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Bank officials said the closure of bank
branches not performing optimally is not a sign of distress since banks
usually monitor operations to ensure they are not operating below their
running costs.

Some banks are planning to close
branches which they consider unprofitable but they require the approval
of the Central Bank of Nigeria which, as the regulator of the banking
sector, has to authorise such closure before it can be effected.

“It is not an issue of worry when banks
access their bank branches periodically and take management decisions
on whether to close those performing under expectations and/or open new
branches as the case may be” said a source at Spring Bank.

“We issued a communiqué about
four-months ago when we closed some branches that were not yielding
revenue and were performing below expectation. The rent you pay for
some locations are not realistic when you compare it to the revenue
generated from such branches and the proper thing to do is to close it
down. For instance, it does not make economic sense now to have about 3
branches in a single street. It is called branch optimisation, not
closure, because another branch could be opened elsewhere”.

The unplanned delay in the take-off of
the Asset Management Corporation of Nigeria (AMCON) and the fate of
rescued banks have continued to fuel speculations that another round of
staff layoffs and branch closures loom.

However, rescued banks have repeated
that nothing of the sort is on their agenda, and that closing down non
performing branches is not really a crime.

“That is not true”, a source at
Intercontinental Bank said. “We have not closed down any branches. I
have just done a nationwide investigation and all our branches are
functioning and there is no intention for any one to be closed. Rather
than close branches, we have just opened two again. All our branches
are operating and undergoing good business”.

Another source at Oceanic Bank, also
one of the rescued banks, said it is not true that the bank is closing
its branches as it has no reason to do so.

However, a staff at Union Bank said banks’ closing some of their branches is not an unlikely possibility in the nearest future.

“This is not utterly unavoidable, but
it is just that there are stages and procedures that need to be
approved by the industry’s regulatory body, the Central Bank of
Nigeria. The thing is just that branches are not just closed down like
that. It’s a long process, because you need to convince the Central
Bank why it is expedient for you to do that and other processes that
have to be followed” the Union Bank staff said.

The way forward

Experts from
various finance institutions in Nigeria and abroad have pushed for
branchless banking; even though they have expressed concern over
security and the level of risk exposure that could be expected from the
implementation of this system.

Major challenges
however remain for the establishment of an effective branchless banking
system; a system where banks’ strategy for delivering financial
services does not necessarily depend on branches. In the Nigerian
banking environment, there’s the need to find alternative ways of
conducting face-to-face interviews or identity checks.

For branchless
banking to develop, experts have suggested that governments need to
continue to work with service providers to find flexible solutions that
meet policy and business requirements.

Consultative Group
to Assist the Poor (CGAP), a global resource centre for microfinance
standards, operational tools, training, and advisory services in one of
its programmes in Nigeria said “Branchless banking has great potential
to extend the distribution of financial services to poor people who are
not reached by traditional bank branch networks; it lowers the cost of
delivery, including costs both to banks of building and maintaining a
delivery channel and to customers of accessing services”.