. He said only 36.3 per cent of the country’s adult population, representing 30.7 million out of 84.7 million are served by formal financial services. This compared to 68 per cent in South Africa and 41 per cent in Kenya.

    “The vast majority 80.4 per cent of those who are fully excluded from formal and informal financial services live in rural areas,” he said.

    He said 39.2 million adults representing 46.3 per cent of the adult population are excluded from financial services. Out of this, women account for 54.4 per cent while those under 45 years account for 73.8 per cent and the uneducated 34 per cent.

    Sanusi admitted that currently, there are no specific regulations and policies on financial inclusion in place. However, many regulations and policies have impacts on financial inclusion, particularly those that focus on distribution channels such as ATMs or Point of Sale (PoS) devices.

    Above all, the banking sector needs to do more by having a suitable financial inclusion strategy that also has place for PWDs. Doing this will ensure that not only the blind and other PWDs are fully integrated into the financial services sector, but are given opportunity to enjoy the full benefits of banking.

     

     

  • Investors scramble for low-priced banking stocks

    Investors appeared to be increasingly scouting for bargain deals within the lower segment of the banking subsector as low-priced banking stocks continued to dominate transactions at the Nigerian Stock Exchange (NSE).

    Transactions on the trio of FCMB Group, Skye Bank and Unity Bank- three relatively low-priced banking stocks, accounted for 43.6 per cent of aggregate turnover volume at the NSE yesterday. Financial services sector, which included banking, insurance and other allied financial services segments, altogether accounted for more than 82 per cent of total turnover volume.

    The market pricing sentiment tilted to the upside with average daily gain of 0.64 per cent, reflecting the fluctuation that had seen the market alternating between the bullish and bearish sentiment in the past three days.

    Aggregate market value of all equities increased from N12.523 trillion to N12.603 trillion while the All Share Index (ASI) rose by 0.64 per cent from 39,130.37 points to close at 39,383.33 points. The increase nudged average year-to-date return at the stock market to 40.26 per cent.

    With 30 advancers to 26 decliners, the market situation was helped by substantial gains by several highly capitalised stocks. Guinness Nigeria topped the gainers’ list with a gain of N4.99 to close at N240. Nigerian Breweries followed with a gain of N3.99 to close at N165. Mobil Oil Nigeria added N1.95 to close at N117. Dangote Cement rose by N1.74 to close at N211.74. Lafarge Cement Wapco Nigeria chalked up N1.50 to close at N107. International Breweries gained N1.49 to close at N29.88. Union Dicon Salt rose by N1.02 to close at N11.06. UAC of Nigeria gathered 70 kobo to close at N65.20. Flour Mills of Nigeria added 55 kobo to close at N86.56 while Presco gained 50 kobo to close at N37.50 per share.

    Total turnover stood at 424.88 million shares worth N3.73 billion in 4,803 deals. Financial services sector accounted for 350.06 million shares valued at N2.34 billion in 2,494 deals. FCMB Group was the most active stock with a turnover of 110.87 million shares valued at N354.79 million in 105 deals. Skye Bank followed with a turnover of 39.80 million shares worth N172.58 million in 102 deals while Unity Bank was the third most active stock with a turnover of 34.49 million shares valued at N17.64 million in 107 deals.

    On the downside, Unilever Nigeria led the losers with a drop of N2.61 to close at N52. PZ Cussons Nigeria dropped by N1.69 to close at N34.76. Ashaka Cement lost 39 kobo to close at N19.80. Union Bank of Nigeria slipped by 29 kobo to close at N9.11 while National Salt Company of Nigeria dropped by 17 kobo to close at N13.32 per share.

     

  • Standards & Poor’s rates economy, banking as high risk

    Standards & Poor’s rates economy, banking as high risk

    •There is strong potential for asset and equity price bubbles

    •AMCON is a major distortion

    Standards & Poor’s Ratings Services has classified economic and banking industry risks as ‘very high’ in a report that underlined fears about Nigeria’s lop-sided economic growth and wealth distribution and the changes in the banking industry.

    In its ‘Banking Industry Country Risk Assessment (BICRA)’, which focused on Nigeria, Standards & Poor’s (S & P) rated the country’s overall economic risk as eight and banking industry risk as seven on a scale of one to 10. In a breakdown of the risk assessment, S & P scored Nigeria as ‘very high risk’ in terms of economic resilience, ‘intermediate risk’ in terms of economic imbalances and ‘extremely high risk’ in terms of credit risk in the economy.

