Nigeria Content Online

Still smarting from the credit crisis of last year, many banks
are now tightening their credit disbursement processes. This follows the
directive by the Central Bank for banks to engage the services of at least two
licensed credit bureaux in determining the credit behaviour of their customers.

Credit bureau operators confirm that there has been higher
patronage by the banks since the CBN circular issued in April. They, however,
complain about the quality of data which they say still falls short of what is
required to make informed business decisions. According to the CBN circular,
all banks and financial institutions need to comply with the provisions of the
guidelines on the licensing, operations and regulations of credit bureaux by
having a data exchange agreement with a minimum of two credit bureaux licensed
by the central bank.

This also covers all previous loans granted to enable the
determination of the borrower’s current exposure to the financial system. The
banks are also expected to report periodically on the performance of the loans
in their portfolio to any of the two credit bureaux with whom they have a data
exchange agreement and to obtain quarterly credit report from at least two
credit bureaux for all previous loans granted to determine borrowers’ composite
exposure to the financial system.

Increased compliance

Ubong Awah, chief accountability officer of XDS Credit Bureau
said the level of compliance has increased. Mr. Awah said with the CBN
regulation, there has been more interaction between the banks and the bureaus,
adding however, that there is room for improvement.

“The figures are not up to expectations,” he said. “You know we
are in a depressed economy. Most of the credit has been to government while
credit to private sector has not really grown.” According to Awah, banks are
currently engaged in remedial work of trying to reassess previous loans and are
being careful in taking up additional bad credit in their books. He projected a
higher figure in the third quarter when the economy would have recovered and
the various credit easing policies of the CBN.

Ahmed Popoola, managing director of Credit Reference Company
said the compliance level by banks was encouraging. According to him, out of
the 22 banks that have signed on with his company, 15 are using and submitting
data as required. “Only seven are yet to comply and each of them has been given
four months period to comply depending on when they signed on,” said Mr.
Popoola.

Data quality

Operators are however worried about the quality of data that are
currently available from the banks. Customer data, whether individual or
corporate must cover up 70 per cent of the identity of the individual before it
can qualify as sufficient, explained Popoola. He said what is important is how
far the banks are ready to comply.

“There are administrative, legal and IT issues involved,” he said, adding
that some of the information cannot be obtained without the consent of the
customers. Mr. Awah said the quality of data will depend on changing the credit
culture of Nigerians to see the importance of credit bureau to the economy.
Popoola believes that the credit bureaux are pivotal to the growth of the
economy. “It is in the interest of the banks and it is in the interest of their
customers. There is no economy in the world where banks give credit to the real
sector and individuals without a functional credit bureau system. So it is in
the interest of the economy for credit bureaus to work in Nigeria.”

More banks are migrating from magnetic stripe cards to the chip
and pin EMV cards (Euro pay, MasterCard, Visa), in response to the Central Bank
directive and the increase in fraudulent activities.

The Central Bank has shifted the migration date about four
times: August 2008; April 1, 2009; June 30, 2009 and December 31, 2009.

Notwithstanding, some finance experts say card holders still
have a lot of safety responsibilities despite the migration to the improved
chip and pin cards.

Intercontinental Bank was the first to introduce the chip and
pin verve cards last year and other banks, including Zenith Bank, GTB, Eco
Bank, Skye Bank, have since joined the race.

The magnetic stripe card was introduced into the Nigerian
economy, through the banks in August 2003 by InterSwitch Limited, the company
that offered card services to the banks at the inception of e-banking in
Nigeria and introduction of ATM.

The chip and pin implements the global standard that is helping
ensure Smart (Chip and PIN) cards, terminals and other systems can interoperate
for secure payments and are less prone to fraud.

The chip technology guarantees that information stored is not
accessible to unauthorized persons. The pin is encrypted (held in a secure
memory) within the chip, meaning that it is difficult and time consuming for a
criminal to access the pin if your card was stolen.

Safety is paramount

Deji Oguntonade, a staff of SugarAnt Technologies Limited, a
technology firm, and an electronic banking consultant said despite improved
technologies, card holders would always be responsible for the safety of their
cards.

“The EMV cards offer more security, but the customer is still
obliged and responsible for keeping his PIN, which is the critical factor in
the usage of the card. It’s the customers’ responsibility to protect the PIN,
and keep the cards from being stolen or lost. The security is that the cards
cannot be easily cloned as before”.

In terms of liability for the transaction as a result of using
an EMV card, the situation is very clear.

Paul Love, a technology solution consultant for ACI Worldwide, a
technology company specialised in aiding customers with large-scale smart card
projects and EMV migrations in response to enquiries says the liability burden
of an ATM discrepancy using an EMV card is clear.

