Executive of Proshare Nigeria, Mr Femi Awoyemi has stressed the need for a reform of the operations and regulations of the Nigerian banking industry, so as to survive technological disruptions.
Speaking on the topic, Liquidity and Credit Portfolio Management: How Nigerian Banks can Win Anew” at the maiden edition if BRANDish Meeting of Minds, Awoyemi said presently banks in Nigeria cannot support the real sector because, as he put it, the long term funds needed to drive the economy is not with the banks.
He also said banks are also facing challenges from the monoproduct, oil economy that the country runs, saying this has “exposed banks to cyclical downturns as slide in the oil prices affects the fortunes or otherwise of the banking system.
“The consistent use of monetary sterilization instrument has affected standard deposit facility. The standard deposit facility is a measure of excess liquidity. The use of monetary sterilization or TSA has led to a liquidity famine. Therefore more than ever the fiscal side should improve liquidity using the banks as a channel of credit,” he said.
Awoyemi called for more improved metrics in measuring risk, wider or broader universe of credit allocation so as to minimise risk and improve standard deviation of portfolio or distribution on credit, roper macro policy to reduce structural impact on credit cost and an over-hauling of the interest rate term structure such that credit do not reside in soft allocations alone.
Pointing out that the current protectionist disposition of the Central Bank of Nigeria (CBN) over the banking banking system is not just ineffective but antithetical to CBN’s role as an industry regulator, he warned that if the current players in the system do not watch and follow developments in the world to reinvent themselves, the banking system will face a major disruption from outside the system that may challenge the very relevance of banking in Nigeria.
“Technology is disrupting several things in the world and banking is not an exception. Uber has disrupted the taxi system in many parts of the world and same would happen to the banks. It is important to note that banking started in Nigeria over 100 years ago but have been unable to cover the country beyond the cities.
“Just a few years after the arrival of the GSM licensees, they have been able to reach practically all corners of the country. While banks have been able to gather just over 25 million customers, the GSM people have amasses well over 100 million lines. What this means is that the telecom people have worked a lot harder than the banks in deepening their roots and connecting with the market. I am not sure the CBN will succeed for a long time in preventing the disruption by the banking industry by the telecom and other industries,” he declared.
