IFC SUPPORT FOR NIGERIAN BANKS
The recent announcement by the International FinanceCorporation (IFC) that it has packaged a $300 million (N45 billion) support for nine Nigerian banks is good news. The financial assistance is just the first phase of a series of contingent support plan by the key arm of the World Bank for Nigerian banks that have excelled in corporate governance, a major benchmark for assessing risk management in the financial services sector.
The beneficiary banks, which are in the top bracket in the Nigerian banking industry, are Access Bank, Diamond Bank, GT Bank, Ecobank, UBA, First Bank, FCMB, Stanbic IBTC and Zenith Bank.
The Vice President of IFC for Global Industries, Mr. Jyrki Koskelo, who unveiled the financial package in Lagos, said IFC decided to inject the amount in these banks as part of its own broader strategy to strengthen the banking sector in Nigeria following last year's global financial crisis, as well as the turbulence that hit some Nigerian banks as a result of the reforms initiated last year by the Governor of the Central Bank of Nigeria (CBN), Mallam Lamido Sanusi.
The IFC Vice President stated that besides best corporate practices, the beneficiary banks were selected based on their long-term partnership with the corporation. Apart from the $300 million, IFC is providing two Nigerian banks, GT Bank and First Bank, with $200 million (N30 billion) and $100 (N15 billion), respectively, in long term funding and convertible sub-debt and loans.
It is heartening that this financial intervention has come at a time that Nigerian banks are going through testy times. This intervention is, indeed, sunshine after a storm. Before the CBN's breathtaking reforms which shook the sector to its very foundation, many banks had piled up huge non-performing loans (NPLs), and committed many financial blunders, with some of the chief executives helping themselves to shareholders' funds.
It is in this regard that the intervention from the IFC should be seen as a welcome relief and a confidence boosting measure that must be reciprocated by the recipient banks. We urge the banks to use the capital judiciously by investing it in areas that will ginger quick economic growth. Such areas should, of necessity, include the real sector like manufacturing, food crop processing, mining and general infrastructural development. The banks should see this gesture as a vote of confidence and a mandate to utilise the fund for the good of the economy. They need to be reminded that the era of round-tripping and other indulgences that have no direct benefits for the people, by their chief executives, is over.
In applying the funds, the banks should be wary of the economic and political condition of the country, and avoid high-risk ventures. We also advise them set up internal lead management groups. These groups should be responsible for carefully documenting this facility and taking significant responsibility for its administration. If well managed, the facility from the IFC can boost our external reserves and stabilise the naira, in addition to increasing the capital base of the recipient banks.
For the CBN, this IFC support is an endorsement of its reform programme. But, reform is only worthwhile if it is corrective. It should not be a disruptive measure that could reverse gains already recorded. We suggest that the CBN directs its reforms mainly to the regulation and monitoring of the various fiscal policies it has initiated. Any measure that could elicit panic from investors will be a disincentive to capital inflow that is urgently needed in the banking system.