    The report scored Nigeria’s banking industry’s institutional framework and competitive dynamics as ‘very high risk’ while the industry’s system-wide funding was adjudged to be of ‘intermediate risk’. The report however noted government’s support for the banking industry.

    According to the report obtained by The Nation, Nigeria’s economic risk was a balance between the country’s considerable natural resources and improving economic diversification and low wealth levels, persistent political risks, and large infrastructure deficiencies.

    “The economy depends, however, on oil revenues, and we consider that there is a strong potential for future asset and equity price bubbles. The main source of economic risk stems from Nigeria’s very weak payment culture and rule of law, poor underwriting standards, and high credit concentrations and foreign currency lending,” the report stated.

    It explained that the economic risk score for Nigeria was based on economic resilience, economic imbalances, and credit risk in the economy.

    The report noted that Nigeria’s strong economic growth and improving diversification were being held in check by oil dependence, low wealth and infrastructure deficiencies pointing out that dependence on oil has been a major catalyst for corruption.

    According to the report, Nigerian economy is expected to expand by about 6.4 per cent per year through 2013-2014, which is strong in a global context. Considerable natural resources support the economy, but the non-oil economy has largely fueled growth for the past few years. Key non-oil growth sectors include agriculture, trade, and services. Positively, this should broaden economic diversification and create opportunities for the banking sector.

    “Nevertheless, we expect the economy, exports, and government revenues to continuing depending on oil in the near term, which exposes domestic economic stability to oil prices. The reliance on oil is also, in our opinion, a catalyst for corruption, political interference, and internal security problems, while the majority of the population has yet to receive any real benefit. Nigeria remains a low income country, with per capita GDP that we estimate will remain below $2,000 over the next two years. Furthermore, there are significant shortcomings in physical, commercial, and legal infrastructure,” the report stated.

    S & P stated that ahead of the 2015 elections, political risk will likely increase and could stymied the reform process in the power, agriculture, and infrastructure sectors.

    “We remain more skeptical about real reform in the natural resource sector due to entrenched interests. Generally, we believe the country’s weak rule of law, along with corruption, will act to restrain growth and pose a continuing risk to the banking sector,” S & P stated.

    It pointed out that Nigeria’s restrained expansion understates the potential for high growth and large imbalances.

    “In our opinion, Nigeria could be exposed over the longer term to inherently high economic imbalances, including periods of credit volatility. This is because its wealth—supported by the country’s immense natural resources—is overly concentrated geographically, industrially, and among its population. In our opinion, this leaves asset prices vulnerable to systemic shocks, such as heightened political risk or a sharp drop in oil prices,” the report concluded.

    While the report noted that regulation and supervision under the Sanusi Lamido-led administration at the Central Bank of Nigeria (CBN) have been far more effective than in the previous regime, it however expressed apprehension that there could be a lapse when the CBN Governor steps down.

    “We view the trend for industry risks in Nigeria’s banking system as negative. In our opinion, mounting competition could push up the appetite for credit risk, particularly among the sector’s lower- and middle-tier banks. This in turn could lead to loosening underwriting standards. The change in the Central Bank of Nigeria’s leadership could in our view alter the positive regulatory developments of recent years, as well as the guarantees and support for lending in preferred (as defined by the Central Bank of Nigeria) sectors. This may further threaten the business models of lower-tier banks,” the report noted.

    The report noted the strong recovery at the Nigerian stock market, which prices have recovered strongly since mid-2012, with inflation-adjusted equity prices growing about 33 per cent in 2013, but it cautioned that Nigerian Stock Exchange is prone to volatility, illiquidity in bearish periods, and rapid growth.

    The Nigerian banking industry’s risk was based on S & P’s assessment of the institutional framework, competitive dynamics and system-wide funding.

    According to the report, Nigeria’s banking regulation and supervision assessment as “intermediate” strongly factors in the proactive intervention of the Central Bank of Nigeria during the 2009 financial crisis, which is thought to have averted a systemic failure. It also takes into account the central bank’s efforts to improve governance and oversight of risk management over the past three years. Nevertheless, staff and data capacity issues remain, as do gaps in the regulatory framework with regards to market, operational, and interest rate risk. Furthermore, the report raised concerns about potential long-term political influence at the central bank.

    It described regulatory track record and corporate governance in the Nigerian banking industry as “weak” noting that in 2009, 10 out of 24 banks, which represented between one-third and one-half of system assets, failed and had to be “quasi-nationalized” due to serious corporate governance deficiencies and reckless lending practices.

