Avoid pre-2006 era, Don advises CBN, says banks’ recapitalization long overdue, As Covenant University VC charges banks not to erode customers’ confidence

IBRAHIM QUADRI

A university Don from Covenant University, Ota, Ogun State, Prof Ochei Ikpefan has urged the Central Bank of Nigeria (CBN) to avert the pre-2006 era of banks’ distress by reviewing the current capital base of the deposit money banks in the country.

The Covenant University under the Chancellor and Chairman, Board of Regents, Bishop David Oyedepo held its 29th inaugural lecture on Friday 28th April at CU Chapel where top management of the institution attended.

The inaugural lecturer, Ikpefan who is a Professor of Banking and Finance from the Department of Banking and Finance of the institution explained that there was a need for another review of banks minimum paid up capital of N25 billion to avert the danger of pre 2005/6 financial crisis.

Similarly, the Vice Chancellor of the institution, Prof. Abiodun Adebayo tasked the CBN to ensure an appropriate regulatory framework instead of the recently introduced poor naira re-design policy with its poor implementation so as not to erode the confidence of bank customers in the country.

Prof Adebayo in his welcome remark condemned the CBN’s recently introduced naira re-design policy which according to him, was a good one but poorly implemented.

According to him, “The emerging scenario in the Nigerian banking sector creates palpable fear and raises questions about our banking industry that guarantees sustainable growth and development. It is disheartening to know most times, that customers of these banks are often affected because of unwholesome practices in the banking industry. “Unfair labour practices, unrealistic target setting, out-sourcing of jobs, and opposition to union activities.

“On the other hand, they commonly exhibit unethical practices to customers, unauthorized tampering with their accounts, charges excessively on transactions, and in interest on loans.”

He however noted, “The Nigerian banks have developed innovative products to meet their needs in good and bad times.”

He went further, “Any failure to meet customers service requirements and public expectations can spike massive cash withdrawal, it may lead to bank failure irrespective of its solvency.

“The consequence on the economy can be so far reaching. It is therefore the responsibility of the apex bank as a regulatory body to ensure banks’ protection and reliability,” the VC noted.

However, speaking on the topic, ‘Securing the Financial Health of Nigerian Bank Today for the Future,’ the lecturer, Ikpefan, as part of his recommendations posited that recapitalization would significantly enhance the financial health performance of deposit money banks in the country.

Prof Ikpefan said, “Nigerian banks have gone through turbulent periods before and after the introduction of Prudential guidelines of 1990 as amended in 2010 but sharp practices, insider trading, waste, round tripping, etc, have continued unabated.

“Reforms remain a major tool for banking soundness, especially in the light of the global financial meltdown. Therefore, there is need for another review of banks minimum paid up capital of N25 billion to avert the danger of pre 2005/6 era where all the banks in Nigeria put together were not up to one bank in South Africa, Malaysia etc. This is evident from the exchange rate of the dollar/naira.
He argued, “In the light of the recent free fall in the exchange rate of naira to dollar, the evidence from one of my studies shows that recapitalization will significantly enhance the financial health performance of deposit money banks but may not impact on their profitability except with good management.

“Therefore, with the current slide in the exchange rate, Nigerian banks cannot lend to the real sectors without eroding their capital base,” he noted.

He added, “The implication of one of my studies also showed that adequate shareholders’ funds can serve as a veritable stimulant in strengthening the performance of Nigerian deposit money banks and also heighten the confidence of customers, especially in this era of global economic meltdown that has taken its toll on the Nigerian financial system.

“Therefore, policies aimed at controlling inflation should be given priority in fostering financial intermediation. Fiscal and monetary policies designed to promote output stability and sustainable growth is good for the financial intermediation.

“The evidence shows that merger created synergy as indicated by the statistically significant increasing post-merger financial performances although banks should not jump at any emerging opportunity that offers itself because the exercise was not designed to be an opportunistic one.

“Nigerian deposit-taking institutions should continue to recognize risk-weighing, indicating charges for credit risk, operational risk, and market risk while capital adequacy standards and requirements should be modelled in the Based framework for quality and quantity capital,” he added.