Home / Captain of Industry Interview / BANKS NEED TO RESTRUCTURE THEIR LOAN BOOKS – PROF. SEGUN AJIBOLA.

BANKS NEED TO RESTRUCTURE THEIR LOAN BOOKS – PROF. SEGUN AJIBOLA.

Is there any hope of survival for all Deposit Money Banks in the country, considering the challenges facing the economy at the moment?
Banking occupies a very delicate position in the economy because during a period of boom, we need banks to manage the boom, and during a period of recession you also need banks to come out to play the catalystic role to bring back the economy on its feet. With the situation we are in today, what is happening in the banking industry currently is a reflection of the challenges the economy as a whole is facing. It is an outpost of what the global economy is going through.
But in our own case, the monolithic nature of our economy has not helped any sector of the economy at all including the banking and finance sector. The economy relies so heavily on oil and gas; so, is the banking industry. If you look at the loan portfolio of banks today, it’s heavily tilted in favour of the oil and gas sector. And immediately the challenge of crude oil price slump started manifesting in this environment, the effect bounced on banks immediately in terms of sluggish performance, and obligations overshooting deadlines and agreed timelines. Then overall performance of the industry started witnessing some downward slide.
So, the loan portfolio of most banks as we have today is badly skewed. And this is becoming a recurring decimal that there is over-concentration on a particular sector that is doing well at a particular time. So, when the fortune changes, then every other person whose apron string is tied to that particular sector suffers. At the very moment is a need for banks to see how they can restructure their balance sheet to accommodate the realities on ground. Somebody has suggested that banks need to re-discuss the existing loan agreements, restructure some of the loans and advances, especially to oil and gas sector and quickly see how they can offload and reduce over-concentration in oil and gas.
What can the country do to get out of the current economic predicament?
We need to look at the global picture. We will only be out of this predicament if we take the bull by the horns. We have been talking, we have been giving sermons on diversification. And anytime we have challenges from the global scene, we first of all, as a people, pretend that we are insulated. We did that in 2007 and 2008. Unfortunately, we were badly hit eventually. That period went, and it seems we didn’t learn anything from that era. And here we are here again, we are back singing the same tune.
So, we need to diversify the economy, we need to embrace in practical terms now (not just in rhetoric) diversification. What do we do to rely less and less on oil and gas that is a wasting asset? Crude oil is becoming old-fashioned in terms of energy sources; it is becoming more and more commonly available to more countries? We need to now reduce our reliance. And how do we do that? We start that by looking from the micro level. The micro business operators in our environment today are expected to be rejuvenated by the microfinance banks? What is their contribution to micro business operators? What are their contributions to the overall economy either in terms of the Gross Domestic Product or employment? India is a living example. Micro business was rejuvenated in India, and today, most of the imported items from India to Nigeria are coming from the micro business operators in India. They have grown to become big pharmaceutical companies, food and beverage industries, electronics/electrical outfits that now export to other parts of the world. We have all these resources in Nigeria, I believe we have the expertise.
If microfinance banks and Deposit Money Banks can join hands to develop that segment of our economy, given our population, given our land mass, and given our resources (every conceivable resource is available in Nigeria), the result will be very tremendous. We should start redefining our life from the micro level. If we can do this, then we can embrace the small to medium- scale enterprises as well. We move from micro to small and then to medium-scale enterprises. We can encourage them and that is why it is everybody’s responsibility because in developing micro, small and medium-scale enterprises, the Federal Government has a role to play in providing infrastructure, law and order; that is, the enabling environment. So, complimentary role should come from those quarters.
We need to redefine our development blueprint to give priority to these areas that cannot just disappear overnight. Micro businesses in the villages and hamlets must have access to resources. I’m a farmer and I can speak from the position of authority: about 50 per cent of my farm produce on annual basis get wasted. It is either we could not transport or we could not preserve. And sometimes when we transport from the farm to villages and preserve, we do not even have the market. By the time you add all these ancillary costs, it becomes impossible for you to break even let alone to make profit. If we can overcome those deficiencies, I believe certain sectors of the economy will contribute more to our life; be it agriculture or solid minerals. And we will be able to reduce reliance on oil export and exporting other things like farm produce or other agricultural products to generate foreign exchange.
