BY Udeme Clement
The statement by the Central Bank of Nigeria (CBN) that the number of banks in the country may further shrink from 24 to 20 in a reform that is underway appears unsettling to some stakeholders in the banking industry who warn that the reform, if it becomes a reality, will bring about further loss of jobs.
A former official of Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSIFI), Otio Nathaniel, who spoke the minds of those agitated by the statement, said the exercise, if not properly handled, would lead to massive unemployment in the industry.
But some analysts said there is not much to fear if the banks number reduction is through mergers and acquisitions as there is likely to be enough space for most of the employees of the banks to be affected.
The CBN Deputy Governor, Financial System Stability, Mr Kingsley Moghalu, who spoke in London, last week, ahead of the issuance of $500 million Eurobond for Nigeria, had explained that the further reduction in the number of banks was informed by the fact that about four would likely be taken over through mergers and acquisitions.
“By mid 2011, the banks will be taken over 20 or 21 banks will remain after the reforms. We are not legislating any number but the way it appears now, about three or four banks will be swallowed up in mergers and acquisitions,” Moghalu said.
The number of banks in the country had been reduced from 89 to 25 on 31 December , 2005 under a consolidation programme carried out by the former CBN governor, Prof Charles Soludo to ensure N25 billion as capital base for each bank.
In a chat with Sunday Business, the former ASSIFI official Nathaniel, said that if the exercise is not properly handled, job losses might hit the banking industry again, as the banks would be forced to shrink.
He said, “The management of CBN should also consider what would be the negative economic implications at a time government is trying to address the issue of infrastructure development to enhance employment creation aims at fostering rapid economic growth and development in the long-run. The reality is that CBN is the Apex bank and monetary authority saddled with the responsibility of regulating business activities in the banking sector.
As such, credit should be given to the management of CBN for the policy initiative and timely implementation to make the banking sector solid. But, beyond that, it is expected that, the CBN must have taken into consideration the fact that there could be job losses in the process of mergers and acquisitions of the four affected banks.”
He added, “Banking is an important sector of the economy. Therefore, CBN as the monetary authority in the country, must ensure that the on-going reform reflect not only short-term development agenda, but policies to stimulate growth in the long-run as well.
The current management of CBN should also align its developmental policies and reform strategies with the existing structures put in place by the former governor of CBN. If you look at some of the policies formulated by the former management of the apex bank and study them carefully, you would see that they are still very useful and if properly implemented, would move the industry forward.
“Instead of trying to jettison the existing policy framework, the current management should carefully re-examine its reform agenda and come up with pragmatic steps on how to ensure uniformity with the old and new polices to ensure continuity in the system. For instance, the recent announcement by CBN to scrap the universal banking system, which brought negative reactions from different stakeholders was a clear case of policy somersault, showing that Sanusi is trying the downplay the existing policies.
We must not also forget the fact that universal banking system paves way for commercial banks to perform an array of functions and services. It gives them ample opportunity to decide on portfolio of businesses and appropriate service delivery channels within an applicable regulatory framework, which would increase their margin”.