    “We regard governance and transparency in the Nigerian banking sector as “weak.” Positively, domestic banks started reporting according to International Financial Reporting Standards at year-end 2012. Increasingly, half-year and quarterly statements are available. We don’t expect implementation of Basel II or III within the next two years. Despite the efforts of the central bank to increase transparency and governance, for example through the reporting of related-party lending or by limiting tenure of bank managing directors, we still believe aspects of ownership, management, and governance lead to additional risk,” S & P stated.

    The report underlined that Nigerian banking industry’s competitive dynamics’ rating represented the structural implications of the competitive landscape that a bank faces within the broader banking industry, which is determined by risk appetite, industry stability, and market distortions.

    The report singled out the Asset Management Corporation of Nigeria (AMCON) as the only major distortion in the financial market noting that though it had played a main role in supporting the banking sector by purchasing nonperforming loans and recapitalizing failed banks, AMCON’s continued presence represented a major distortion.

    According to the report, AMCON remains a significant shareholder in the banking sector, through its direct ownership of the three quasi-nationalized banks, share collateral from margin loans, and a sizable liability with the Central Bank of Nigeria while all banks also have to pay 0.5 per cent of total assets to AMCON yearly to pay off past bad debt.

    “The Nigerian banking sector has undergone two major consolidation periods in the past 10 years. In our opinion, the second phase is close to an end, although the future of the three quasi-nationalized banks remains unclear. As the new industry landscape clears, we expect competition to increase and the sector to continue to organize itself into three distinct tiers. Most rated banks are in the upper and middle tiers. Positively, with 21 banks operating in the sector, we don’t believe there is any significant overcapacity because of inherently low leverage and retail penetration, as well as strong long-term economic growth fundamentals. We anticipate stiff competition, however, on at least two fronts: attracting low-cost retail deposits in a country with low banking penetration, and banking large corporates together with their staff, third-party suppliers, and distributors. We believe foreign banks will continue to attempt to enter the sector in 2013-2014, but barriers to entry remain high for banks without significant capital or scale,” the report outlined the industry stability outlook.

    S & P will today discuss its expectations about the risks and growth of Nigerian financial services over the next two years at a complementary seminar scheduled for Lagos. The seminar will look at Nigeria’s sovereign ratings in the context of political manoeuvring before and during the 2015 general elections which could undermine the reform process, increase regional tensions or derail Nigeria’s currently positive economic growth and diversification story.

     

  • Sterling Bank creates awareness for non-interest banking

    Sterling Bank Plc has begun enlightenment for the Muslim community on the need to embrace non-interest banking.

    Its Group Head, Non-Interest Banking, Basheer Oshodi said there is need to let Nigerians know about the opportunities that exist in that segment of the market.

    Oshodi, who spoke in Lagos at the weekend during a non-interest banking workshop organised by the bank, said the lender is committed to introducing the banking concept to everyone. He said the bank recently got the Central Bank of Nigeria’s (CBN’s) approval-in-principle to practice non-interest banking in the country.

    “What we are trying to do here today, is to introduce non-interest banking to everyone. We have gotten approval-in-principle from the Central Bank of Nigeria (CBN). What we are doing now is to get people to be aware of what non-interest banking is all about. We are trying to showcase the type of products we are going to come out with. Those products cover both risk assets and liabilities,” he said.

    According to him, research showed that 30.5 million adult Nigerians are willing to buy into non-interest banking products. Also, over 60 per cent of Nigeria’s adult population remains unbanked. Both scenarios, he said, are indications that the non-interest banking concept cannot fail in the country.

    Oshodi said, the bank will not only be focusing on the 30.5 per cent interested adults, but would also target the over 60 per cent unbanked population, when it finally begins operation.

    He said non-interest banks do not pay interest on deposits, but relies more on partnership and profit sharing, usually in a ratio of 70:30. The customer he said takes 70 per cent, while the bank takes 30 per cent from the profit, and also gives a portion to depositors.

    Chairman, Advisory Committee of Experts on Non-Interest Banking, Sterling Bank Plc, Sheik Abdulkader Thomas said Nigeria is a huge market for non-interest banking given its huge population base. He said the banking concept is a viable means of gathering huge deposits that banks can even use in financing infrastructure and other developmental projects.

     

  • Banking stocks trail market’s bottom

    Banking stocks recorded the least returns at the stock market as mid-year earnings failed to rekindle investors’ optimism on future outlook of the subsector.

