The Central Bank of Nigeria governor, Sanusi Lamido Sanusi, recently reiterated his desire for a change in the structure of banks in Nigeria. He mentioned that the current structure of 24 universal banks is unsustainable. It is not yet clear what the CBN governor means, but...


Currently, banking in Nigeria, as the roles of financial intermediation, payment system and the channel for the conduct of monetary policies are concerned, has 24 universal banks, a plethora of micro-finance institutions, and development finance institutions such as the agricultural bank and the bank of industry. However, as crucially as it is, there is no regional bank, although the universal banks have different regional strengths.
As it pursues its reforms of the banking industry, the CBN may be concerned that the current banking structure is not efficient, responsive and relevant to the needs of all the banking users in the country. If that is the case, what changes are required of the present structure? Three principles are critical for the success of the reforms of the CBN going forward and these include changes to the present banking structure.
The first principle is that of following the reforms through in a planned sequential manner. It is critical for the CBN to ensure that its reforms are not muddled up by trying to accomplish many things at the same time.
Many analysts would agree that the first thing that is required of the CBN at the moment is to exit the banks that it intervened. The process is long and may be more tedious than expected. A focus on this as it relates to recapitalization, mergers and acquisitions, and strengthening of corporate governance practices are the expectations of many Nigerians for now. The focus and completion of this process will help make changes to the structure much easier for the CBN to deal with.
It is also critical that the CBN defines the competition of any form of structure it wants to emerge. It will be helpful that there are no arbitrary rules in the determination of which banks operate in a particular segment of the banking industry. Each bank should be able to determine which segment of the market it wants to operate in and also be able to decide if it wants to operate in all. Once the rules are set, transparent and competitive space are defined.
One principle that has defined the universal banking environment is that of competition, and though changes can be made to the rules, negating competition will be awkward for our economy in the coming years. Indeed, incentives and capital requirements can be used to define market segments, but any action perceived to be underlined by coercion will not work in the long run.
The third principle the CBN must follow is that of transparency. The CBN must be transparent in its reforms. In the past, the CBN had been accused of being selective in carrying out its policies. It was perceived that some banks were favoured.
We therefore, believe that the apex bank's reforms will work, and will achieve the required changes in the structure of banks if only its policies and directives are transparent to all.
 This article was gotten from www.businessdayonline.com
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