By YINKA KOLAWOLE
Mortgage institutions and other domestic development financial institutions (DFIs) in Nigeria set up specifically for purposes such as mortgage/housing finance, trade finance, etc., have under-performed.
According to the latest report by Afrinvest, a firm involved in investment banking, securities trading, asset management and investment research with a focus on West Africa, the institutions have fallen short of expectations and are far from fulfilling their mandates.
Due to this, the investment firm scored the Central Bank of Nigeria (CBN) a ‘weak pass’ on its blue print promise to ensure the financial sector contributes to the real sector of the economy. “Rapid financialisation in Nigeria has not benefitted the real economy, as much as has been anticipated,” the firm said.
In 2010, while advocating solutions that the CBN was going to be pursuing to right the then ills of the Nigerian financial system, CBN Governor, Sanusi Lamido, laid out a blueprint for reforming the sector built around four pillars, the reported noted. The pillars include enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that the financial sector contributes to the economy.
“The outcome of the banking consolidation was expected to deliver advantages of scale boosting growth in the real economy through the provision of credit. With the implementation of the preceding three pillars, banks were expected to begin to engage the real economy through initiatives such as development finance, foreign direct investment, venture capital and public private partnerships,” the firm said.
Afrinvest however scored the Central Bank 3 of 5, equivalent to ‘good performance’, on the implementation of the first pillar, enhancing the quality of banks.
“The programme was expected to consist of industry remedial programmes to fix the key causes of the crisis including the implementation of the risk based supervision, reforms to regulations and regulatory framework, enhanced provisions for consumer protection and internal transformation of the CBN,” it stated.
The firm also awarded the CBN 4 of 5, equivalent to ‘very good performance’ on its implementation on the second pillar, ‘establishing financial stability’. Afrinvest said the key feature of the second pillar centered on strengthening the financial stability committee within the Central Bank, establishment of a hybrid monetary policy and macro-prudential rules, development of directional economic policy, among other related responsibilities.
“The 2009 stress test exposed huge toxic assets on bank’s balance sheet. Consequently, the creation of the Asset Management Corporation of Nigeria (AMCON) was the first step towards easing the burden of over N3.0 trillion of non-performing loans. In addition, the hitherto universal banking model of banking was to be restructured into International, national, regional mono-line and specialised licences,” the firm said, and rated the regulatory institution 4 of 5, indicating a ‘very good performance’”.