“From a technology point of view the position is clear, the EMV
card and the PIN can be proven to have been used in the ATM,” Mr Love said.

“From a liability point of view, in normal circumstances the
cardholder is absolutely liable for the transaction”.

“What happens in abnormal circumstances depends on the
relationship the customer has with the bank, and the banks approach to customer
service. If a card is used after a customer has reported it stolen – the bank
should then be liable.

An entrepreneur has told young professionals that
starting a business in a small way is a good way to show that one’s business
would be successful later.

Speaking at a business forum on Wednesday in
Lagos, Ibukun Awosika, the chief executive officer of Sokoa Chair Centre, a
chair production outfit, said that “Small beginning in business is not because
you don’t have enough capital; but it is based on wisdom, as the place of
humble beginning allows you to start well.”

Ms. Awosika, who spoke on the topic, ‘Failsafe
strategies for succeeding as an entrepreneur’ explained that entrepreneurs
should always allow their business to be flexible in order to adapt to change
in the society.

“The best business plan in the world is filled
with assumptions, or it could be a good idea that has a high chance of
succeeding but would always be subject to some issues within and outside of
your control. And at the end of the day, there would be so many judgment calls
that you make on a day-to-day basis,” she said.

However, Ms. Awosika added that many entrepreneurs
in Nigeria change their business focus as a result of the challenges they face
in their business, which is also normal.

Investing in human
relationship

Ms. Awosika emphasised managing human relationship as a major
key to grow any entrepreneur’s business.

“When you set up a business and you want it to be successful on
a continuous basis, it is important that you do the right thing at every point
in time. Don’t take any stage of it for granted. Anyone you think is useless to
you today might be the person that would save the life of your business
tomorrow. Also, it is a small world, people move from one area to the other.”

She further explained that the key measure to take in building
business relationship is to earn people’s trust, which is the greatest asset of
any business.

A participant, Temitope Busari, said that the forum has helped
him to readdress his business plan.

“Though I have conceived a business plan, I have been going
about the implementation the wrong way, wanting to use the big bang approach.
But this forum has proven that starting small is the best strategy and also
ensured I have an indepth knowledge of the business idea. “

Rarzack Olaegbe, another participant, said, “The take home for
me is on building lasting relationship, not with the top managers only but also
with the middle and lower level personnel.

“The people may be at the bottom of the ladder, but you would need them
somehow, someday. However, if you have not earned their friendship when the
going was good, obviously it would be hard to ask for their favour in bad
times. The most important factor for me of all the issues she raised is
building cordial relationship across all levels.”

Actionaid Nigeria, an international non-governmental
organisation, wants the federal government to give more attention to female
farmers in Nigeria.

Ifeoma Charles- Monwuba, its Deputy Country Director, made this
request when the group paid a visit to Sheik Abdallah, the Minister of
Agriculture, in his office in Abuja on Wednesday.

The group said that women make up a large percentage of farmers
in Nigeria but are often marginalised because they do not have easy access to
credit and other inputs necessary for effective and more profiting farming
activity.

Mrs Charles-Monwuba said, “Women farmers in Nigeria deserve
greater attention in order for food security, and right to be insured due to
the fact that they are the main producers of food. Despite their enormous
contribution to food production, they have less access to extension services, credit
and fertilizers than men do.”

Women feed Nigeria

Further, she said, “Women farmers constitute at least 70 per
cent of the workforce feeding Nigeria and we want the government to ensure they
are able to produce food at sustainable level, and not only feeding the nation
but move them out of poverty. That would require that these women have access
to the credit facility they need to buy farming inputs, that they have access
to agricultural extension workers that support them and provide them the technical
support and also be sure of access and guaranteed market for their products.

She added that in Africa, women farmers’ plots have often been
found to have 20 to 40 per cent lower yield than those run by men, and these
differences arise from inequalities in agricultural inputs, arguing that if
women receive the same level of education, experience, and farm inputs as men,
they can increase their yields.

“Women in agriculture face a lot of challenges in food
production processes in Nigeria, and chief among this is their lack of access
to one of the primordial factors of production: land. Women own less than one
per cent land on which they farm on, despite their high level of contribution.
This implies that almost all farmlands they farm on belong to men. This lack of
control over land they cultivate means that women cannot use land as they
require, and this limits their agricultural activities which results to low
level of production leading to hunger in families who cannot afford to buy food
especially during pre-harvest period,” she said.

The group, therefore, called on the ministry of agriculture and
other agencies of government to support women farmers to have a more secure
tenure and increased access to land. “Government should eliminate all policies
and practices that discriminate against women in matters of land rights,” she
said.

Mrs Charles-Monwuba also wants the federal government to keep
its promise to increase spending on agriculture if it is desirous of halving
hunger in Nigeria by 2010.

