BANK REFORM: NIGERIA HAS DONE WELL BY GLOBAL STANDARDS - RAZIA KHAN, S&P

By NBF News
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As the reform measures in the Nigerian banking industry draws to a close, a number of internationally renowned financial experts have given a pass mark to the Central Bank of Nigeria (CBN) for taking measures adjudged to be of global standard.

Regional Head of Research Africa, Standard Chartered Bank London, Ms. Razia Khan said such step by step measures taken by CBN beginning from August 2009 to August 2011, are by global standards perfect. According to her, having successfully seen the banking sector through a far bigger crisis in which depositors did not lose their money the latest move by the apex bank at nationalising the three remaining banks was understandable.

Stressing that as the removal of interbank guarantees approached, a rise in interbank rates with its negative consequences was inevitable. Also the three nationalised banks 'had been making losses on a monthly basis, and were subject to a surge in withdrawals as September approached,' Khan stated.

Commending CBN, she opined that although debate over the authorities' pre-emptive action continues, it is difficult to see any justification for not taken action ahead of the end-September deadline, giving the wider risks posed to the banking sector by the failing banks.

Similarly, a Frankfurt-based credit analyst at Standard and Poor (S&P), Christian Esters, said in a phone interview that the banking sector in Nigeria has undergone such a significant transformation in the last two years that is capable of raising the country's rating higher. But 'What holds the rating down is the remaining political uncertainty. It is also the dependence on the oil sector prices and the low level of economic development generally.'

'The banks' asset quality has markedly improved since AMCON relieved the banks of the bad loans,' said Esters. 'The ratio of non-performing loans has been bought down quite a lot by this measure.'

Earlier, the Head, Corporate Communications, CBN, Mohammed Abdullahi chronicled the steps taken by the apex bank to include: working closely with the Ministry of Finance, NDIC and SEC, which has led the governments' efforts to stabilise the banks and mitigate any adverse impact on financial system stability, with a firm commitment that depositors and creditors would not lose any money. other key actions taken are: a.

Injection of N620billion into the banks and the replacement of the executive management teams with interim management teams tasked with taking the banks to a safe harbour.b. Management actions, including loan recovery, cost minimisation, deposit stabilisation, liquidity managementetc.c Implementation of a detailed recapitalisation plan through the introduction of a strategic partner, potentially in combination with a rights issue.

The banks officially launched their respective M&A processes in December 2009. This process was driven by the Boards of the respective banks.d. Establishment of AMCON – AMCON has now successfully acquired the bulk of the Non-Performing Loans (NPLs) from the affected banks in two tranches (December 2010 and March 2011).