IT is becoming obvious that Nigerian banks are experiencing significant challenges reminiscent of the 1994 episode that led to the failure of a large chunk of banks in one fell swoop.
Flowing from above scenario, there appears to be growing concerns among Nigerians over possible round of banking collapse in the country, which requires urgent and strategic measure to stem the tide.
Only recently, Nigerians were greeted with shocking news of abrupt and unexpected withdrawal of the operating license of Heritage Bank by the nation’s financial regulator, Central Bank of Nigeria (CBN) without adequate explanation.
Essentially of all the critical sector of the economy, the banking industry appears to be the most resilient and dynamic, yet most vulnerable to the endemic culture of misinformation and financial contraption.
This is appropriately so considering the fact that the entire system revolves around key elements of trust and confident; failure to consciously abide by these ethical dictate, usually send wrong signal to ubiquitous customers and depositors alike which may lead to bank runs and ultimately bank collapse
There is no doubt, that Nigeria has had a chequered history of banking collapse and financial failure as a nation with the attendant consequences on both customers and the national economy.
Historically banking collapse is not peculiar to the Nigerian environment, but evidently unlike other established climewith well- defined extant financial regulations and capacity to absorb pressure, the frequencies of occurrence in the country and the apparent lack of appropriate mechanism to ensure relative stability and resilience had definitely impacted negatively on the overall wellbeing of the nation’s economy and this calls for concern.
Besides the facade of alluring deceptions created in the public space by bank operators, most of who engage in ludicrous game of wit and filthy lucre to outsmart one another, it will shock you to note that 48banks failed in Nigeria between 1994 and 2006; the highest ever, while 11 banks closed under purchase and assumption due to several issues like poor corporate governance
Beyond the specter of infractions that dug the banking sector over time; ranging from corruption to insider loan deal, there is the need to ensure consistent policy regime irrespective of the administration in place while the CBN as a financial regulator has to do its job with utmost diligence and professionalism by ensuring periodic diagnosis of the health status of the various banks operating in the country.
It is indeed a sad commentary to accentuate the fact that in the past 40 years, over 50 banks had collapsed in Nigeria; examples here will suffice; in 1994 to be precise, 2.5 billion USD was lost when over 60 financial institutions including Banks for Credit and Commerce International (BCCI) and the International Trust Bank of Nigeria (TTB).In 2006 the Federal Government had to intervene and rescued Bank of the North (now Unity Bank) after it experienced financial difficulties; also in 2011, CBN had to stepped in to rescue three banks from grave danger of caving in following the banking reforms that follows at that era
While it is unnecessary to list names of banks that had gone under in the past few years, it is however, imperative to highlight the critical factors that had given rise to such dubious narratives with a view to correcting the obvious anomalies, particularly now that a chilling rumour is fast spreading across the country of impending crash of three additional banks after Heritage experiencelast month.
Prominent among the factors responsible include poor risk management, leading to high levels of non-performing loans, lack of corporate governance, regulatory lapses, liquidity crisis, insider fraud, corrupt practices and inadequate capital base, among others.
Amid the growing concerns and palpable anxiety in the country, there is absolutely no serious commitment on the part of operators to demonstrate that things will be done differently this time as the Nigeria Deposit Insurance Commission (NDIC) could only pay a maximum of N5million to big time depositors.
While it is grossly incredulous to continue in the same trajectory, addressing those obvious challenges, such as unnecessary leakage of information regarding banks health, would no doubt brighten the prospect of the banking sector in Nigeria.
