Finance experts
have affirmed that the embargo on universal banking is not likely to
have adverse effects on Nigeria’s banking climate, if the requirements
for such transitions are met appropriately.
Gamaliel Onosode,
Chairman, Zain, and a leading boardroom player in Nigeria’s corporate
environment, said the policy is a welcome one, as he did not think it
was a good idea introducing universal banking into Nigeria.
“I can only say
that I am delighted. After trying it for the years that they have, the
Central Bank has now come to the same conclusion that I had at that
time, just as when consolidation was introduced. I felt that room
should have been created for banks that still desired to remain
relatively small as quality is not equated with the size of the bank.”
Akinbamidele
Akintola, finance analyst at Renaissance Capital, an investment firm
said, “Right now, you have a situation where banks have insurance
companies, stock broking companies, and all other sorts under them in
the name of ‘universal banking.’ What they are hoping to do is make
sure that banks focus on their core designation, like if a bank is a
commercial bank, all it does is core banking activities.
“I do not think
this should adversely affect the banking industry, but the concern is,
does the Central Bank of Nigeria have the manpower, efficiency, and
capacity to really execute this? That is the concern,” he said, adding
that the CBN did not state if the new policy was to affect existing
banks or interested parties.
Back to the basics
Mr. Onosode argued
that the abolition of universal banking would effectively mean all
smaller banks can now exist to run in a capacity that would be
convenient for what they were specialised in.
“I didn’t see why
all banks should become mega banks the way they were. That was my view
at that time; effectively, we are going back to that, as there are
going to be smaller banks now. The larger the number you have of that
sort, the more difficult it would be to regulate them effectively so as
to achieve the objective that they were set up to achieve.”
Mr. Onosode said
universal banking had the tendency to weaken transparency, if the
quality of the existing supervision and regulation was not improved.
He noted that when
a bank wants to have all kinds of businesses, it becomes very difficult
to prevent it from getting its fingers burnt, from putting depositors’
money in all kinds of high risk ventures, which may not succeed and put
the interest of all other stakeholders in trouble.
Apart from the
transparency issue, Mr. Onosode also said it is easier to generate and
create skills, as these facilitate proper monitoring and management to
be carried out in respect of these banks, as opposed to what is o
btained now.
He further added
that the real sector is not being well supported by the banking sector
as it is supposed to, because the banks – rather than invest in the
real sector – would seek lower risks adventures because of the high
risk involved.
Recycled policies
The Central Bank of
Nigeria (CBN) on Monday, said it will soon discontinue the issuance of
universal banking licenses to operators, in line with ongoing reforms
in the banking sector, to consolidate on the stability recorded so far.
Under the new
policy, operators would be expected to apply for and get separate
licenses for each model of banking operations, including commercial
banking, micro-finance banking, mortgage banking, and investment
banking.
The Central Bank is
expected to spell out the details of the implementation of the policy
in a transitional period that would last between 18 and 24 months to
ensure that normal banking operations are not disrupted.
Under the tenure of
Joseph Sanusi, a one-time CBN governor, some financial observers had
called for the replacement of old models with the introduction of
universal banking to create a level playing field for both commercial
and merchant banks. This was finally introduced in 1999.
They had also
argued that Universal Banking is a global phenomenon and the country
cannot afford to be left out, even though the conditions precedent to a
successful universal banking practice in the country were, and perhaps,
are still not in place.
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