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Not yet uhuru- The Nation

By The Citizen
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Last week, the Nigerian Deposit Insurance Corporation (NDIC) released its 2012 annual report on the state of the nation's lenders. Among its many highlights, it showed that the banking industry recorded a total of 3,380 fraud cases. The figure for 2011 was 2,352. However, there was a significant decline in the amount involved, from N28.4 billion in 2011 to N18.04 billion in 2012 - that is, 36.4 percent. In the same vein, the contingency loss rose from N4.072 billion in 2011 to N4.52 billion - a quantum jump of 10 percent.

Among the other highlights, the banking sector's total assets reportedly grew from N21.89 trillion in 2011 to N24.58 trillion in 2012 (10.91percent). As for the ratio of non-performing loans to total loans, this is said to have decreased from 4.95 percent in 2011 to 3.51 percent in 2012. The NDIC attributes this to the purchase of the non-performing assets of the banks by the Asset Management Corporation of Nigeria (AMCON). Credit to agriculture stood at 3.6 percent of the entire loan portfolio in 2012 -a slight improvement from 3.11 percent in 2011.

In all, the NDIC rated 10 of the 24 banks as 'sound'; nine were rated 'satisfactory' just as one bank was rated 'marginal'. It found no bank 'unsound'.

Four years after the exercise undertaken by the Sanusi Lamido Sanusi-led Central Bank of Nigeria (CBN) to cleanse the industry of its rot, the mere suggestion that fraud continues to fester ought to trigger alarm. If it is any indication, it is of how the internal controls instituted by the banks in the aftermath of the exercise have failed to square up to the challenge of fraud.

And here we are dealing with a quantum jump in fraud cases from 2,352 to 3,380 all in one year! Taken together with the jump in contingency losses by as much as 10 percent, there can be no better indication of how much the system has remained fraud-ridden.

The challenge of course is to bring fraud cases to the barest minimum. That would obviously require taking a comprehensive look at the internal controls of the banks, with a view to bringing them up to date. Investing in new technologies to fight fraud would be a positive move at this time; however, a programme of human capital development to address the problem would seem infinitely better in the long run. The challenge for the Bankers' Committee is one of finding the right mix. What the NDIC report suggests is that it is yet to get there.

At the heart of the NDIC report is the question of the state of the financial services sector. Most instructive is the NDIC's rating of the financial services sector as relatively stable in spite of its findings of only 10 'sound' banks out of 24. The nation deserves more than a 'relatively stable' financial sector. We say this because it's been eight years since the first round of banking reforms - consolidation - and four since the second cycle - sanitisation - ended. Once the nation had a motley club of 84 banks; now there are 24 with the anaemic banks supposedly gone with their toxic assets.

What Nigerians are interested in is whether anything has changed in any substantial sense. Are the banks better primed to assume their financial intermediation roles to the credit-starved economy? Are the costs of funds to the real sector any cheaper now than they were prior to the reforms? What about the plan to deepen the financial services sector? Is the informal sector now better served post-reforms? These are the questions that bother Nigerians - not some high-minded system stability.

Above all, does anyone need other proof of the neglect of the vital agricultural sector than the paltry 3.6 percent credit extended to it in 2012?