‘Extremely’ weak corporate governance, weak credit administration characterise Nigerian banks- NDIC

Central Bank of Nigeria

The NDIC and the CBN carried out the examination of the banks

An examination of Nigerian banks in 2011 by regulatory agencies showed that they had “extreme weaknesses in corporate governance” and “weak credit administration,” the Nigerian Deposit Insurance Corporation, NDIC, has said.

As part of its on-site supervisory activities, the Managing Director/ Chief Executive Officer of NDIC, Umaru Ibrahim, said the corporation, in collaboration with the Central Bank of Nigeria, CBN, undertook a joint target examination of the 24 insured Deposit Money Banks, DMBs, in the country, with NDIC leading the examination of nine banks, against CBN’s fifteen.

What they discovered showed an ugly state of Nigerian banks.

Findings during the target examinations revealed extreme weaknesses in corporate governance; weak credit administration; insiders’ credit in excess of 10 per cent of paid-up-capital; concentration of credits and inadequate capital in some banks; improvement in industry assets’ quality arising largely from the sale of non-performing loans to AMCON; and credits in excess of single obligor limit.

These were contained in latest annual report, 2011, of the Corporation.

In addition, the regulatory authorities’ risk-based supervision, RBS, exercise involving 16 non-

intervened banks revealed some banks engaged in poor corporate governance practices; poor risk management arising from inadequate manpower and poor training of risk management personnel.

The Corporation said it also conducted special investigations of 29 petitions and complaints from different bank customers and stakeholders relating to excessive bank charges, irregularities in customers’ accounts, conversion of deposits and arbitrary closure of accounts.

Like big banks, like micro finance banks

Similarly, 195 microfinance banks and primary mortgage banks, PMBs, examined as part of the corporation’s on-site examination showed weak capital base; poor understanding of microfinance business; weak corporate governance; poor internal control and record keeping; poor asset quality; insider abuses; and weak earnings among operators.

Of the 103 microfinance banks, whose licenses were revoked in 2010 by the NDIC, following the target examination conducted during the year, 22 PMBs were found to be technically insolvent, about 93 were closed, 16 PMBs voluntarily closed shop, while the locations of ten others could not be traced.

To sanitize the microfinance sub-sector, the corporation prosecuted about 55 directors, staff and related parties of the 19 closed MFBs who were found to be responsible for the collapse of their banks in 2011, while about N2.024 billion, or about 41 per cent of total insured amount of about N4.94 billion, was paid to about 70,424 depositors as at August 2011 as against about N1 billion in 2010.

Deposits stood at N1.7trn

The insured deposits in the country’s banking industry in 2011 stood at about N1.7 trillion, the report stated.

The figure is equivalent to about 13.79 per cent level of risk exposure, with the seven top banks – First Bank PLC, Zenith Bank PLC, United Bank for Africa PLC, Access bank PLC, Guaranty Trust Bank PLC, Ecobank Nigeria PLC and Skye Bank – accounting for about 70.14 per cent, while the rest 13 banks represented 29.86 per cent.

Mr. Ibrahim said the corporation’s Deposit Insurance Fund Risk Exposure to the banks during the year, including the three banks acquired by the Asset Management Company of Nigeria stood at about N135.45 billion, or 7.96 per cent of Industry total insurance.

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