Investors were at their calmest unease when First Bank of Nigeria Holding Company (FBNH) released its 2015 facts behind the figures on the floor of the Nigerian Stock Exchange (NSE). The bank (as distinct from the Holding company) had hit a slightly rough patch as its loan growth had been closely shadowed by rising borrower delinquency. This was coming at a time when the bank was faced with the unnerving implications of the Central Bank of Nigeria’s (CBN’s) stringent monetary policy measures ostensibly designed to keep inflation rate at single digits and give heft to the external value of the naira.
The CBN’s strong arming of banks to keep 75 per cent of their deposits of government-related funds with the CBN as reserves and a further 20 per cent of private sector money in similar reserves, has placed severe liquidity constraints on many money-centre institutions, First Bank inclusive. The Bank Holding Company’s Managing Director, Bello Maccido, noted at the groups Facts –behind- the- Figures session that the bank was groaning under pinch of the central bank’s monetary tardiness and it, therefore, had to take two fundamental strategic decisions. The first was to roll back the growth of its loans and advances to curb ballooning loan impairment provisions and the second was to aggressively grow its retail deposit base.
Both decisions appear strategically brilliant, but have their own unique implications. The first has much broader macroeconomic consequences than the second. The decision to reduce lending by the bank (and its competitive rivals) would slow down growth of the real sector of the economy thereby bursting into flames the embers of unemployment, which have already proven troublesome and painful. However, this may prove to be only a temporary setback as the bank tries to clean up its balance sheet and improve its bottom line adjusted for loan loss provisions.
Hallmark newspaper is of the opinion that too high a domestic interest rate and too stiff a restriction on lending by way of a hike in cash reserve ratio could do unrestrained damage to entrepreneurship and growth. For the country to provide jobs for the over one million people coming into the labour market annually, the economy must growth at a rate not less than 10 per cent per annum. To achieve this both fiscal and monetary policy policies must favour growth as has been demonstrated recently by the United States of America’s adoption of an economic philosophy of ‘quantitative easing’ to dig the country out of a dreary recession after the 2008 global economic meltdown that threatened to flat line many of its key industries.
This newspaper is encouraged by the decisions of a growing number of banks to revert to the retail end of core banking activities which focuses on walk-in retail customers and their expressed and unexpressed needs. The lazy and indolent dependence on public sector money as a means of funding loans and advances has overtime proven to be brazenly risky and technically costly. The uncertainty attached to the tenor of public sector funds and the significant ‘cost- of –carry’ of such money (in other words the cost of holding the money without being able to attract commercially competitive returns from custodianship) makes the emerging development of banks increasingly marketing retail customers for deposits is welcome.
We believe that Nigerian banks should stop whining like children denied of lollipops by non-indulgent parents. Local Nigerian banks must be made to compete for stable sources of deposits untainted by the mushy corruption of public sector carpet baggers. Banking must be restored to a pristine state of market competitiveness that relies on efficiency and effectiveness. Banks must be made to leverage exceptionally gifted individuals and superb technology to offer services that break the barriers of customer expectation.
The best way forward for Nigerian banks is to return to the basics of private-sector driven good conduct. Banks must be prepared to sweat for the confidence of an increasingly discriminating and discerning retail customer base. With declining revenue from oil export, the days of easy public sector deposits are over; skimpy dresses and power suites are no longer adequate or even required to raise cheap (and cheapening) funds.
The best way for banks to assure themselves of a future that is bright and bountiful is for them to stick to the best traditions of their profession; they must show a rigorous capacity to innovate, a relentless desire to please and an untrammelled ability to apply technology at the quickest speed and most effective costs. It is that simple and that basic.