Nigeria’s economy through NDIC’s stethoscope

INCREASINGLY analysts and the Nigerian public are looking up to the annual report of the Nigerian Deposit Insurance Corporation (NDIC) to grasp the true situation of the nation’s economy, especially from the perspective of the banking sector. The 2014 report is out and remains as pungent as ever. Knowing how its report has become critical in decision-making,  NDIC expectedly attaches much importance to the report.

Ideas are only interesting if they lead to results. The idea of deposit Insurance in Nigeria is blossoming year after year. The overall verdict of the 2014 annual report pronounces a positive outlook of the economy.

“The banking industry performance and level of soundness  in 2014 indicated that 23 Deposit Management Banks (DMBs) were rated sound and satisfactory; only one DMB  was  rated  marginal during the period under review. Overall the banking industry was safe and sound in 2014,” the report asserts.

The barely two-month old administration of President Muhammadu Buhari is very likely to welcome the report for the assurance that the administration has not much to worry about in the fundamentals. So he’ll be able to concentrate his energies on tackling corruption and other financial crimes. He will do well to give special attention to the cyber variant of financial crime that has reared its ugly head in the banking sector. As the report shows, a whopping N6.2 billion was lost by Nigerian depositors and banks in 2014 to cybercrimes, with the majority of cases related to internet banking and ATM scams. According to the report,  the total number of such scams grew astronomically from 3,786 cases  in 2013, to 10,612 cases in 2014. While it involved about N5.61billion in 2014 (compared to N21.80billion the previous year), the actual loss was N6.19 billion.

This is obviously a worrying signal that has the potential to erode the confidence of account holders and scare away those yet to enter the banking net. Nigeria, with 170 million population, has only about 28.5 million adult bank accounts holders. In February 2014 the Central Bank of Nigeria (CBN) introduced Bank Verification Numbers (BVNs), an initiative which obliges customers to do biometric registration and obtain a unique number for proper identification, which is part of measures to stem bank account fraud. By the end of June when the deadline for obtaining the number expired, only around 12 million account holders had complied.

On a positive note, the report reveals that total loans and advances granted by banks across the country climbed from N10.04 trillion in 2013 to N12.63 trillion in 2014. The report is however quick to point that, despite significant improvements in banking industry’s asset quality, the volume of non-performing loans rose from N321.66 billion in 2013 to N354.84bn in 2014. But it allays any fears by stating that the ratio of the bad debts to total loans is within the regulatory threshold of 5 percent. Accordingly “all the DMBs in the industry had liquidity ratios in excess of the minimum prudential requirement of 30 per cent, as at 31st December 2014, indicating that all DMBs were sufficiently liquid,” the report says.

The NDIC, as part of its mandate, carried out the risk assessment of all deposit banks in collaboration with the Central Bank of Nigeria to provide reliable information on the banks’ risk assets quality, adequacy of loan loss  provisioning and capital adequacy positions. And the result is something quiet promising: the assessment reveals that 15 banks have  “high” and “above average” composite risk rating, while eight others had “low” and “moderate” rating, showing their level of compliance with banking rules and regulations, their risk appetite and the adequacy of their risk management frameworks.

Credit risk, one of the many types of risks banks are exposed to, has a significant impact on the profitability of Nigerian banks. Therefore, while on the one hand the regulatory bodies (CBN, NDIC etc.) need to be cautious in setting up a credit policy that might negatively affect profitability,  on the other, the banks’ boards also need to know how credit policy affects the operation of their banks to ensure judicious utilisation of deposits. After all, approaches to risk management in general have changed across organisations and the whole world in recent times, as economists observed. This necessitates  the recognition by many business leaders that risks are no longer mere hazards to be avoided — they also, in many cases, constitute opportunities to be embraced.