    The Nigerian Stock Exchange (NSE) Banking Index opens today with the least year-to-date return among the eight indices that track equities at the NSE. Besides, the banking index is the only indicator with successive negative returns weekly, monthly, or quarterly.

    A review of year-to-date returns of groups of tracked equities on the NSE showed the banking index with the least return of 17.78 per cent. Banking stocks last week recorded average decline of 1.28 per cent, which built up a month-to-date return of -1.37 per cent and quarter-to-date return of -0.57 per cent.

    The All Share Index (ASI), the common value-based index that tracks prices of all equities, carries a year-to-date return of 30.27 per cent, far ahead of returns in several subsectors including banking, insurance, consumer goods and oil and gas subsectors.

    Unlike the ASI, which includes all equities, the banking index is a representative index and comprises of 10 banking stocks including Access Bank, Diamond Bank, Ecobank Transnational Incorporated (ETI), Fidelity Bank, Guaranty Trust Bank (GTBank), Skye Bank, Sterling Bank, United Bank for Africa, Union Bank of Nigeria and Zenith Bank.

    However, half-year reports by several banks including Zenith Bank, GTBank, Access Bank, ETI and Stanbic IBTC Bank have failed to stimulate the pricing trend in the subgroup. The subgroup fell below market’s average last week in spite of subsisting interim dividends and earnings reports. The ASI closed last week with a weekly loss of 1.11 per cent.

    The NSE Industrial Goods Index indicates the highest year-to-date return of 55.26 per cent. The ethic-based NSE Lotus Islamic Index, which comprises of 15 equities that meet the Islam’s standards, trails with the second highest return of 42.86 per cent. The NSE 30 Index, which tracks 30 most capitalised stocks on the NSE, opens with a return-on-board of 28.33 per cent. The NSE Oil and Gas Index still retains a substantial year-to-date return of 25.18 per cent in spite of the highest loss of 4.24 per cent recorded last week.

    The NSE Consumer Goods Index, which tracks fastest moving consumer goods companies, has a return of 22.72 per cent while the NSE Insurance Index is two points ahead of the banking subsector with a year-to-date return of 19.94 per cent. The NSE Insurance Index was the contrarian index in the pervasive downtrend at the stock market last week with a weekly return of 1.91 per cent.

    Interim earnings reports by banks have largely showed muted growths across key fundamentals, which analysts said highlighted the constraints imposed by new banking rules on cost structure and mandatory reserves for public deposits. Interim report and accounts of Zenith Bank for the period ended June 30, 2013 showed that profit before tax rose to N54.1 billion in first half of 2013 as against N50.2billion recorded in the corresponding period of 2012. The report indicated that profit after tax rose from N42.41 billion to N45.419 billion. Gross earnings grew by 13 per cent to N171 billion compared with N151 billion recorded in the comparable period of 2012.

    Also, key extracts of the interim report and accounts of Access Bank showed top-down declines in key performance indicators with profits before and after tax dropping by 14 per cent and 20.2 per cent respectively. Gross earnings had declined by 5.3 per cent. The bank however announced interim dividend of 25 kobo, same rate declared earlier by GTBank. Access Bank’s gross earnings dropped from N109.96 billion in first half 2012 to N104.13 billion in first half 2013. Profit before tax was lower at N26.09 billion as against N30.21 billion recorded in comparable period of 2012. Profit after tax slipped from N26.4 billion to N21.1 billion.

    Meanwhile, aggregate market capitalisation of all equities dropped by N129 billion last week to close at N11.584 trillion as against its week’s opening value of N11.713 trillion. There were nearly two decliners for every advancer with 52 losers against 28 gainers. The ASI, which opened at 36,986.94 points, closed the week down at 36,577.28 points.

    Total turnover stood at 1.12 billion shares worth N12.94 billion in 24, 489 deals. The financial services sector contributed about 65 per cent of total turnover with 724.39 million shares valued at N6.29 billion in 13,418 deals. The conglomerates sector followed with a turnover volume of 129.62 million shares valued at N223.10 million in 961 deals.

     

  • Banking literacy guidelines coming

    Banking literacy guidelines coming

    Plans are underway to release the financial literacy frameworks in September this year to increase the customers’ knowledge and participation in banking activities, it was learnt.

    Sources close to CBN said the frameworks, which formed an integral part of the financial inclusion strategies introduced last year to bring more people into savings net, would soon be implemented.

    It was also gathered that commercial banks, microfinance institutions, mobile money operators, among others, are going to play significant roles in the execution of the guidelines.