That’s one side. Through both the forward and backward integration that we can achieve through some of these strategies, we can generate other things like employment opportunities and so on for the generality of our people. We can then feed the multinationals and big companies, especially with some of the raw materials.
We should also redefine our lives as a people. We need to reduce our reliance on certain imported items. We have Abakaliki rice, we have Igbimo rice in Ekiti; we have rice from other locations. Why must we spend this scarce foreign exchange on Thailand rice, which in most cases as we are told are expired products being imported to Nigeria? Why should we import toothpicks, biscuits when we have substitutes that are even better and more nutritious? These are some of the ways we can redefine our economic blueprint to take care of what is happening.  And by the time we have these, I tell you, we have more opportunities for banks to thrive.
In its bid to promote ethics and professionalism and secure public confidence in the banking sector, how has the CIBN been administering disciplinary action on errant members in the public and private establishments?
We have a sub-committee on ethics and professionalism, which is one arm. We also have a Code of Conduct Tribunal. Our code of conduct will not be effective if we don’t have a tribunal. We also have an Investigative Panel. Our memberships are of two categories: we have individual members-these are the staff of banks and other financial institutions as well as academic institutions. Then we have corporate members: all the commercial banks in Nigeria, the Central Bank of Nigeria and the Nigeria Deposit Insurance Corporation are our corporate members.
All microfinance banks and mortgage banks in Nigeria are also our corporate members. We have an Investigative Panel that looks into the reported cases of infraction or misconduct. And if in any of these cases, any of our members is adjudged to be sufficiently culpable (either as an individual or a corporate member), the mater is referred to the Code of Conduct Tribunal. We also have a Disciplinary Tribunal. All these are provided for in the CIBN Act No. 5 of 2007. The Investigative Panel and Disciplinary Tribunal are copiously provided for in our statute. So, we do have and we implement everything to the letter.
Our tribunal has the power of the high court, and we have a retired justice of the Supreme Court as an assessor in that tribunal. And the decisions of the tribunal are like the decisions of a high court. The only challenge we have is, most times, cases of infraction, abuse of office, misconduct, are not reported – they are suppressed. So, that’s part of the kind of stakeholders’ constructive engagement we want to start having now. These cases must be reported to us, either that of a corporate member or individual member. We will drive them to the Investigative Panel and from there to Code of Conduct Tribunal. And when we see criminal negligence from crimes committed, the Tribunal refers such for full prosecution. So, we have all these in place to entrench ethics and professionalism in the industry.
As the 19th president of the CIBN, what are some of the things you plan to achieve during your short tenure?
I have been on the Council of our great institute for 12 years, serving in different capacities, from being an elected council member to national treasurer, second vice-president, first vice-president, and eventually the president and chairman of council. I have risen through the ranks. I was the chairman of the Lagos State Branch of the institute as well. So, rising through the ranks in the structure and organogram of the institute, I can say the institute has come a very long way in making its impact felt not only in the banking and financial services industry but the economy as a whole, the professional service, the academia and so on.
But we still have quite a number of mileages to achieve. We have quite a number of milestones to record and the institute, as a beautiful bride, is to be prepared for the next level. So, assuming this position as the 19th president of our revered institute, I’ve codenamed my agenda as the 7Cs mandate. And the 7Cs are clearly explained in my acceptance speech. And the content and context of those Cs are well encapsulated in that acceptance speech and they touch every aspect of our life.
First, as a frontline professional body; second, as a sector of our national economy that is regarded as the commanding height of the economy; and third, Nigeria as an economy, on the African continent and emerging very strong and willing to be one of the 20 largest economies within the shortest time now. So, putting all in that vantage position to influence the attainment of these critical macro-economic goals, I see the CIBN as a professional body that still has a lot to contribute to the lives of individual members, the lives of our corporate members and the national economy as a whole which should dovetail into the life of the citizenry. So, it is the amalgam of all these broad perspectives that now dovetail into what I described as the 7Cs mandate.

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