This balancing act can be seen in the result of the report on credit distributions in the 2014 NDIC annual report. The report said the oil and gas sector led the banking industry sectoral credits distribution, accounting for 25.74% of the top 10 of 22 sectors of the economy that accounted for 87.35% of total credits, compared with 81.99% in the previous year.  The manufacturing sector was next with 13.19%, while the other sectors accounted for 12.65%, as against 18.01% of the total credits extended by the DMBs in 2013.

On the international scene Nigeria has earned respect in areas of peace-keeping and diplomacy, which is complemented by NDIC’s achievements  in the financial sector. An example is the Memorandum of Understanding (MoU) signed between the NDIC and the Poland-based Bank Guarantee Fund (BFG) in 2014. The issues included cooperation around Cross Border Supervision; Cross Border Resolution Colleges; Early Warning Models and Macro Prudential policy etc.

Similarly, the World Bank granted technical assistance to the NDIC for development of Target Fund Ratio Framework. The assistance will enable the NDIC determine adequacy of its DIF as well as address the deficiencies identified during the 2011 assessment of its compliance with the IADI Core Principles for effective Deposit Insurance System (DIS).

At the regional level NDIC is in the forefront of the effort to articulate a collective vision for the continent. This was displayed at the Kenya meeting of the African Mobile Phone Financial Service Policy Initiative (AMPI) roundtable on the future of mobile phone financial services in Africa. Clearly, this is a fast growing area of e-commerce that needs effective regulation, especially with the vulnerability of the web-based platforms. With the speed at which telecommunication is evolving and breaking barriers to sharing information and accelerating collaboration across different markets, the role of regulatory bodies has become, more than ever before, imperative and urgent.

The report also reminds the public of the state of the NDIC’s efforts at seeking the bill for the repeal and re-enactment of the NDIC Act 2006, which was pending before the just concluded 7th National Assembly and had scaled through second reading and was subjected to public hearing. One of the major issues contained in the proposed amendment is granting the NDIC power to pay insured amounts to depositors in the event of imminent or actual suspension of payment by an insured institution before the revocation of its licence. This is to forestall legal actions such as the ones shareholders of Fortune International Bank Plc. and Triumph Bank Limited instituted challenging the revocation of their licences, which is still pending in court.

The bill generated unnecessary furore from unsuspecting quarters last year. But the 8th National Assembly needs to urgently look at the bill with a view to giving it speedy consideration, in view of the need to boost the powers of the NDIC to carry on with its enormous work of protecting depositors by providing an orderly means of compensation in event of failure of insured financial institutions in line with international best practice. Surely, NDIC contributes to the financial stability of the economy through its function of assisting monetary institutions in formulating and implementing banking policy. It has a lot to achieve if given the correct measure of power. Its annual report is now the stethoscope the public confidently uses to take the pulse of the banking sector.

*Hassan contributed this piece from Abuja

I WILL start this response using the Yoruba adage; agba kii wa loja ki ori omo tuntun wo, which pre supposes that elders are stabilising forces for the peace of society. It gives pre eminence to the role of elders in guaranteeing stability and peaceful co-existence of various components of the society.

There is no doubt that Chief Bisi Akande, a former governor and pioneer chairman of the All Progressives Congress, is one of the  respected leaders and leading lights, not just in the formation of the APC, but the necessary take off harmonisation and synchronisation needed for a formidable opposition. I commend their dedication, perseverance and commitment that resulted in the success and transformation of the else while opposition party to the ruling party, the first of its kind in Nigeria’s chequered political evolution.

In the context of where the APC has found itself today, the party elders, with due respect and deverence, have not performed to the admiration of most of us who see the elders of the APC as role models. The high wired political campaigns, the unity of purpose exhibited, the patriotism demonstrated by all and sundry gave the hope of an organised and united party where the love of the nation supersedes personal or section interests.

By his recent statement, Chief Bisi Akande has opened up to Nigerians the different categories of leaders in the party. Any well meaning member of the party however would understand that there was something pathetically wrong with the postulations encapsulated in the treatise signed by the elder statesman which was meant to be his own public intervention in the crisis of leadership that is threatening the long-dreamed achievement of the party.