    Confirming the development, the CBN’s spokesman, Mr Ugochukwu Okoroafor, said the framework is one of the initiatives on the radar of the banking watchdog.

    He said the guidelines are of utmost importance to the apex bank since they would help in making more people understand and access banking services.

    He said apex bank has created a consumer protection department to cater for the needs of depositors, adding that the financial literacy frameworks would compliment such efforts.

    He said: “It is true that financial literacy frameworks will soon be released. We created a consumer protection department to help fight for depositors whose rights have been trampled upon. The next thing is to create a conducive environment to facilitate the growth of customers by making them literate on issues relating to banking transactions. This is where the issue of financial literacy frameworks comes in.”

    Noting that the level of financial illiteracy in the country is very high, he said many people do not know how to prepare and present bankable projects to secure loans. Besides, he said they do not also know how to open accounts, write cheques, request for loans or overdrafts, operate Automated Teller Machines (ATMs), use Point of Sale(PoS) terminals among other electronic payment channels.

    He said the level of financial inclusion is very low in the rural areas because many do not have bank accounts.  The frameworks, he said, would address these issues when they are eventually implemented.

    The CBN introduced financial inclusion programme following the discovery that about 70 per cent of the 160million people do not have bank accounts. The World Bank in a report also noted that Nigeria had the highest number of people that do not have access to banking services.

     

  • The many faces of banking reforms

    The 2009 banking reforms introduced by the Central Bank of Nigeria (CBN) seems to be passing the test of time. No bank has failed and no depositor has lost money. But, many jobs have been lost. COLLINS NWEZE and DUPE OLAOYE-OSINKOLU report.

     

     

     

    THEN the National President of the Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Comrade Olusoji Salako, predicted job cuts as a fallout of the banking reforms introduced nearly four years ago by the Central Bank of Nigeria (CBN), he was seen as a prophet of doom. Events since then have proved him right.The government, however, has allayed the fear of bank workers, saying the reforms will create more jobs in the long run, after the initial cut.

    Today, the reforms have claimed thousands of jobs and also removed the attraction of banking jobs. Reason: regular jobs have been converted to contract and casual labour.

    The reforms also led to a drastic reduction in workers’ salaries and emoluments. The good side is that the reforms forced banks to reduce cost, thereby preventing them from declaring “paper profits.”

     

    Labours’ grouse

    ASSBIFI data showed that over 7,000 jobs have so far been lost to the reforms. The number will get higher as the retrenchment which began in 2009 is still on. “It is something we thought would have abated by now but it has not. It also shows that something is still not right with our banking sector. All the reforms, efforts and intervention by government have not yielded the desired result in the sector,” Salako said.

    He said the CBN’s monetary tightening measures, which have left interest rate at 12 per cent in the last one year brought hardship on the real sector. Many firms are reducing production capacities and cutting jobs, he said.

    Besides, he added, loan growth is suffering, with banks concentrating on lending to multinationals and other blue chip companies where risk is minimal. The financial statements of the banks, however, indicated that their loan portfolios have risen.

    Concerned about the bank reforms-induced job losses, ASSBIFI said the government has not developed the right political will to implement its own policy. Salako said the government got the reforms process wrong. “You are doing reform and people are asking… where is the money collected from people that are indebted to these banks or people that were involved in the destruction of these banks? Where are they?

    “Now if you deploy money into a system, you must ensure that the system works. The regulator has not helped matters. A lot of people who have been found wanting in the course of the problems we have in these banks are around and enjoying their loots. They have properties everywhere and it is like the government is handicapped. If you don’t collect all thiss money, how can the banks survive?”

    Salako blamed the Asset Management Corporation of Nigeria (AMCON) “for not being fair”. He said AMCON has not helped the industry because it did not state its intervention in clear terms. “If AMCON wants to be fair, it should come out in clear terms stating its intervention, who will lose and gain. You see, when the government begins to do things and write several versions of its own policy, then there is a problem. The government must develop the right political will to tackle the issues involved,” he said.

    On why inherited workers are usually laid off by new owners of acquired banks without severance benefits, he said the issue with banks, such as Mainstreet is that the government is the owner of that bank under law. Under the law, any institution that is not up to a certain year of existence cannot pay gratuity.

     

    CBN intervention

    The CBN and NDIC had in July 2009 carried out a special examination of all the 24 banks with the aim of assessing their health, with particular focus on liquidity, capital adequacy, risk management and corporate governance practices.

