Nigeria’s reform in the banking industry has helped stabilise the sector but the banking system still has a long way to go in completely remedying the situation, central bank governor told CNBC on Friday.
“The IMF talk about transparency in the ownership structure and that is a big problem, you have all sorts of companies that own banks and sometimes it’s very difficult to know exactly who is the alter ego of those companies,” said Nigeria central bank governor Sanusi Lamido Sanusi.
“Unfortunately there’s a limit because the rules around the corporate law are not made by the central banks so you’ve got a number of improvements that need to be made and a number of disclosures that need to happen.”
A combination of non-performing loans, abuse of position by banking chiefs and a cloudy financial system led to the discovery of a number of banks on the verge of collapse that sparked the 2009 banking sector crisis.
After a probe headed by the central bank governor in the same year, a number of banks were found to be dangling on the edge of ruin, including Afribank Plc, Finbank and Equitorial Trust Bank Limited. The crumbling banks were given a 2011 deadline to secure new investors and a number of chief executives were dismissed as a means of eradicating the vices in the system.
All three financial providers failed a joint bank stress test, resulting in a revoking of licenses and a reduction in the number of banks in the country. 400 billion naira was then injected into the sector to rescue remaining banks that survived the reforms. Today Nigeria’s banking sector boasts improved stability and is slowly moving towards profitability.
“The broader economy still has challenges, there isn’t enough diversification and there is still an excessive dependence on oil,” added Sanusi. “We still need to see the fruits of the power reform and certainly the oil industry needs much more transparency.”
Issues of transparency, oil theft and a the remnants of a corrupted financial system core still plague the oil-rich country but corruption-monitoring and transparency measures such as the cashless policy, which will place a ceiling on the amount of cash withdrawn from banks, will aid in the sector’s progress.
“I think the IMF report was generally positive on both the fiscal and monetary side, I think they’re simply saying there are still areas that need to be looked at and it is something I accepted,” said Sanusi.http://www.abndigital.com