Progress, novelties and oddities in the Nigerian banking landscape – Businessamlive

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BY MARCEL OKÉKE

Developments in the Nigerian banking system in recent times can be dispassionately classified into a few leaps and bounds, novelties, and then numbing oddities. From the acquisition of the “elephant” Union Bank of Nigeria (UBN) Plc by the “baby” Titan Trust Bank Limited, to the start of business by a few newly licensed banks, to the opening of thousands of “unlicensed” accounts by one of the banks by virtue of privileged access to a “common database”. There is also the problem of bankers who lost their jobs during the years of banking consolidation (2005/6) and who now have to be paid for their backlog of severance pay by the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), thanks to a court ruling in favor of the ex-bankers.

On the regulators’ side, even the apex bank has not been spared the ripples of the system’s quirks: as, according to reports, the Independent National Electoral Commission (INEC) has banned the Central Bank of Nigeria (CBN) from maintaining his sensitive electoral portfolio. materials. The Chairman of the Commission, Prof. Mahmood Yakubu, announced this in Abuja during a symposium on “The Electorate: A Conversation on Elections in Nigeria”. Yakubu said that in the meantime, the CBN would no longer be in charge of election materials, starting with the Ekiti State Governor’s Poll scheduled for June 18, 2022.

Clearly, the highlight of Nigeria’s banking sector advances in recent months has been the completion of the acquisition of an approximately ninety percent majority stake in one of the oldest banks in the country. , UBN, by a child barely three years old. bank, Titan Trust Bank Limited. Unsurprisingly, when the process leading to this deal began about six months ago, many industry players and stakeholders expressed doubts or outright disbelief. This was due, in part, to the fact that UBN – arguably the second oldest depository bank (DMB) in the country – had long been in the “big league” and held a prominent place in the Nigerian financial firmament – playing very actively and primarily in virtually every subset of the financial services industry. There was the “big, strong and reliable” Union Bank of Nigeria Plc; Union Merchant Bank Limited; Union Homes Limited (mortgage bankers); Union Insurance Company Limited, among others – all under the UBN Group giant.

On the other hand, Titan Trust Bank (TTB) Limited effectively started operating as a commercial bank after obtaining its national bank license on April 26, 2019. But with the conclusion of the acquisition agreement, the whole of UBN’s executive leadership, including its chief executive, had to “retire”, handing over positions to the new owners (TTB). Indeed, the new CEO of UBN is the managing director of TTB, Mr. Mudassir Amray. With this, the 105-year-old bank (UBN) is now fully owned by the three-year-old bank (TTB) – arguably, the first such acquisition in the annals of banking in Nigeria.

While this unprecedented acquisition agreement was being finalized, another unprecedented development was occurring in the industry, namely the securing of a court ruling requiring two key regulators (CBN and NDIC) to pay bankers who lost their jobs during the notorious 2005/6 bank consolidation. Specifically, a National Industrial Court in Lagos had on May 23, 2022 ordered the two federal government agencies to pay over N5.7 billion to the termination benefits to more than a thousand bank employees affected by the 2005/6 recapitalization exercise. The money, according to Judge Paul Bassi, must be paid within three months from the date of the judgment, failing which the sum would bear interest at 10% until it was liquidated.

Operating under the Association of Former Employees of Unconsolidated Banks of Nigeria, the concerned bankers gave the CBN and NDIC a one-month ultimatum to pay their N5.7 billion benefits. The association’s chairman, Mr. Magnus Maduka, warned that “if the Central Bank and the NDIC want to save themselves unnecessary trouble, they should simply grant every staff of these banks, including those who have joined a week before the closing of the banks, their terminal services.

Incidentally, the legal action that resulted in the decision in favor of the “ex-bankers” was one of the fallouts from the bank recapitalization exercise that ended in 2006 with only 25 “winning” banks. However, as the court case progressed, the banking industry continued to experience new dynamics, including mergers and acquisitions, massive organic growth, the impact of financial technology (fin-tech), expansion and off and onshore competition, etc. merchant and commercial banks (and other specialized banks) have emerged in recent times, unlike shortly after consolidation.

Specifically, while the 2005/6 recapitalization exercise ended with 25 “big banks”, the number of depository banks (DMBs) has now nearly doubled; and there has been a proliferation of other specialized banks and non-banking financial institutions. In the last three years or less, the following DMBs have started operations in Nigeria: Titan Trust Bank Limited, Globus Bank Limited, Parallex Bank Limited, Providus Bank Limited, SunTrust Bank Nigeria Limited, Premium Trust Bank Limited, Signature Bank Limited. Similarly, a number of merchant banks have also emerged, namely: Coronation Merchant Bank, FBNQuest Merchant Bank, FSDH Merchant Bank, Rand Merchant Bank, Nova Merchant Bank.

It should be noted, however, that while the “influx” of new banks into the banking sector in recent times has largely had positive effects on the system, it also has some negative impact. It has intensified competition in the industry to such an extent that some operators have all but abandoned ethics and professionalism. A recent example of “deadly competition” is where a bank allegedly opened multiple unauthorized accounts, using a database of Nigerians at its disposal, contrary to the regulations of the National Information Technology Development Agency (NITDA ).

This banking practice has been compared to that of Wells Fargo, the American bank fined $185 million by the Consumer Financial Protection Bureau in the United States, for opening 1.5 million unauthorized accounts, resulting in the dismissal of more than 5,000 company employees.

However, in Nigeria, according to NITDA regulations, the penalty for breach of personal data of Nigerians by a company in possession of 10,000 data and more, is 2% of the company’s annual gross turnover of the year former. Although the NITDA regulations also state that the data controller could pay N10 million for the data breach, it depends on which is higher.

As NITDA pursues the alleged breach to conclusion, an insult to the integrity of the banking industry and its regulators has been thrown down with the CBN’s ban on retaining sensitive INEC election material. This decision, which obviously calls into question the integrity of the apex bank, is certainly not unrelated to the recent partisan political misadventure of the management of the apex bank – which resulted in the legal action against INEC and the Attorney General of the Federation (AGF) by the CBN. chief. Although the deal has since been withdrawn or overturned, the sanctity and purity of the apex bank has been irretrievably lost. For INEC, the apex bank has become as partisan and vulnerable as any other agency, when it comes to keeping sensitive election material safe – a role the CBN has played almost exclusively for eons. Although in material terms the apex bank has lost nothing, the symbolism and significance of INEC’s decision cannot be fathomed. This is indeed a lesson for all!

Marcel Okeke, a practicing economist and consultant in business strategy and sustainable development based in Lagos, is a former chief economist at Zenith Bank Plc. He can be reached at: [email protected]; +2348033075697 (text only)

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