    Ten banks were adjudged to be in grave states with deficiencies in capital adequacy. Of these, eight also had significant deficiencies in liquidity, risk management practices and corporate governance policies. The 10 banks got a lifeline of N620 billion in the form of Tier 2 Capital.

    The Managing Director/Chief Executive Officer, AMCON, Mustafa Chike-Obi, said the acquisition and transfer of ownership has been effected through a subscription agreement with each of the three banks. By the subscription agreement, AMCON has become the owner of the three banks, and provided sufficient capital to restore them to the level of capital adequacy stipulated by the CBN.

    Thereafter, the lenders assumed all the assets and some of the liabilities of the defunct legacy banks based on a Purchase and Assumption Agreement with NDIC as statutory transferor of the said assets and liabilities. The liquidation was gazetted in accordance with the law, thus bringing the process to a close.

    The bridge banks recognised the enormous people issues they inherited. Most of them temporarily retained their legacy staff as directed by stakeholders by issuing them new employment offer letters with terms and conditions, which included a six-month probationary period.

     

    Job cuts

    However, to tackle effectively the legacy people issues that they met on ground, the bridged banks management carried out a rationalisation in response to a performance review which identified, among others, staff with low and unacceptable levels of performance.

    But the sacking spree did not just end in bridge banks. There were also large job cuts in Ecobank Nigeria, Access Bank, Union Bank, Diamond Bank, among others, as the lenders’drive for deposits deepened.

    Ecobank had, at a go, sacked 1,000 of its workforce. Majority of the disengaged staff were those that joined the bank after it took over the former Oceanic International Bank.

    A staff member of the bank, who spoke anonymously, confirmed that over 700 staff were affected by the rationalisation. The bank later said in a statement that it was giving opportunity to 600 of its non-core staff to become permanent employees. The lender said it has also recognised after careful review, the need to disengage staff and provide severance pay to those affected in agreement with the workers’ unions.

    The Managing Director of the Bank, Mr Jibril Aku, explained: “Our focus in the new enlarged Ecobank is to ensure a smooth integration of the two banks as soon as possible while working to improve the quality of service to our customers and our operational efficiency.”

    He said the bank understands that people are its key asset, and, therefore, have emphasised the need to reward its best performers, and open up new opportunities for talented, committed people to join it as permanent employees. He added that the bank is taking steps to ensure that all disengaged staff are treated fairly in line with industry practice.

    Director, Centre for Social Justice (CSJ), Eze Onyekpere, however, regretted that the regulators did not keep to the deadline. “Revoking licences of the banks about seven weeks to the expiration of the deadline is not only an abuse of powers, but clearly a vindictive action without precedence. Why did the CBN fix a deadline if it had no intention of respecting same?” he queried.

    In defence, a top CBN official said the regulator had to move in to revoke their licences when it was obvious that the lenders could not find a partner to merge with, stressing that a particular bank was losing an average of N10 billion every month.

     

    Benefits of CBN’s reform

    CBN Director of Communication, Ugochukwu Okoroafor, said rather than thinking of how much jobs have been lost because of the reforms, there is need for labour leaders to also look at the grave cost of not reforming the sector.

    He said countries, such as Greece, Iceland and Spain, decided not to reform, and that has cost the economies a lot. “The alternative for the reforms would have been a disaster. And we have seen a drastic reduction in non-performing loans due to the role of the Asset Management Corporation of Nigeria in the reforms,” he said.

    The apex bank’s spokesman said Nigeria has benefitted a lot from the reforms, adding that no depositor lost his money.

    He said there have been no new jobs because no new banks have been established.

    Corroborating Ugochukwu, a top CBN official, who craved anonymity, said the banking reforms were carried out without any bank failing, no depositor or creditor losing money and at minimal fiscal costs, as the banks themselves bore some of the costs.

    He said: “Capital adequacy ratios averaged more than 20 per cent and non-performing loans, which had soared, are back below five per cent.

    “Besides, banks have transformed from places merely buying government bonds and funding blue-chip companies to focusing on the middle part of the economy, where growth happens and jobs are created. The middle part of the economy involves industries, such as agriculture and manufacturing, which have long been neglected by lenders.

    “We also have low inflation rate. This is the first time in years since moderate inflation rate was achieved, as Nigeria recorded a 8.6 per cent (as at end February 2013) inflation rate in January.

    “There is also stability in the financial system, which provided macroeconomic stability through maintaining zero-tolerance for infractions in regulatory requirements on data or information reporting.

