Nigerians are underserved and being punished by the inadequacies, inefficiencies and lack of governance in the banking industry, most of which can be blamed on the Central Bank of Nigeria (CBN), which is failing in its statutory responsibility to regulate and supervise the banks, according to panelists and contributors at the online citizen-organised People’s Parliament.
Attendees at the event, titled, ‘Issues with Banking in Nigeria and How to Solve Them’, attended by Nigerians at home and in the diaspora, agreed that without urgent CBN intervention and another major restructuring in the industry, the banks will continue to device ways to maximize profit to the detriment of ordinary Nigerians who are being hurt by the banks.
According to a statement for Rescue Nigeria by Biodun Durojaiye and Tunde Odediran, the People’s Parliament has been organised for more than two years by the Initiative for Good and Informed Citizenship, a civil advocacy group popularly known as Rescue Nigeria, formed to educate and empower Nigerians about social and political issues.
Panelists at the event included a business administrator, chartered economist and certified financial compliance professional, Frederick Okuagba; investment and commercial banker, now energy infrastructure entrepreneur, Ademola Oni; and a chartered accountant in the UK and Canada, experienced in Nigerian and Canadian banking, Ibukun Akinyinka.
Former banker, Ademola Oni expressed concerns about the current state of the banking sector, highlighting issues such as lack of regulation, irresponsible marketing, and a focus on consolidation over expansion. He argued that regulatory bodies need to be more proactive in monitoring and regulating banks, and suggested that aggressive marketing tactics should be reined in.
According to him, things were going well with the banks until the change of guard at the CBN to a former banker and shareholder of a bank. “They have amended so many regulations that had been in place, to suit themselves.”
Oni raised concerns about the state of the banking system in Nigeria, including lack of supervision, indiscipline, and unjustifiable charges used as profit-making strategies by the banks and other financial institutions, highlighting uncontrolled and frequent service fees and the mandatory payment of interest on deposits. He, suggesting that Nigeria could learn from more advanced countries to improve its banking system.
“What they are doing in Nigeria, they can’t do in Ghana because their central bank is strict. They can’t do it in Kenya or the UK. Because of the capacity of the Nigerian banks, they are dominating in other countries; so why are we having issues in Nigeria,” he pondered.
The banks have to be held accountable and monitored properly so that they do not cross the boundaries of the law as they strive to make profit, Oni added, observing that the banks have become immune to regulations and so powerful once one of their own became the governor of the Central Bank.
He remarked that the same Nigerian bankers which followed the laws in other parts of African and the UK found it difficult to follow the rules in Nigeria because of weak monitoring of financial institutions in the country.
Akinyinka agreed that while there was an urgent need for strict banking regulations in Nigeria, the banks also operate in a difficult environment, adding that the time is right for another consolidation in the industry.
“The banks are relaxed and are not competitive in terms of delivering service. They just want to make profit. We need a revolution in the banking industry. When you have to line up to enter a bank, you are going to have issues. The banks need to invest in infrastructure, technology and training”, he reasoned.
The Canadian banker discussed the evolution and challenges of the banking industry in Nigeria, particularly focusing on the impact of off-site ATMs and Fintech services. He highlighted how banks previously made profits from off-site ATMs, but regulatory changes and the introduction of Fintech services disrupted this revenue stream. However, Ibukun pointed out that Fintechs have opened up new opportunities in service delivery.
The participants discussed the challenges Nigerian banks face, particularly in lending to small and medium-sized enterprises (SMEs) and the retail sector. Akinyinka, citing his experience in Nigerian banking, noted that high risk associated with the interest rate, compounded by the current economic climate, makes lending unattractive to banks. He also pointed out that microfinance banks, which are closer to the SME market, are also stifled by the operating environment.
According to him, no business can make be successful if the lending rate is at 30%, and banks find it difficult to lend at lower rates because of the risk of default.
Owing to the risk of default, Oni and Okuagba revealed that banks would rather lend to an investor “having a bad business plan with a collateral in Ikeja, rather than one with a good business plan with a collateral in Sango Ota”.
The group agreed that the economy, as a whole, needs to improve for banks to feel more comfortable lending to small businesses.
They also discussed the need for banks to invest in infrastructure, training, and service delivery to remain competitive. The increasing use of fintech services was identified as a potential avenue to improve banking, but no clear conclusions were drawn.
Adding his voice to the need for better regulatory systems, Fred Okuagba suggested that most of the profits declared by the banks were paper profits and called for a more honest approach to policy and guideline implementation.
The discussion also touched on the challenges of the banking system in Nigeria, particularly the problem of cash circulation and the role of Point of Sale (POS) systems.
Contributors pointed out that many people still prefer using POS systems to banks due to the latter’s limitations, and the need for a more cashless society, but agreed that corruption in the banks and lack of regulation have caused POS operations to become a misnomer.
Okuagba and Akinyinka emphasised the need for improved consumer protection, increased financial literacy, and better service delivery by banks. They suggested that banks should build capacity to address customer complaints, increase staffing requirements for online transactions, and implement measures to prevent tampering with ATMs.
Nigerians were encouraged to educate themselves about domestic banking laws to avoid being taken advantage of. The discussants emphasized the importance of social media and informing the CBN of difficulties to hold banks accountable.
The panelists at the People’s Parliament also advised bank customers to be informed about their rights and to document all interactions with banks and regulatory agencies properly.
The group agreed to reconvene in three months to further discuss further solutions to the problems in the banking industry.
The next People’s Parliament will hold on Sunday, 29 September 2024.
Rescue Nigeria is an organ of the Initiative for Good and Informed Citizenship.
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