Doubts persist about Nigeria's banks

THE bright logos of Nigeria's financial institutions adorn the tallest
and poshest office blocks in central Lagos, the country's commercial
capital, testimony to years of impressive growth in banking. But now,
after a rocky year, there are worries that some of the optimism may
have been overblown.


The reform of Nigeria's creaking, corrupt banking system was one of
the big achievements of President Olusegun Obasanjo in his second term
in office (2003-07). As part of a policy to squeeze weak or failing
banks out of business, in 2005 the Central Bank of Nigeria raised
banks' capital requirements. In a hectic round of consolidation, the
number of banks dropped from 89 to 24. Those that remained have had a
very good few years, with massive local expansion and sometimes
triple-digit growth in their share prices. And with less than a fifth
of Nigerians keeping their money in banks and with fast growth led by
private companies, there still seems to be plenty of potential for
more business. Banks surveyed by a Lagos-based stockbroker, Afrinvest,
showed that median before-tax earnings had risen by 141% year-on-year
by June.


Yet share prices have been dropping throughout 2008, suggesting a lack
of confidence. Would-be investors have started to eye Nigeria's banks,
in particular their regulatory practices, more warily. Some wonder
whether the apparent gains of the past few years are all they seem.
"The foundation is not there, it's weak," says an analyst, Osaruyi
Orobosa-Ogbeide, of a Lagos-based firm, Financial Derivatives.

Though banking standards have certainly risen a lot in recent years,
they still lag behind those of America and the European Union,
particularly in terms of transparency. In April, United Bank for
Africa, one of the country's biggest, fell foul of American regulators
who served the bank with a $15m fine for ignoring anti-money-launderi
ng regulations despite several warnings. "There's no resemblance at
all between operating in Britain or America and operating in Nigeria,"
says Fola Fagbule, a research analyst with Afrinvest. "It's light
years apart, and it's an issue [the banks] need to address".


The top seven Nigerian banks, with a combined market value of almost
$40 billion, are overvalued by as much as 56%, according to a report
published in May by JPMorgan, an American financial-services company.
Part of the problem is that banks have used their own money to push up
their stock prices by engaging in risky lending to corporations and
individuals who invest in the banks' own shares.

Those in charge of imposing some order on the sector have also been
found wanting. After share prices began to fall earlier this year, the
central bank set a floor on trading in a bid to buoy the market.
Investors were left with no choice but to hold on to stocks; that
unnerved many of them. Bismarck Rewane of Financial Derivatives
described the action as "a disorderly intervention in a chaotic market."

Lamido Sanusi, a risk-control officer who will take over next January
as the head of Nigeria's oldest bank, First Bank, is disappointed that
regulators are not tougher in insisting on transparency and disclosure
of information. Foreign investors demand open banking procedures, he
says, yet banks are not now obliged to open their books to scrutiny.
"Are these banks being properly managed? Are these assets being
properly deployed?" asks Mr Sanusi. "We don't know the reality."


Nigeria is sub-Saharan Africa's second-biggest economy after South
Africa's and the world's eighth-largest oil exporter, yet the
continent's most populous country (with 140m-plus citizens) has yet to
fulfil its economic potential. A robust banking sector that everyone
can have confidence in is essential; the country's reformers and
regulators cannot rest on their laurels.

engineerd:

tell me how this affects my life! Nigerian banks healthy or NOT? wth?

blacklion:

I'D like to know more about Lamido Sanusi. The much I know about him is related to some articles he wrote opposing sharia law. But I know very little about his management credential or risk control experience. Can any one with relevant info please share?

ayotee2000:


Sanusi Lamido Sanusi holds degree[/b]s [b]in economics from the Ahmadu Bello University, Zaria, Nigeria, and in Shari’ah and Islamic Studies from the International University of Africa, Khartoum, Sudan.

Born in Nigeria in 1961, Sanusi is a member of the Fulani ruling family in Kano, being a grandson of the 11th Fulani Emir, Muhammadu Sanusi. Sanusi started his working career as an academic, teaching economics at the Ahmadu Bello University from 1983-1985. He then moved into banking, working first as a merchant banker with Icon Ltd (a subsidiary of Morgan Guaranty Trust Bank of New York and Barings Brothers of London) and after his studies in the Sudan as a risk manager with the United Bank for Africa plc, one of the largest banks in Nigeria. In September 2005 he was invited to the Board of Nigeria's largest retail bank, First Bank of Nigeria PLC and he is currently the Executive Director in charge of the Risk and Management Control Directorate of First Bank. Sanusi is a writer who has over the years participated in debates on politics, religion and society in Nigeria. He has also been invited to speak at international conferences in several countries. He has recently focused his writings on religion and the state, as well as the question of interpreting Islam in modernity. He has contributed articles to a number of publications on shari'ah in Nigeria and also presented papers at several international conferences, in addition to participating actively in public debates in the Nigerian press. Most of his articles are available on the internet.

http://www.zamyn.org/162-Lamido-Sanusi.html

kemisuga:

I can bank my money in my house . Nothing interest me about any bank in Nigeria.

Hawkeye:

Where is your house? hehehe

kemisuga:

I can bank my money in my house . Nothing interest me about any bank in Nigeria.

brownbonno:

Are there no Bankers in the house to give their intelligential views on this topic ?
Are Nigeria banks only exit as conduct pipe for laundry government into foreign countries ?

Only seven banks in the country are healthy, according to the Nigerian Accounting Standards Board (NASB), contrary to the widespread view that all the 24 banks are strong.

The NASB is Nigeria's financial reporting watchdog.

It stated that from its examination of the books of the banks, their weaknesses would have been glaring to the regulators and the public if the uniform year-end rule had been enforced.

NASB Technical Director, Jim Obazee, told financial journalists at the weekend that only two of the healthy seven banks qualify as market makers.

His words: "Four banks were captured by the study as still in transition to healthy condition, meaning that they are not yet there; 11 banks were found to be merely existing, meaning they are not strongly footed for the role they assume to be playing.

"The study identified two weak banks that have to be strengthened to protect the industry."

Obazee is also the Moderator of International Accounting of the American Accounting Association (AAA), and a member of the United Nations Committee on Trade and Development (UNCTAD)

He said Nigerian banks engage in a number of malpractices that hide their true financial position from the regulators, and that most of their claims concerning their rankings are baseless calculations that deceive the public.

"The situation in most of the banks is that when the liabilities are properly accounted for, the over N1 trillion balance sheet claimed by some of them amounts to nothing in terms of net worth."

He stressed that a uniform year-end fixed in any month other than December will help to sanitise the system.

Since most companies' year-end fall in December, the pressure of work is unbearable for the five major auditing firms if banks also end the year the same month, said Obazee.

He added that any other month from March is ideal as a common year-end.

"Notwithstanding the shortcomings of the common year-end, it remains the best practicable solution to effective monitoring, surveillance and regulation of the banking sector."