By PETER EGWUATU
The reforms being embarked upon by the Central Bank of Nigeria (CBN) and other financial services regulatory bodies in the capital and money market sub-sector of the financial sector, are gradually bearing fruits given the positive 2011 financial results so far released by some banks.
The Banking sector which accounts for 70 per cent of activities in the Nigerian capital market is gradually regaining investors’ confidence as some banks are beginning to make profit and declare dividends for their shareholders.
Recently, Zenith Bank Plc, in its 2011 financial year, reported a Profit After Tax (PAT) of N37.4 billion and declaring 85 kobo dividend per share for its shareholders. Access Bank Plc also reported a PAT of N16.7 billion, while declaring a dividend of 30 kobo per share to its shareholders.
Similarly, GTBank Plc reported a PAT and extra ordinary item of N52.7 billion and a final dividend of N1.10kobo having paid an interim dividend of 50 kobo. Also, Ecobank Plc reported N32.267.45 PAT, while declaring $ 0.04 dividend.
Other results include:
Diamond Bank N1.3 billion PAT; Stanbic IBTC Bank N11.2 billion Profit Before Tax (PBT) and 10 kobo dividend; FCMB declares loss of N9.9 billion and no dividend proposed.
Meanwhile, some analysts have attributed the positive results to improved regulatory framework by the regulators as well as the myriad of reforms across the sub-sectors of the economy,
It should be noted that the CBN banking response was a response to not only the devastating impact of the global financial meltdown experienced in 2009 but also the rot occasioned by weightier issues of near collapse of corporate governance in most of the banking institutions.
In a similar vein, the Securities and Exchange Commission (SEC) did embark on a lot of reforms aimed at repositioning the capital market, which went down the drain in 2009.
It will be recalled that on assumption of office in June 2009, the Mallam Lamido Sanusi led- CBN, noted that poor governance practice, overt and undue exposure to the capital market, oil and gas sector, poor risk management practices and inadequate disclosure and transparency about banks’ financial position, characterised the banking sector.
Following this, the CBN and Nigeria Deposit Insurance Corporation’s (NDIC) commissioned special examinations on the then 24 banks in the country in August 2009, nine banks were found to have significant deficiencies in capital adequacy and liquidity requirements, as well as major weaknesses in corporate governance and risk management practices, while two were found to have primarily capital deficiencies.
In the past, these banks would have been transferred to the NDIC for liquidation, however, the magnitude of the problem and associated risk to financial system stability necessitated a change of policy gear in the approach to resolving these problems. Thus, for the first time, members of the executive management of these mal-administered banks were made to account for the mismanagement of depositors’ funds through prosecuting them in the law courts.
It will be recalled that the CBN replaced the affected banks executive management and in some cases, boards of the banks with new ones and some of the former Chief Executive Officers (CEOs) are already being tried as one of them was convicted.
The CBN, it will be recalled, injected a total of about N620 billion into the banks in form of tier 2 capital to be repaid from the proceeds of recapitalisation in the near future.
This has helped to stabilize the banks and restored investor confidence in the banking system.
As a further confidence building measure, the CBN reaffirmed the guarantee of the local interbank market to ensure continued liquidity for all the banks and guaranteed foreign creditors who hitherto have refused give credits to these banks.
This measure has brought confidence in correspondent banking relationships with our local banks.
Furthermore, in an effort to chart out of the Augean stable, the CBN enunciated a four pillar policy framework. This includes: enhancing the quality of banks, establishing financial stability, enabling healthy financial sector and ensuring financial sector contributes to the real sector.
Meanwhile, AMCON which was established under the recommendation of the CBN came into existence following the promulgation of an enabling Act by the legislature in 2011 as a broad resolution strategy aimed at addressing the problem of Non –Performing Loans (NPLs) in the banking sector, among others.