Posted by From Kunle Aderinokun in Abuja on
The Central Bank of Nigeria (CBN) yesterday said banks in the country have total capitalization of N404 billion at the end of March, representing a 30 percent increase over the N311 billion `recorded before the beginning of the on-going consolidation exercise in July 2004.
The Central Bank of Nigeria (CBN) yesterday said banks in the country have total capitalization of N404 billion at the end of March, representing a 30 percent increase over the N311 billion `recorded before the beginning of the on-going consolidation exercise in July 2004.
Making this known in Abuja, at the 21st Annual Directors' Conference organized by the Financial Institutions Training Centre (FITC), Deputy Governor, Financial Sector Surveillance (FSS), Mr. Tunde Lemo, said the level of capitalization pre-consolidation at an equivalent $2.4 billion was relatively low for the size of the nation's economy, which is estimated at $65 billion.
Lemo said the banks were predominantly "small size banks with very high average cost and low capital base, noting that average capitalization then was N1.3 billion or $10 million.
He said as at the end of March, out of the 87 banks in the country, six banks had capital base of more than N10 billion, while 11 banks had between N5 billion and N10 billion; 38 banks- between N2 billion and N5 billion; 9 banks -N1.5billion and N2 billion; 8 banks - between N1 billion and N1.5 billion and 15 banks - N1 billion and below. But many of the banks during the review period were at advanced stages of their share offering at the Nigeria Stock Exchange (NSE).
The deputy governor noted that as at end of September 2004, the Nigerian financial services industry was made up of the principal stakeholders including 89 deposit money banks (DMBs) with about 3382 branches ; five discount houses; 81 primary mortgage institutions (PMIs) ; 532 community banks; 85 buraeux de change; six development financial institutions; 118 insurance companies; one stock exchange; one commodity exchange, the CBN, the Nigeria Deposit Insurance Corporation, Securities and Exchange Commission, National Insurance Commission and Financial Sector Regulatory Coordinating Committee (FSRCC).
According to him, 81 banks were fully owned by Nigerians while eight banks were owned by foreign investors with ownership by government accounting for less than five per cent.
He said 89 banks had 3,382 branches and 56,861 employees in charge of 14.802 million deposit accounts.
Noting that their aggregate balance sheet total was N3.222 trillion and aggregate deposit liabilities N1.756 trillion, he said gross aggregate credit was N1.146 trillion.
He, however, pointed out that the net credit was N1.146 trillion and aggregate provision was N284 billion, representing about 20 per cent of the gross credit.
Lemo said the top four banks in the country were during this period (September 2004) controlling 32.30 per cent of the aggregate assets, 32.57 per cent of the aggregate deposit liabilities, and 28.76 per cent credit.
He also said the top 10 banks controlled 50.84 of the aggregate assets, 51.65 per cent of the aggregate deposit liabilities and 45.38 per cent of the aggregate credit. This, according to him, "suggests the oligopolistic nature of the Nigerian banking industry."
He said the banking system at this period was being funded mainly by deposit liability, which represented 54.50 per cent of the industry's total deposit liabilities.
Capital and reserves, he added, contributed only 9.65 per cent of the funding source while paid up capital, which is the owners' contribution and reserves represented 4.13 per cent and 5.52 per cent respectively.
He however pointed out that credit represented 33.95 per cent of the total assets and also the largest earning asset of the banking system.
Lemo who presented a paper on "Developing Regulatory Capacity for the Post-Consolidation Era," said the consolidation programme provides great opportunities and challenges for the regulators, the operators and the stakeholders.
While he believed the programme is the pre-requisite to the enhancement of the country's banking sector's capacity to compete internationally, he said "it should be realized that the size alone would not constitute a sufficient condition for (the) efficiency and competitiveness."
He emphasized the need to build capacity to cope with the challenges of the post consolidation era. According to him, "the challenge to develop or build capacity in the post consolidation era is one that must not and is not taken lightly."