Banks embark on branch rationalization

This is not the best of times for Nigerian banks as the harsh operating economic environment is forcing them to rationalize their business outlets. The banks are also citing shrinking revenues as an additional reason for closing their unprofitable branches.

With this, analysts wager that the Central Bank of Nigeria’s (CBN) goal of achieving 80 per cent financial inclusion in the country by 2020 is under threat.

In a recent Hallmark survey of bank branch operations nationwide, many of the banks cited the need to cut down on rising operating costs and their not adding to their bottomline as reasons for closing down branches. Many of the affected branches they also volunteered are located in rural communities.

Banking observers believe that the rampant branch rationalization by banks could impact negatively on the CBN’s effort to improve financial inclusion in the country.

First Bank Nigeria (FBN) had last month during its Facts behind the Figures session on the floor of the Nigeria Stock Exchange (NSE) disclosed that it would be closing some of its branches.

Access Bank recently shut 130 of its branches and even Standard Chartered Bank, which has only 42 branches in Nigeria, has also concluded plans to embark on shutting down some of its branches.

As part of a strategic effort at deepening and broadening retail banking activities in the country and bringing more money outside the formal monetary system into mainstream transmission and settlement arrangements has set an inclusiveness target of 80 per cent, within the next five years, with the Bank claiming the country had attained fifty (50) per cent as at last year.

Hallmark newspaper investigations show that there are about 5,347 bank branches in the country with United Bank for Africa (UBA) having the largest network with 626 branches. First Bank of Nigeria has 560 branches, while Ecobank Nigeria Plc.  boasts of 600 branches.

For Dr. Richard Mayungbe, a lecturer with Lincoln University,California, USA, the CBN’s efforts with regards to financial inclusion in the country is laudable, but there is still a lot of work to do.

According to Mayungbe, “In Ishara-Remo, the headquarters of Remo North Local Government Council, where I hail, we have to travel pass three Local Government Councils to gain access to banking services, which is intolerable,” he said.

He argues that the decision by banks to shut some of their branches would further increase the number of Nigerians who are financially excluded.

But the Director, Corporate Communications of the CBN, Mr. Ibrahim Mu’azu stated that the CBN is still on course to achieve its 80 per cent financial inclusion objective by 2020.

He argued that financial inclusion is not just about operating formal bank accounts, but has to do with financial literacy.

He was of the opinion that the closure of the bank branches would not in any way adversely affect the CBN target as more banks have introduced other platforms through which Nigerians could gain access to financial services.

He noted platforms such as mobile money transfer, Point of Sales (PoS) machines, Automated Tellers Machines (ATMs) as alternative means through which Nigerians could be financially included.

“Financial inclusion can never go down. It is a literacy issue. Once you are literate you cannot be illiterate again. It is not looking at the banked or unbanked.

We are encouraging small businesses to embrace mobile money, where they don’t need bank accounts.

Through their telephone they could carry out all the transactions they want,” he explained.

Explaining further, he said by financial inclusion, people are just being availed with financial services at the retail level of the man or woman on the street.

“Opening bank branches is not an issue. There is a cost. They cannot do it at a loss. You can’t just go and keep staff where business activity and margins are thin. We can only see how it goes,” he noted.

The Managing Director, BIC Consultancy Services Limited, Dr. Boniface Chizea reasoned that the closure of bank branches should not in any way affect financial inclusion.

“This is because we are moving rapidly towards an era of branchless banking with the rising wave of technology in banking and the way it has reconfigured banking operations far from what it had been in past.’’

Now you can do online banking for most banking transactions; make transfers, purchase goods and services, book flights and pay for flight tickets and so on.

“And therefore the new dispensation would require that compatriots deepen their computer literacy and becoming more internet savvy to operate.

Therefore branches will be massively discounted in the future and should not impact in any way the push for greater financial inclusion.

The era of branchless banking is round the corner,” he posited.

The Head of Communications and Public Affairs, Nigeria Deposit Insurance Corporation (NDIC) Alhaji Hardi Birchi, in a telephone interview told Hallmark that there is a huge stash of money outside the formal banking sector, which players in the financial industry are trying to bring into formal financial play.

He disclosed that efforts are being made to make more Nigerians to be financially included through PoS, Mobile Money Operators and other plat forms.

There are presently about 12,000 automated teller machines (ATMs) in the country.

And according to the Chief Executive Officer and Executive Secretary, Electronic Payment Providers Association of Nigeria (E-PPAN), Mrs. Onajite Regha, there were over 200, 000 PoS terminals in Nigeria, with only 40 per cent of them working effectively.

According to Enhancing Financial Innovation & Access (EFInA) Access to Financial Services in Nigeria 2014 survey, in terms of financial access, only 45.4 million adults (48.6 per cent of total adults) were formally included, while 36.9 million adults (39.5 per cent of total adults) were financially excluded.

The EFInA Access to Financial Services in Nigeria 2014 survey revealed that the North East and North West have the highest percentage of financially excluded adults in the country.

“In the North West, the percentage of financially excluded adults declined from 63.8% in 2012 to 56.0% in 2014. However, in the North East, the financial exclusion rate increased from 59.5% in 2012 to 68.4% in 2014,” the report stated.

The South-West as at last year saw 62.6 per cent of adults formally banked, while 12.7 per cent were informally banked and 24.8 per cent victims of financial exclusion.

The data showed that the South-East has 63.3 per cent adults banked,11.3 per cent serviced by , while 25.4 per cent were still financially excluded.