By UDEME CLEMENT

Apparently, after the September 30, deadline for weak banks to recapitalise, the country will be experiencing a new era in the banking industry. While the five rescued banks, viz: Oceanic Bank International Plc, Finbank Plc, Union Bank of Nigeria Plc, Equitorial Trust Bank Limited (ETB) and Intercontinental Bank Plc scaled through by securing core-investors, Spring Bank (now Enterprise Bank), Bank PHB (Keystone Bank) and Afribank (MainStreet Bank) were on August 5 handed over to Asset Management Corporation of Nigeria, AMCON, through a nationalisation process designed by Central Bank of Nigeria,CBN, to protect depositors money.

Oceanic Bank is operating under a Transaction Implementation Agreement (TIA) with Ecobank Transnational Incorporated (ETI), Union Bank also sealed a merger deal with African Capital Alliance Consortium, Finbank with First City Monument Bank, Intercontinental with Access Bank and Equitorial Trust Bank with Sterling Bank Plc.

Governor of CBN, Mr. Lamido Sanusi, only recently declared that the crisis in the banking sector would be over by September 30. He stressed that, by that date, all commercial banks must have been capitalised with very strong liquidity rate and very low non-performing loans (NPL) to ensure efficiency in their operations.

CBN Governor,Lamido Sanusi

He said: “NPL of the Nigerian banking industry would be reduced to five per cent. By September 30, we have drawn a final line under the banking crisis of 2009”.

The monetary authority and Nigeria Deposit Insurance Corporation (NDIC) had, in July 2009, carried out a special examination of the 24 banks with the aim of assessing their financial capability and efficiency, with particular focus on liquidity, capital adequacy, risk management and corporate governance practices.

According to the result of that evaluation, 10 banks: Oceanic, Afribank, Intercontinental, Finbank, Spring Bank, BankPHB, Equitorial Trust Bank, Unity Bank, Wema Bank and Union Bank were deficient in capital adequacy.

Eight of them had significant deficiencies in liquidity, risk management practices and corporate governance policies, while two- Wema and Unity Bank- had capital adequacy issues. To prevent instant collapse, CBN gave the 10 banks lifeline of N620 billion.

Meanwhile, President Goodluck Jonathan has said all banks henceforth must benefit from public sector deposits to avoid concentration of deposits in few banks, even as he disclosed that 27 per cent of public money would have been endangered in the recent crisis that rocked the banking industry had the monetary authorities not waded in.

The president said at the time CBN intervened to regulate the system, 52 per cent of public sector deposits were in three banks that were healthy and 27 per cent in banks that were taken over by CBN.

Looking at the economic benefits and challenges of mergers and acquisitions in the banking sector, some analysts said they would promote franchise value aimed at giving significant protection for shareholders. Others explained that the process would further reduce the number of banks, thereby making the industry less competitive. The experts views:

Nigerian banks should embrace modern technology—Mr. Abdou Ceesay, Central Bank of Gambia: Banking is an important sector of the economy. Therefore, there is need for commercial banks to embrace modern technology in their operations to enhance efficiency in the system.

We are aware of the fact that the recent audit conducted by CBN on capital adequacy, asset quality, management, earnings and liquidity showed categorically that 12 banks were still operating sub-optimally, though none of the 24 existing banks was rated in the top grades during the period under review by the monetary authority.

This calls for efficiency as well as prudent management in the system. The banks should improve on the use of modern technology in their daily transactions to enhance efficiency. Once this is achieved, it would help to harmonise the financial system to enable the banks function optimally to increase their turn over. For instance, in The Gambia, we have 13 banks and they use the latest technology in their operations.

The Ministry of Finance and the apex bank should work as a team to check income flow in the economy -Professor Fabio Canova, a senior economist from University Pompeu Fabra, Barcelona, Spain: The monetary policy formulators should be acquainted with appropriate macro-economic modelling and forecasting techniques needed to stimulate growth and development of the financial sector and the economy at large.

Economic growth and development could be achieved through effective macro-economic policies formulation and application aimed at transforming the various sectors of the economy for greater productivity. Given certain limitations, it is vital that some intelligent value judgment based on knowledge of the unquantifiable variables and considerations of other non-economic factors be brought to bear on the results obtained from the models before the final formulation of socio-economic policies. It is imperative for the monetary policy formulators to appreciate the intuition behind emerging tools of economic analysis and in particular to be able to evaluate the forecasts generated therefrom.

Mergers and acquisitions would boost the financial capacity of banks- Dr. Kwasi Osei-Yeboah, Bank of Ghana: Recapitalisation of banks through mergers will create a synergy in the system and improve the level of technology in the industry.

But, beyond that, operators in the financial sector should make use of efficient models and forecasting techniques needed to grow the industry. The use of efficient banking models and appropriate forecasting techniques will create more business opportunities for operators in the financial sector.

Also, modern scientific forecasting methods in the financial sector should be based on sound monetary policies and economic framework capable of optimising outputs in the long-run. Such forecasts must be based on efficient statistical methods and

models well-structured to enhance economic development in the financial sector and the economy at large.

Appropriate forecasts could achieve two ends, such as providing values for some outcome and reducing uncertainty about the range of values that may result from future events. Players in the financial sector should ensure the use of credible data for policy analysis and forecasting to achieve greater productivity in the economy.