The Chartered Institute of Bankers of Nigeria about five months ago inaugurated Dr. Uche Messiah Olowu, as its President and Chairman. In this interview, he warns that any bank director involved in any form of wrongdoing will face a tribunal that had been set up by the council and if found guilty would be de-registered from the institute. He also reveals that the institute is adopting a name and shame strategy for bad behaviour. Obinna Chima provides the excerpts:
How will you score corporate governance in the Nigerian banking sector today?
It is work in progress. Generally, in any developing economy, corporate governance is a work in progress. We are not yet there, but we can be there. The market is so informed that if your governance is bad, you would be punished for it. The central bank and other regulators have shown that they can bite. So, as the market continues to see those kind of discipline, you cannot afford, but to fall in line. Compliance issues are getting stronger daily and no bank want to be fined heavily and so governance is taken seriously today because the regulator has proven that it can bite.
If you consider what happened to the defunct Skye Bank were some of the board members were alleged to be responsible for the demise of the bank, one begins to wonder what the CIBN tells directors of banks when you engage them?
The CIBN is not a regulator, but we regulate the conduct of our members. We always emphasis conduct, governance in all our programmes. We also have a disciplinary mechanism. Our tribunal is also equivalent to that of a High Court and before now, we had a retired Justice of the Supreme Court in charge, who currently is the Ambassador to Britain. We have presently a Retired Chief Judge of Lagos State as the Assessor of the Tribunal. So, that is how we take disciple seriously. Right now, we are introducing ethics certification, making sure that people understand and buy into what we are talking about. If anybody reports to us any wrongdoing, no matter who you are, you will face the process and we would take you out of the register. In fact, we are adopting name and shame. So, we want to make sure that this institute continues to produce people that we can be proud of. So, we cannot condone any act of wrong doing by anyone, whether he is a director or chairman. First of and foremost, we custodians of resources as bankers and so we must be found faithful in all that we do.
Once more, the Governor of the Central Bank of Nigeria while speaking at the CFA Investment summit held this month, expressed concern over banks’ apathy towards lending despite various initiatives by the central bank. In your opinion, what is the way out of this issue?
In the first place, the business of banks is to acquire risks: that is lending, manage it and control the risks. That is the business of banking. They facilitate lending from the surplus to the deficit unit as the engine of growth. That is primarily their responsibility and that’s what they do for a living. So if they are shy from that, I think the best thing is to do a root course analysis. One, in an economy that is not doing well, simple economics tell us that you have to be very cautious because you look at the macro economy, you look at the environment, is it worth taking the risk? You are dealing with the depositors’ funds and it is expected that these funds should come back. So, if you have a situation where the market is a little bit challenged, would you want to throw in money in there? What I mean by challenge is that, one, you some huge portion of funds are sterilised as cash reserve requirements (CRR). Then, you have the exposure to oil and gas and to power, which is a systemic issue. It didn’t occur to anybody that the foreign banks didn’t lend to the power sector operators. So, our banks took the risk and today the sector is not working the way it should work. Then, the exposure to oil and gas, there is no doubt it, in the upstream sector it is cyclical. Yes, the prices came down but the banks didn’t hedge. We could blame the banks for that, but we learn every day. Those that hedged didn’t have problem, those that didn’t hedge had problem. But the oil rebounded again, because we know it will rebound for sure and so those that couldn’t pay are beginning to pay. They have restructured the loans long-term, just like what banks in other climes did. And so the restructuring happened. But where we have serious problem is in downstream due to government policy. Government said it was going to cure the banks for subsidy, interest and foreign exchange differentials, but it didn’t pay, neither did it respect that obligation. But banks monies had gone out of the vault, locked up there and not earning anything. That was also a systemic issue. So, there was also a devaluation. Then, we had a situation where the culture here, of people borrowing money and not willing to pay back. So, the banks are becoming sceptical. Again, the federal government is borrowing from the market. Banks are rationale entity, so that would borrow the federal government at low risk. Yes, but I will not also absolve the banks, because we must find a way to add value to the economy by de-risking certain sectors, especially the agric sector. That was why the CIBN has come up to see what we can do in terms of financing the agriculture value chain. Do we deal with the Bank of Agriculture? NIRSAL? How do we set up certification in agric financing? Because that is the place where banks should put their monies. Again, infrastructure is also a problem. You don’t hold a bank responsible. Banks have their roles, but if you look at the root cause from a holistic perspective, you will find out that there are challenges in the economy. So, if the banks are not lending, it’s because of certain bottlenecks and they need to be resolved. Of course, the CBN Governor is right to say he wants banks to lend. But they really need to find a way to resolve the oil and gas crisis. But in the consumer space, we have seen a lot of things happening. But it is the real sector that is challenged. Most of them are folding up. The rates are not single digit, they cannot compete and they cannot pass on the entire cost. So, for a bank to lend, the macro-economic and fiscal policies must be aligned and fine-tuned to create an enabling environment that banks can push money into, to make sure economic activities flourish.