What I found most confounding in the treatise was the high moral horse upon which the revered former national chairman sought to ride in denouncing certain actors in the current impasse within the party particularly at the national assembly.  It was unfortunate that the former chairman could not openly acknowledge that the unfortunate drama that played out in the two chambers of the national assembly, and more specifically at the senate, on June 9th, 2015 was a clear demonstration of the failure of the party’s leadership to act on time. Their Rome was on fire but the Emperor was asleep.

Chief Akande confirmed in that intervention the common fear of an average northerner in dealing with politicians from the south west. In truth, but for the uncommon miracle that glued the two regions together in the last election, they have never really been successful associates in any political venture. Thus when the 2015 polls brought them together and brought out a resounding victory, many had thought it was going to be the beginning of a fresh relationship that will help shape the future of Nigeria for the better.

But now it is evident the likes of Chief Akande all along had not been happy about the marriage of the north and south-west. Maybe because in the cult of the old ACN, holding offices was by the discretion of a few men; the Old Aweri of Kongi’s kingdom who are gods and whose decisions must not be inspected, questioned or reviewed. For them, your ability to serve is tied to your age in the system, even if that has limited your exposure and makes you unable to think out of the box. For the north, that is however never the case.

Maybe that was why Chief Akande looked down with so much condescension on leaders of the north in that treatise such that he could even isolate/identify ‘democrats’ within the APC and who are not from the north. Hear him: ”Democrats among the APC leadership insisted on selection by mock elections, rather than tribal or sectional considerations. As a result of primary elections, Ahmed Lawan and George Akume emerged as APC candidate for Senate President and Deputy respectively while Femi Gbajabiamila and Mohammed Monguno emerged as the Speaker and Deputy for the House of Representatives.”

There are many questions surrounding the ‘mock elections’ in reference here, the most germane are, how was it that the two personalities that the ‘democrats’ had openly canvassed for were the eventual winner? In that mock election, was every member of the national assembly elected on the platform of the APC present? If some of them had boycotted out of anger or for whatever reasons, didn’t elderly wisdom dictate that the party’s leadership should have suspended the mock elections to make it truly transparent and all involving? Is this not the same thing that happened in the senate and for which the ‘democrats’ now want to hang Bukola Saraki and co?

It was most uncharitable and unbecoming of an elder of Chief Akande’s status in the politics of Nigeria to cast wild aspersions on the generality of northern leaders and group them in the same camp as oil/drug barons and criminals. So his group was aware they were dealing with criminals all through the elections period and they were comfortable to be associated with such in public and private? So Baba Akande was aware of a meeting in the house of Alhaji Kawu Baraje with the intent of hijacking the APC for the PDP and kept silent all along? Or should we rely on the textual analysis of his statement and argue that he was only reporting an hearsay?  Then should an elder statesman rely on hearsay to make such wild allegations?

Assuming, but without conceding that a meeting actually took place as is being alleged and that the focus was to see how the nPDP would benefit from the current administration, how has that become a crime, particularly if those involved, for instance, had begun to see deception in the way the ‘cult of elders’ in the old ACN, were going about as if the APC is their sole property?

Another issue agitating my mind is the sudden media onslaught against Saraki and co. Well, why this is not unexpected given that the old ACN is well known for such. But Baba Akande and his fellow travellers should understand that if they used the media to pull down Goodluck Jonathan, now they are in power any attempt to pull down Saraki, a member of their party but whose action they currently deride, will lead to the fall of the party. It will be unfortunate to see such old men using their own hands to scatter the same house they had laboured to build, just like the fabled Akogbatugbaka of Fagunwa’s world of fantasies.

My caution to Chief Akande and co, is that while truly Nigeria has much to benefit from the control of the central government by strong political elements from the South-west given their political sophistication, they should not forget that that element has never been able to bring them near power even when they sought marriage with the south-south or south-east. The north has population and that was what helped the APC in 2015. The records are there for all to see.

Thus, what is needed is a careful balancing of the various strength of each part of the relationship and not for one group to assume a holier-than-thou attitude.

