CBN okays 17 banks to manage foreign reserves November 22, 2007 | posted by Mobolaji Aluko (Archives)

 

 

 VANGUARD

CBN okays 17 banks to manage foreign reserves

 

Tuesday, 20 November 2007

 

THE Central   Bank (CBN) has given 17 Nigerian banks approval to manage the nation’s foreign reserves . The apex bank has also allotted between $325 million and $1billion to the 17 banks depending on the class of their mandate

 

.Besides, the least capitalised Nigerian bank achieved a capital base of about N25 billion ($188 million) as against N1.3 billion ($10 million) before consolidation, while  total capitalisation of the sector rose significantly from N311 billion ($2.4 billion) to N932 billion ($7.3 billion) by December 31, 2005.

 

Group Managing Director/CEO, Afribank Nigeria Plc, Mr. Sebastian Adigwe, speaking at the 11th Champion Insurance Day in Lagos yesterday recalled that the Nigerian banking industry was struggling, trying to overcome several challenges which made it very difficult for the sector to support the real sector of the economy before July 2004.

 

“There used to be 89 banks comprising institutions of various sizes and degrees of soundness.

 

Evidently, the industry was highly concentrated on the 20 largest banks which accounted for over 70 per cent of total industry deposits, assets and liabilities.

 

In addition, the sector was battling with some challenges among which were: poor capital base, capacity issues, poor corporate governance, unethical practices, distress syndrome and accelerated erosion of public confidence,” he said

 

“As at December 31, 2005, N360 billion and Direct Foreign Investment of $652 million and £162,000 were raised by banks.

 

The unexpected level of success achieved has not gone unnoticed in the global market as evidenced by the improved rating of Nigerian banks. In the rankings, 20 of the 25 Nigerian banks are now in the top 100 banks in Africa; 17 are in the top 40 banks, while four are among the top 10 in Africa. Seventeen of the 25 banks are in the top 1,000 in the world,” he said.

 

Moreover, against the backdrop of the heated crisis insurance industry recapitalisation  generated,  Mr. Adigwe advised the sector to take a cue from the banking sector.

 

“Because the banking sector was able to grapple with the exercise and came out successfully, the insurance industry can do same and be at peace with one another,” he said.

 

Adigwe who was the Guest Speaker at the occasion said: “There is no doubt that the Nigerian insurance industry has a lot to learn from the experience of banking consolidation for its own consolidation to achieve the desired goals.

 

It can easily avoid some of the unexpected challenges of the banking experience and with the benefit of hindsight  proactive steps can be taken to ensure that the gains already recorded are sustained and other milestones are achieved as soon as possible.”

 

The 49 insurance companies that were licensed to operate in the country, the Afribank GMD stated, should require the cooperation, trust and faith of all stakeholders, adding that the institutionalisation of sound corporate governance and appropriate regulatory oversight were very important.

 

According to him, “just like the way it was for the banking sector, the consolidation of the insurance industry was designed to tackle all the institutional problems that made it difficult for the sub-sector to make desirable positive impacts and support the growth and development of the economy.”