But we now have the Real Sector Support Facility (RSSF) as well as the differentiated CRR system for the banks which were supposed to encourage lending?
I agree with you. It shows the CBN is listening. Make no mistake, the CBN is in a real dire situation because in all of these, they have to also control the volume of money in the system. What are they targeting? Inflation and price stability, which are very important. The way things are, the CBN cannot fold its hands. That policy is a good joker to jumpstart the economy. But I don’t know whether the process has started. You see, in this country, we are always very long on strategy, but short on execution. So, if the programme is properly executed, it should be able to lead to a lot of velocity in banks’ lending. I hear a lot of applications have already gone to the central bank and if they are executed well, it should be able to address those challenges.
You also talked about loan defaults. Don’t you think the credit bureaux were set up to help address the issue of serial debtors?
What credit bureaux does is to alert you and give you information, whether to lend or not to lend. Credit bureaux cannot address the issue of those loans that are already bad. Yes, it will help going forward, but we have a lot of loans out there that have gone bad. The Asset Management Corporation of Nigeria (AMCON) is battling with a lot of them and they even want to review the AMCON Act in order to enhance its recovery. So, going forward, I don’t think any bank will want to refund someone that has a bad credit history. But there is already huge chunk of non-performing loans (NPLs) out there and that has put phobia in everybody. Again, you look at, would you want to lend to the downstream? Of course no. Already, banks’ portfolio is huge on that. Yet, this is an oil and gas economy. Heavy transactions are done are outside Nigeria – the United Kingdom or the United States – Standard Chartered Bank, Citi, etc. I know that there is going to be a lot of investments in the oil and gas sector. And the local content law allows that certain percentage must be domiciled in Nigeria. So, what are we going to do? Again, that is why the CIBN is looking at how we can broaden and deepen the knowledge of our members in the oil space, so that some of those transactions would be domiciled here. Yes, we are beginning to see that we are learning and acquiring skills in that area, but we need to deepen that space through our Committee of Practice, through certification and by getting experts in the oil and gas space to educate our bankers. You need knowledgeable bankers in the economy to deepen this market.
Earlier you talked about the CIBN’s plan for the agric sector. Can you be specific about that?
We are by law given the mandate to certify. Certification is our forte, for those seeking to do banking in Nigeria. We normally enter into collaboration in what we call make or buy. That is, if we don’t have the resources in house, we buy it. So, we want to collaborate with let’s say NIRSAL, to do a certification. Part of the mandate of the CIBN is to drive the competency framework as enshrined by the Bankers’ Committee. So, we do joint certification where we expose our bankers to opportunities in the agric space and deepen their knowledge. I have discussed with NIRSAL and we want to have specialist skills in certain specialist areas. So, we want to build specialists across the banking spectrum, be it oil and gas, banking, power, etc, so that we can stand strong across our peers. We have acceptability with international financial institutions wanting to do business with us.
Dearth of manpower in the banking sector has remained a challenge. How is the CIBN supporting banks to address that?
Yes, you are right. And in my speech when I was inaugurated, I did acknowledge that after a review a consultation. I am also a practitioner. I do agree with you that there is dearth of skills. But the banks and the CIBN are tackling it frontally. The banks today have very serious learning academies. These learning academies are banking schools, where fresh graduates who are not fit-for-purpose – you know university degree gives you about 10 per cent of what you should know; 20 per cent is by mentoring and 70 per cent by coaching and mentoring. So, what the bank does today is to throw them into the training school, polish them and bring them into the system. So, they would be grooming them as they grow up. There is also the learning academy for the middle level. So, they are spending huge chunk of their resources on training because it is very essential. In the past, bankers were well trained and after some time the emphasis shifted to bringing deposits and all that, not knowing that you need to adequately empower these guys to take position. So, that gap has been identified and it is generally with every sector. Banking is not an isolation. But what is happening today is that banks have built strong learning academies or banking schools, where they train people. The CIBN is to accredit and audit the process. We also do compulsory professional development, where for example, we recently organised the first fintech conference in Nigeria, in collaboration with the fintech association, to educate our members and let them know the emerging disruptions. So, in the nearest future, we believe we would have a well-empowered workforce that understand what banking is and would continue to remain ahead of the change curve as disruption comes in because banking would remain, but the forms and shapes of banking would change. Today, banks are more like technology companies rendering financial services. The banks in Nigeria need to be prepared to compete with the banks abroad. We all shop from the same market and so the only way to do that is to get the right knowledge. Knowledge today is a global village, so you seek where the knowledge is and bring it down. We are tasking our members to be innovative. We want to change the narrative. We are quick to accuse banks, but nobody wants to praise the banks for what we have done in the payment sector. We are ahead of most banks in the world in terms of the payment system. Nigerians are very creative.