    The Bank’s Financial Stability Committee works closely with a reinvigorated Financial Services Regulation Coordinating Committee (FRSCC), which is an umbrella platform for the coordination of activities of the various regulators in the financial system. The bank and its stakeholders are become conscious of the institutional relationships and market interactions among the various sub-sectors in the financial sector and the need to integrate regulations.

    “In addition to these, external reserves have been inching up, hitting $49 billion in the first quarter of the year, 2013.

    “The naira exchange rate has also been able to stablise the naira. For two consecutive years, the naira averaged N157.42 to N159.20 (end of first quarter, 2013) against one US dollar.

    “Non-interest banking, which provides additional window and opportunity in form of new products and there are attempts to bring in some of the unbanked members of the society through financial inclusion.”

    He noted that the CBN has also intervened in the real sector (agriculture, aviation, manufacturing and power sectors); Nigeria’s macroeconomic indicators rose by more than six per cent this year and the country has a account surplus equivalent to about eight per cent of GDP and its debt-to-GDP ratio is less than 20 per cent.

    He also spoke about the improvement of the payment system, which culminated into the launch of the cash-less policy.

    The CBN official said: “To strengthen governance practices, eliminate perceived ambiguities in and align the code with current realities and global best practices, the bank implemented the Corporate Governance Project. The banking system relies on the effective operation of a range of integrity systems for keeping the institutions and their management honest and accountable.

    “It also introduced the Shared Services. This project is geared towards reducing costs by about 30 per cent over the next three years. It is meant to reduce costs in the industry through the sharing of data centres, infrastructure, Automated Teller Machines (ATMs), banking applications and power, among others.”

  • Electronic banking, electronic frauds

    Electronic banking, electronic frauds

    With the introduction of electronic banking, many thought that frauds would become a thing of the past. How wrong they are. Bank frauds are rising more than ever before despite the coming of mobile money, Automated Teller Machines (ATMs), among other electronic banking products. LUCAS AJANAKU reports.

     

    THE Managing Director, SO4 Engineering Services, Soji Oluwasuyi, will not forget in a hurry what happened to him about four years ago when he lost money through the automated teller machine (ATM).

    According to him, he withdrew N20,000 from a branch of his bank on Idimu Road, a Lagos suburb and headed for the Island to fix an electrical fault for a client.

    “I was on top of the roof when a text message (alert) came to my mobile phone. When I opened it, it was a transaction alert that N40,000 had been withdrawn from my account in Gbaja Market. That was the first time I will hear about the existence of a market bearing that name. I screamed and someone told me it was somewhere in Yaba area or so. I was shocked because I still had the ATM card in my breast pocket. The following day, I rushed to my bank to complain and I was given a piece of paper to write a petition. I did that but that ended the story,” he said.

    He was just one of those who lost money to the ATM fraud that rocked the industry during the formative years of its adoption. The situation has since changed with the introduction of fraud-resistant technology in ATM cards.

    Deputy Governor, Banking Supervision, CBN, Tunde Lemo, said ATM fraud has gone down tremendously to about 98 per cent.

    But it is against the backdrop of previous experience and the fact that Nigerians are smart that a recent report of the global information technology (IT) security firm, MWR InfoSecurity becomes relevant.

    Mobile banking on Android phones could put consumers at risk of fraud and cost banks millions a year, MWR InfoSecurity warned.

    MWR Labs, the research arm of MWR InfoSecurity, investigated the security standards of leading Android mobile phone brands to determine the exposure to risk of consumers who use mobile devices phones for online banking, Mybroadband, noted.

    According to a recent research, Android is the leading phone platform with over 50 per cent market share, driving the development of mobile banking apps for the Android ecosystem while results indicated that on some handsets, as many as 64 per cent of manufacturer-added applications or apps were exposing users to serious security issues.

    Commenting on the development, Managing Director, MWR, South Africa, said: “We found that while banking apps were generally well written and had very few security issues, the integrity of consumer phones was often compromised by software provided by the phone manufacturer or additional software added by the network provider, exposing online banking customers to potential fraud.

    “Some of the leading Android handset manufacturers are already looking at shipping mobile devices with native near-field communication (NFC) payment functionalities but if the software in the phones is not secure, the risk will then be even higher.”

    According to him, the increasing number of merchants migrating to smartphone based Point of Sale (POS) devices, by using Bluetooth or directly connected chip-and-pin accessories for iPhone or Android, for example, is symptomatic of the fact that mobile phones will become a critical element in the payment chain, warning that if they are not adequately protected, they could introduce additional risks for card fraud that could cost banks millions a year.