The minister of agriculture pointed out that whatever happens in
the agricultural sector affects everybody, saying that the issue of credit is
crucial to farmers both male and female.

“We will fashion out modalities to ensure that credit gets to the people,”
he said.

From the US Capitol, to the rowdy chamber of the
British House of Commons, to the technocrat-filled halls of the European
Parliament, efforts are in full gear to rewrite the rules that govern financial
markets.

Similar to its first cousins, freedom, democracy,
free markets, and liberty, the word ‘reform’ in itself is so value-laden no one
dares lift a finger against it. And like all value-loaded concepts, its
vagueness makes it so easy to hijack. These days, no election campaign is
complete without extensive coverage of the candidates’ manifesto points on
‘fixing the financial system,’ whatever that means in operation. In the same
vein, no central banker, market regulator or stock exchange executive wants to
be left behind in this latest incarnation to pacify the marketplace. Everybody
wants to get a piece of the action.

No one seriously questions that reforms are
needed to instil greater transparency and trust into markets. In fact, many
items on the reform list have long been campaign issues among governance and
investor activists. However, until the market turmoil began, they were either
not considered urgent or the political will was lacking.

Presently, it is at the top of the legislative
agenda. Board member selection, remuneration, risk management, regulatory
capital, corporate governance and market monitoring are just some of the
mandates bestowed on various government- and regulator-instituted committees.
Reformania raises two questions. How much of the posturing will produce
substantive and positive gains for market participants? Second, up to what
point will the market bear before too much of a good thing turns bad?

Risk of reform overload

The Nigerian experience is a good example of the risk of reform
overload, especially when driven by a rainbow coalition of reformers. It is
hard to escape the sentiment that some, not all, of these crusaders only want
to be able to say ‘we are doing something about the stock market collapse and
executive misconduct’ too. Of course, that may be an unfair judgment. To clear
their names, they should be telling us what they were doing when these heinous
crimes against capitalism were taking place.

The taint of opportunism is unmistakable, almost like artistes
and thespians falling over themselves to identify with rescue efforts in the
weeks after the Haiti earthquake. But there is one big difference between
dilettante celebrities trying to do good by giving publicity to a humanitarian
crisis and regulators agitated by a market catastrophe.

When the showbiz crowd loses interest, they quietly move on with
no damaging baggage left behind. With regulators, the excess luggage of new
regulations, costly rules and conflicting laws will weigh down on the necks of
companies and investors for years to come. Just ask Mayor Bloomberg how much
New York City lost to London in its competitiveness as a harbour of global
capital after the passage of Sarbanes-Oxley.

In the past year, different committees have been set up to
review the functioning of the country’s capital markets and governance codes.
Motivated by occasionally overlapping agendas, each group has set out to work
on generic terms of reference such as improving transparency, enhancing
disclosure and protecting investors.

Only last year, the Dotun Suleiman-led Technical Committee for
the Review of the Capital Market Structure and Processes in Nigeria, created by
the Securities & Exchange Commission, released its report which called for
wide-ranging changes in the market. Before the ink on that document was dry,
other inquiries were set up by the Aliyu Ahmed Wadada-led House Committee on
Capital Markets, and the Senator Ganiyu Solomon-chaired Senate Committee on
Capital Markets.

These investigations were in addition to the sweeping changes
introduced by Lamido Sanusi, the governor of the Central Bank of Nigeria, aimed
at sanitizing the banking sector and those introduced by Arunma Oteh, the
director-general of the Securities and Exchange Commission.

More committees

More recently, last month, the ministry of finance inaugurated
two high powered committees, chaired by Fola Adeola, a respected former banker
and venture capitalist, and Konyinsola Ajayi, a senior lawyer, to review the
country’s capital markets and corporate governance rules. With so much activity
going on, investors wonder if these groups may not be duplicating each other,
or worse, unintentionally working at cross-purposes, creating room for reform
arbitrage among participants looking for the lowest cost rules regime. The
current re-regulation frenzy may lead to equally high costs for investors in
the long run.

At this rate, investors could soon grow weary of new reform initiatives and
rather insist on a report card on the implementation of existing rules like the
2003 Atedo Peterside Code of Corporate Governance. It is blatantly absurd to
imagine that merely passing more laws will make a society more law abiding.

Still smarting from the credit crisis of last year, many banks
are now tightening their credit disbursement processes. This follows the
directive by the Central Bank for banks to engage the services of at least two
licensed credit bureaux in determining the credit behaviour of their customers.