Do you see the fintechs as a threat to banks?
Technology is an enabler. Just like it happened with disruption in medicine, and all other endeavours, technology is helping us to shape our lives. So, it is no exception in banking. If you recall, I alluded to the fact that banks would become technology companies that are rendering financial services. So, fintechs are welcome. I heard the Vice President saying the other day that the banks should embrace fintechs. The banks have already embraced fintechs. What is fintech? Financial technology and the banks have already embraced them and are leveraging on technology to render finance. So, the banks are not afraid of fintechs in the first place. Even, presently, the banks are actively involved in the technology space. Do you know that banking is so important in any economy. What do you need in banking? Convenient and speed at a lowered cost and banks have continued to intervene in that space. So, we are not afraid of the fintechs. What we are calling for is a collaboration between the banks and fintechs, especially in the consumer space. The banks would continue to leverage on fintechs, especially in financial inclusion. The Shared Agency Network Expansion Facility (SANEF), which we are involved. It is in our own good to reach the unbanked, because as you empower them to embrace financial services, they become empower financially and all those wash into the banking system. So, there is no way we are scared of fintechs. That is why we are also doing a certification in fintechs. We want to be ahead of our time.
What have set out to achieve during your tenure as the President?
My five-point agenda was clear. We are going to review our Act to empower us more because the potential is huge. We are waiting for the ninth National Assembly to come in, because right now it is politicking. Secondly, if you watched me, I have been speaking a lot about capacity building. We have said that there is lack of skills, so how do we improve skills? I have entered into an agreement with the Lagos Business School (LBS)and we would collaborate on certain things. I have some international institutions that want to collaborate with us on training, but we believe charity begins at home, that was why we went for the LBS. The principle for me in capacity building is that where you don’t have the resources, you buy it. So, capacity building is very important for me. So, we are doing certification in specialist areas –trade, enterprise risk management, talent management and strategy and technology. We are making sure that those skills that are lacking in Nigeria, we bring them in. Then, overall, we are looking at strategy and advocacy. You also need technology to do what you are doing, so we are revamping our technology skills to make sure it is robust enough to carry those things that we are doing. We are setting up Committee of Practice. Committee of Practice is made up of various experts in various skills. We are also activating mentoring and coaching. We are doing research to make sure that women are given prominent place in banking. We are going to organise programmes to make sure that women are given the right place in banking. We want to make sure that women’s voice is heard in banking because it is very important. Women are very good leaders, so we have to bring them up in banking. We are pushing for that advocacy. Our staff should be well remunerated. We want to have first class people that should be able to carry out the programmes we are doing. Then of course, ethics is important for us. We have a collaboration on ethics with the International Finance Corporation. So, skills and competence is very key for us. We are organising seminars for judges to make sure that law and the technicalities of banking are fused together, so that there would be better understanding. We are looking at having a lot of collaboration with the legislators to let them understand how their actions and inactions affects Ease of Doing Business. Of course, we have changed our curriculum in tune to drive current trend. So, we want to push that through the National University Commission and NABTEB. The mentoring and coaching is championed by the Managing Director of Fidelity Bank Plc, Mr. Nnamdi Okonkwo. We have the best in our Council and Committees. We are also partnering the Finance Correspondents Association of Nigeria, which is the body for financial journalists in the area of capacity building. Also, we just instituted the Government and Business relations. In that committee, we have people from the media, ex-bankers, politicians and others there. We want a situation whereby that gap can be bridged and our advocacy can be very effective. That is inspired by the former chief executive officer of Access Bank, Aigboje Aig–Imoukhuede. Then we have funds and grants committee that is headed an erstwhile Deputy Governor of the CBN, Ernest Ebi. We have an international relations desk because we a lot of international institutions we want to enter into relationship with. So, we are restructuring our system to make sure we get those things right.