    These findings were illustrated by the ruling on HTC by the Federal Trade Commission in the United States of America on February 22 that directed that HTC take immediate action to address security weaknesses in the software developed for its mobile devices that allowed location tracking and the theft of personal information stored on users’ phones.

    According to MWR Labs, six classes of potential vulnerabilities in apps and packages in the leading brands and mobile phones were looked at using a modified version of Mercury, its security testing framework, to automatically scan the devices and identify security weaknesses, adding that it discovered security vulnerabilities in software added by phone manufacturers or network providers which could be targeted by a malicious application inadvertently downloaded by the user.

    The report added that these weak apps often have more permission that allow them to access contacts, make telephone calls and even record the content of those calls, meaning that the potential consequences are serious and sensitive data could be compromised in the process.

    Other apps were also discovered that allowed further apps to be installed with an arbitrary set of permissions, essentially leaving consumers fully exposed to fraud.

    “The move by consumers away from PC’s for online banking to mobile platforms will inevitably be followed by the criminal gangs who have been successfully targeting online banking for years. We have already seen many examples of malicious apps sending premium rate text messages and expect there will be a natural progression to higher value areas such as payments and banking,” Grobbelaar said.

    Managing Director, New Horizons, Tim Akano, warns that the banking industry will be the target of attack this year. According to him, hackers will compromise the network of the lenders and sell data for profit.

    The warning notwithstanding, mobile money has continued to face some challenges in the country leading to its sluggsih uptake.

    Managing Director, Parkway Projects Limited, Uzor Eziukwu, disagrees. He said the uptake has not been slow, adding that it would take sometime before the initiative would be stabilised in the country.

    Parkway is a leading provider of home grown e-banking and e-payment solutions in Nigeria and reaching out to the rest of Africa

    “I don’t agree that it has been slow and sluggish. Generally, financial services have their life cycle. We have the same experience with ATM cards, which took about three years to pick up. We are just one year into mobile money or mobile payment, the response is ok but there are challenges like infrastructural challenges but it is still (in its) early days, we will get all these things sorted out,” he said.

    According to Visa Incorporated and Fundamo, the Visa-owned mobile money platform, while the market has potential to lead the world in mobile money, only 35 per cent of the citizens are aware of mobile money

    A study by Visa revealed that only 35 per cent of respondents were aware of mobile money versus an average of 56 per cent across all six of the emerging markets surveyed.

    According to the study, there were 110 million mobile subscribers in Nigeria, but only 56 million of them have bank accounts, making it one of the most exciting mobile money markets in the world because of its huge potentials. The report noted: “Consumers’ needs for financial services are far more sophisticated than previously believed and go well beyond the established transaction set offered by mobile money services today.”

    The Visa study suggested that the success of mobile financial services was determined by how deeply a mobile money provider understood its customers and tailored the service to their needs as well as those of mobile money agents from service menus to marketing and education.

    To raise awareness and drive adoption, it said providers needed to educate consumers on the key benefits and uses of mobile money services, whilst tackling barriers to uptake. According to the study, 83 per cent of respondents in Nigeria cited “safety of not having to carry around a lot of cash” as the primary benefit of mobile money, adding that the greatest barrier to adoption in the country was whether those money was sent to would know how to receive it.

    A mobile payment expert, Emmanuel Okegwale, identified mobile banking application interoperability as a key challenge in developing a sophisticated mobile payment system in the country. “The single reason for this is the manner in which mobile phone applications evolved over time, device manufacturers focused on particular standard and this led to a proliferation of applications. The financial regulator, CBN, should look into this issue at this early stage so that mobile banking ecosystem can be robust with national standard that cuts across banks. “Bank-specific mobile banking platforms is akin to having each bank deploying its own ATM technology which other bank customers cannot access,” he said, adding that interoperability can also help to evolve a standard that will enable low end phones, which are excluded, to do mobile banking.

    He said apps distribution for mobile banking is another area where some banks are facing challenges. According to him, while some forward looking banks are overhauling their gateways and reducing their reliance on mobile operators’settings to enable customers’ phones, others are actually asking that customers come with regular operator settings, which in many instances, might not be correct configurations settings.

    Analysts say mobile banking holds the solution for the CBN’s financial inclusion strategy. They, therefore, urge stakeholders in the ecosystem to find a way round the security challenge.