Credit bureau operators confirm that there has been higher
patronage by the banks since the CBN circular issued in April. They, however,
complain about the quality of data which they say still falls short of what is
required to make informed business decisions. According to the CBN circular,
all banks and financial institutions need to comply with the provisions of the
guidelines on the licensing, operations and regulations of credit bureaux by
having a data exchange agreement with a minimum of two credit bureaux licensed
by the central bank.

This also covers all previous loans granted to enable the
determination of the borrower’s current exposure to the financial system. The
banks are also expected to report periodically on the performance of the loans
in their portfolio to any of the two credit bureaux with whom they have a data
exchange agreement and to obtain quarterly credit report from at least two
credit bureaux for all previous loans granted to determine borrowers’ composite
exposure to the financial system.

Increased compliance

Ubong Awah, chief accountability officer of XDS Credit Bureau
said the level of compliance has increased. Mr. Awah said with the CBN
regulation, there has been more interaction between the banks and the bureaus,
adding however, that there is room for improvement.

“The figures are not up to expectations,” he said. “You know we
are in a depressed economy. Most of the credit has been to government while
credit to private sector has not really grown.” According to Awah, banks are
currently engaged in remedial work of trying to reassess previous loans and are
being careful in taking up additional bad credit in their books. He projected a
higher figure in the third quarter when the economy would have recovered and
the various credit easing policies of the CBN.

Ahmed Popoola, managing director of Credit Reference Company
said the compliance level by banks was encouraging. According to him, out of
the 22 banks that have signed on with his company, 15 are using and submitting
data as required. “Only seven are yet to comply and each of them has been given
four months period to comply depending on when they signed on,” said Mr.
Popoola.

Data quality

Operators are however worried about the quality of data that are
currently available from the banks. Customer data, whether individual or
corporate must cover up 70 per cent of the identity of the individual before it
can qualify as sufficient, explained Popoola. He said what is important is how
far the banks are ready to comply.

“There are administrative, legal and IT issues involved,” he said, adding
that some of the information cannot be obtained without the consent of the
customers. Mr. Awah said the quality of data will depend on changing the credit
culture of Nigerians to see the importance of credit bureau to the economy.
Popoola believes that the credit bureaux are pivotal to the growth of the
economy. “It is in the interest of the banks and it is in the interest of their
customers. There is no economy in the world where banks give credit to the real
sector and individuals without a functional credit bureau system. So it is in
the interest of the economy for credit bureaus to work in Nigeria.”

More banks are migrating from magnetic stripe cards to the chip
and pin EMV cards (Euro pay, MasterCard, Visa), in response to the Central Bank
directive and the increase in fraudulent activities.

The Central Bank has shifted the migration date about four
times: August 2008; April 1, 2009; June 30, 2009 and December 31, 2009.

Notwithstanding, some finance experts say card holders still
have a lot of safety responsibilities despite the migration to the improved
chip and pin cards.

Intercontinental Bank was the first to introduce the chip and
pin verve cards last year and other banks, including Zenith Bank, GTB, Eco
Bank, Skye Bank, have since joined the race.

The magnetic stripe card was introduced into the Nigerian
economy, through the banks in August 2003 by InterSwitch Limited, the company
that offered card services to the banks at the inception of e-banking in
Nigeria and introduction of ATM.

The chip and pin implements the global standard that is helping
ensure Smart (Chip and PIN) cards, terminals and other systems can interoperate
for secure payments and are less prone to fraud.

The chip technology guarantees that information stored is not
accessible to unauthorized persons. The pin is encrypted (held in a secure
memory) within the chip, meaning that it is difficult and time consuming for a
criminal to access the pin if your card was stolen.

Safety is paramount

Deji Oguntonade, a staff of SugarAnt Technologies Limited, a
technology firm, and an electronic banking consultant said despite improved
technologies, card holders would always be responsible for the safety of their
cards.

“The EMV cards offer more security, but the customer is still
obliged and responsible for keeping his PIN, which is the critical factor in
the usage of the card. It’s the customers’ responsibility to protect the PIN,
and keep the cards from being stolen or lost. The security is that the cards
cannot be easily cloned as before”.

In terms of liability for the transaction as a result of using
an EMV card, the situation is very clear.

Paul Love, a technology solution consultant for ACI Worldwide, a
technology company specialised in aiding customers with large-scale smart card
projects and EMV migrations in response to enquiries says the liability burden
of an ATM discrepancy using an EMV card is clear.

“From a technology point of view the position is clear, the EMV
card and the PIN can be proven to have been used in the ATM,” Mr Love said.

“From a liability point of view, in normal circumstances the
cardholder is absolutely liable for the transaction”.

“What happens in abnormal circumstances depends on the
relationship the customer has with the bank, and the banks approach to customer
service. If a card is used after a customer has reported it stolen – the bank
should then be liable.