Economic Crisis: How Far Can The Banks Go?


By Marcel Mbamalu

ARE the banks really in trouble, as feared by the Nigerian public? To what extent has their exposure to the ailing stock market, the troubled oil and gas sector and the severed foreign patronage and supply of credit compounded their anxiety over the global economic challenges?

Expectedly, they are restructuring. The Guardian reliably gathered that, some of the banks now set \'unrealistic\' targets for their staff, who wish to survive impending sack. In one of the banks, it was learnt that all levels of staff, including drivers were given a one-week \'survival target.\" The deadline, which ended last Friday, would determine who stays on. These targets range from N20, 000 to N100 million, depending on the level of the staff. Investigation showed that the bank is using the \'survival target\' as a means of prosecuting its proposed retrenchment plan, as hard times bite harder.

\"The idea, I think, is that a staff who don\'t bring any money to the bank is not useful in the present circumstance and everybody is worried,\" said a driver in one of the branches.

How liquid are the banks in the present circumstances? How much impact has the global challenge had on this critical sector of the Nigerian economy and how has it fared in managing the colossal amount raised during the consolidation period?

Those who subscribe to banks\' spirited defence of liquidity, even in the face of global economic challenges, job cuts and reduced demand for goods and services, are of the opinion that the banks themselves are not helping matters. Unhealthy competition among them- the rivalry and discomforting rate of de-marketing, as well as the rat race for deposits - give disturbing signs of distress.

The perceived publicity stunts prompted the recent CBN restrictions on the level of publicity allowed for banks\' financials. According to the apex bank, such publications must not appear in more than two National dailies and must be limited to certain specifications, obviously less than full page. The idea said to have been mooted by the Bankers\' Committee, was to arrest frivolous claims and pettiness in the sector.

There is no doubt that, after the consolidation of the banking sector, which provided the banks with enough funds to play even in offshore markets, the financial sector became a strong factor in the country\'s economic development agenda. Despite current challenges, including that of stakeholder confidence, occasioned by the current economic meltdown, as well as the crashing of international oil prices, the sector still remains a source of hope to economic recovery.

\"In Nigeria today, the banking system appears to be the last man standing. So, let\'s not pull it down with speculation and public statements,\" said Mazi Sam Ohuabunwa, Chairman of the Nigeria Economic Summit Group (NESG).

The level of attention the sector has received in recent times, especially since the global financial crisis began in September 2008 must have overwhelmed managers of the Nigerian financial system. Governor of the country\'s apex bank, Professor Chukwuma Soludo, had pre-empted reactions by insisting that, judging from the indicators prevalent at the time, the Nigerian financial sector, and by extension, the economy would not be affected.

Of course, the statement elicited divergent reactions, some of which claimed that, aside the global economic crisis, some Nigerian banks are sick and were waiting for an alibi to solicit assistance in the form of bail-out.

Because the credit crunch in the United States of America, which was primarily caused by unprofessional and dubious management of sub-prime mortgages by US banks, coincided with crashing prices of crude in the international market, the global economy suddenly became vulnerable. Stock markets started contracting; the economies of oil export dependent countries, like Nigeria, began a southward movement.

The heated debate trailing Soludo\'s earlier declaration on the health of the banks and the economy vis a vis the global challenge was also sequel to the sudden, but continual contraction of the country\'s stock market, which some experts, blamed on banks and the manner they handled margin loans.

That matter appears to be wrested with Director-general of the Security and Exchange Commission, Musa Al-Faki, retracting his reported condemnation of banks as being instrumental to the woes of the capital market.

Also the National Deposit Insurance Corporation (NDIC), last Friday, re-echoed: \" No Nigerian bank is sick.\"ngrguardiannews

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