The circular face of the clock is the most unsettling aspect of having to wait for any event, process, or person in (or with) which one finds scant entertainment. Such is the reiterative character of time in its elasticity that even a broken-down clock is faithful twice a day. And as with the relentless ticking of the clock, so it is with the affairs of men. Or what do we make of the second season of the “Proliferation of Bank Awards”? “Season 1” was that overwrought period that introduced the special audit of banks by the Central Bank of Nigeria (CBN) in 2009. It was a period, buoyed by global financial excesses, when just about every run-down financial vessel found itself afloat.
Every bank doing business in the country found space and time in the newspapers to advertise the harried consumer’s attention to a plaque recently awarded by some institutions. It was useful if the awarding institution were some foreign medium (with an exotic name). And the awards were nearly always risible. Nearly all the awards for “The Best…in Africa” for example had (and could only now have) meaning, in the first instance, only if “Africa” is defined as “Sub-Saharan and north of the Limpopo”. For in those other places, standards were invariably higher. Beyond this though, nearly all the awards then failed the test posed by the question, “Where lies, in this, a value proposition for the customer?”
For the most part, the rash of “awards” was an unintended (but clearly foreseeable) result of the domestic banking regulator’s decision in 2004 to raise banks’ minimum paid-up capital to N25 billion in 2006 from a miserly N2 billion. Before this, the CBN had talked up the virtues of having “big” banks operating in the country. We had set ourselves the improbable target, about that time, of being amongst the world’s leading twenty economies by 2020. The gap to be breached in pursuit of this goal was cavernous, and the funding needs massive. In this environment, constant references to the humongous sizes of South African banks relative to the local variety simply reinforced the sense that it was nice to have, in Nigeria, at least one bank as large as the third biggest bank in South Africa. Subsequently, newspaper pages were deluged with reports on Nigeria’s biggest bank. Irrespective of the metrics used, the baton changed in this carousel at a woozy pace. Balance sheets received decorative assistance from innumerable back-to-back transactions.
Even the putative increases in branch networks, which accompanied this drive for “bigness”, did not translate into increased customer satisfaction, or value addition to the economy. The branches were not aimed at growing businesses (the cost of their faux colonnades and rococo architecture, ensured against this possibility) but were constructed to the dictates of a megalomaniac worldview. Given the levels of financial inclusion and levels of poverty in the country, there is no question but that the banks’ domestic sales networks ought to have been built around a different branch paradigm. Instead, the banks’ activities pushed real estate prices up and then in a vicious loop on itself, turned this “boom” into investment vehicles for banks to put their money in. It all bottomed out later, though. But that is a tale, already well told.
To be fair, the apex bank quickly realised the unintended consequence of its “big is better” incentive, and tried perfunctorily to impose a common year-end on the industry in the hope that it could break the back-to-back bit of the business that was driving the fixation with balance sheet sizes. Ultimately, the cycle of deceit was only exposed in 2009, at the end of the CBN’s special audit. The lead winners of “Season 1 of the Bank Awards” turned out to have had clay feet. Still, they won these awards into their death throes.
So, who were the people who doled out these evidently flawed awards? In the light of the evidently fictional account of the operations of most of the banks in which the apex bank had to intervene, what were the consideration of the awarding institutions? The answers to these questions matter less than the fact that we are back where we started. The infernal hour hand has gone full cycle. And everything appears unchanged! Again, banks in the country are winning awards left, right, and centre. And as it was yesterday, some of these awards come across pretty strangely. For an industry whose balance sheet comprises 95% government borrowing, which contributes less than 3% to annual output growth, accounts for less than 1% of total loans to businesses, and whose products are accessible to less than 35% of bankable adults in the country, it is hard to see how it is able to fill the pages of our newspapers with evidence of its “relative success”, as indicated by the number of plaques it manages to win every day.