BY OKEY ONYEWEAKU
Despite the seemingly average performance of Deposit Money Banks in the financial year ended 2014, all of them are still smarting from the harsh regulatory environment. Expectedly, many of them point to the choking regulatory rules put in place by the Central Bank of Nigeria (CBN), as reasons for not meeting set financial targets last year.
The blame game has echoed and re-echoed at most Banks’ Annual General Meetings attended by Hallmark newspaper over the last few weeks.
In its effort to ensure a stable financial system and by extension, help grow the Nigerian economy, the CBN last year raised CRR from 12 per cent to 50 per cent and then 75 per cent on public sector funds and from 12 per cent to 15 per cent and 20 per cent on private sector funds, in addition to other regulatory measures.
Hinting the disservice some aspects of the apex Bank’s policies have had on money lenders, Group Managing Director, FBN Holdings, Mr. Bello Maccido, revealed that CBN’s regulation has posed serious challenges to the group, causing a revenue decline of N64billion in the financial year ended 2014.
According to him, the apex bank’s decision to tinker with the Cash Reserve Ratio (CRR) in 2014 adversely affected the Holdings’ revenue last year, resulting in the sterilization of about N560 billion and a N64 billion fall in revenue to the company.
“Major policies, pronouncements and actions from the Central Bank had a major impact on the operations of the group. But I will like to say that in spite of that we grew in the year 2014 with numbers that are robust,” he stated.
The CBN last year raised CRR from 12 per cent to 50 per cent and then 75 per cent on public sector funds and from 12 per cent to 15 per cent and forward to 20 per cent on private sector funds.
He disclosed that the enforcement of the treasury Single Account with 25 per cent of qualified public sector funds withdrawal monthly and the implementation of Basel 2 requirement in October 2014 took its tolls on FBN Holdings’ revenue in 2014.
Mr. Bisi Onasanya, Managing Director, First Bank of Nigeria limited, also expressed displeasure over the CRR on private sector deposits at 20 per cent in Nigeria, saying it was the highest in the world.
He further explained that the high rate was affecting banking operations negatively in the country.
Most DMB’s believe that they would have performed better or attained their short term targets if not for what they describe as ‘unfriendly’ monetary policy, which resulted in the creaming off a substantial part of their revenues.
Similarly, Sterling Bank’s Chief Financial Officer (CFO)/Executive Director, Mr. Abubakar Suleiman noted that regulatory headwinds, especially the hike in Cash Reserve Requirements (CRR) on public sector deposits had resulted in severe challenges to banks’ profitability and restricted their lending capacity to finance economic growth.
He argued that the amount of bank deposits that the CBN had sterilized as a result of the 75 per cent CRR on public sector deposits and 20 per cent CRR on private sector deposit was “unprecedented” and had constrained banks’ lending capacity.
He pointed out that the deposit with the CBN were non-earning adding that not only does this impact adversely on banks’ bottom line but it also prevents lenders from funding businesses.
He however emphasized that despite the tough operating environment Sterling Bank was still committed to meeting its expansion programmes.
Noting the challenges caused by the current regulatory measures, Group Managing Director of Access Bank, Herbert Wigwe said the banks were engaging the regulators, presumably to find ways of mitigating the effect on DMB’s.
He also enthused that Access Bank improved on its performance for last year 2014 despite the harsh operating environment.
In spite of the stiff regulatory headwinds, GMD, G T Bank, Segun Agbaje said its financial institution would continue to pay the AMCON fund, because it was in the interest of the banks, adding that banks agreed during the 2008 banking to be contributing 5 per cent of their total asset to the company.
On the contrary, the CBN believes that the regulatory measures it has put in place were in the best interest of both macro and micro-economic disposition of the country which economy has become most unstable and disturbing.
The Deputy Governor, Corporate Services, Mr. Bayo Adelabu, had defended these policies when members of the House of Representatives Committee on Banking and Currency recently visited uhim in his office in Lagos.
“The decision of the MPC was the best we could do under the circumstance the economy is presently. We noticed that a lot of things contributed to the pressure on the naira. Firstly is the declining revenue from oil,”he said.
“Our source of revenue in this country is just oil and when oil price declined by about 25 per cent last month, we expected that there would be pressure on the foreign reserves. We believe that the pressure on the naira, apart from the declining oil prices, is also as a result of the liquidity in the banking industry whereby a lot of frivolous demands are being made by customers.”
“The only thing to do to stop banks from granting loans to these customers is to mop up more of the monies available to the banks. That was why we increased the CRR on private sector deposits. We believe it will reduce the pressure on the foreign reserves.”
The CBN deputy governor noted that instead of lending to the productive sectors of the economy, banks were busy advancing loans to mainly importers of consumable items.
“What the CBN is saying is that we need to become more patriotic. We should patronise locally-made goods and services. We do not need to be importing everything. This is part of the reasons for the pressure on the naira,” Adelabu said.
“Why should we be importing fruits, eggs and tooth picks?” he asked.
A critical look at some of the bank’s results which may have prompted the blame of the lender of last resort for the misfortunes of some financial institutions include, the total dividend of G T Bank to shareholders which dropped from N45.62 billion in 2013 to N42.68billion in 2014. Analysts believe that bank could have paid a higher dividend were it not for the challenges of the times. Similarly, while Stanbic IBTC’s profit Before tax fell by -3.3 per cent in 2014, its PAT fell by a greater magnitude -49 per cent.