Chief Akande confirmed in that intervention the common fear of an average northerner in dealing with politicians from the South west. In truth, but for the uncommon miracle that glued the two regions together in the last election, they have never really been successful associates in any political venture. Thus, when the 2015 polls brought them together and brought out a resounding victory, many had thought it was going to be the beginning of a fresh relationship that will help shape the future of Nigeria for the better.

But now it is evident that many like Akande are not happy about the marriage of the north and south-west all this while. Maybe because in the cult of the old ACN, holding offices was by the discretion of a few men; the Old Aweri of Kongi’s kingdom who are gods and whose decisions must not be inspected, questioned or reviewed. For them, your ability to serve is tied to your age in the system, even if that has limited your exposure and makes you unable to think out of the box. For the north, that is however not the case.

Maybe that was why Chief Akande looked down with so much condescension on leaders of the north in that treatise such that he could even isolate/identify ‘democrats’ within the APC and who are not from the north. Hear him: ”Democrats among the APC leadership insisted on selection by mock elections, rather than tribal or sectional considerations. As a result of primary elections, Ahmed Lawan and George Akume emerged as APC candidate for Senate President and Deputy respectively while Femi Gbajabiamila and Mohammed Monguno emerged as the Speaker and Deputy for the House of Representatives.”

There are many questions surrounding the ‘mock elections’ in reference here, the most germane are, how was it that the two personalities that the ‘democrats’ had openly canvassed for were the eventual winner? In that mock election, was every member of the National Assembly elected on the platform of the APC present? If some of them had boycotted out of anger or for whatever reasons, didn’t elderly wisdom dictate that the party’s leadership should have suspended the mock elections to make it truly transparent and all involving? Is this not the same thing that happened in the Senate and for which the ‘democrats’ now want to hang Bukola Saraki and co?

It was most uncharitable and unbecoming of an elder of Chief Akande’s status in the politics of Nigeria to cast wild aspersions on the generality of northern leaders and group them in the same camp as oil/drug barons and criminals. So his group was aware they were dealing with criminals all through the election period and they were comfortable to be associated with such in public and private? So Baba Akande was aware of a meeting in the house of Alhaji Kawu Baraje with the intent of hijacking the APC for the PDP and kept silent all along? Or should we rely on the textual analysis of his statement and argue that he was only reporting an hearsay?  Then should an elder statesman rely on hearsay to make such wild allegations?

Assuming, but without conceding that a meeting actually took place as is being alleged and that the focus was to see how the nPDP would benefit from the current administration, how has that become a crime, particularly if those involved, for instance, had begun to see deception in the way the ‘cult of elders’ in the old ACN, were going about as if the APC is their sole property?

Another issue agitating my mind is the sudden media onslaught against Saraki and co. Well, why this is not unexpected given that the old ACN is well known for such. But Baba Akande and his fellow travellers should understand that if they used the media to pull down Goodluck Jonathan, now they are in power any attempt to pull down Saraki, a member of their party but whose action they currently deride, will lead to the fall of the party. It will be unfortunate to see such old men use their own hands to scatter the same house they had laboured to build, just like the fabled Akogbatugbaka of Fagunwa’s world of fantasies.

My warning to Chief Akande and co, is that while truly Nigeria has much to benefit from the control of the central government by strong political elements from the south-west given their political sophistication, they should not forget that that element has never been able to bring them near power even when they sought marriage with the south-south or south-east. The north has population and that was what helped the APC in 2015. The records are there for all to see.

Thus what is needed is a careful balancing of the various strength of each part of the relationship and not for one group to assume a holier-than-thou attitude as the Akande treatise has done and which, significantly, has further polarised the party. If like he noted, the battle is because of 2019, there must be a much better way to handle the various interests such that the Akande group does not go back to being a regional power lord all over again. It is never difficult to reinvent the political marriage between the north and the south-south/south-east if the current love affair with the south-west proves fatal to the interest of the north.