• Saturday, May 18, 2024
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Economic headwind calls for right decision from bank directors


In the boardroom of the financial services sector as well as other organisations, directors make a lot of decisions that may make or mar the organisation.

The current economic situation in Nigeria calls for the right mix of individuals to sit in that room; people who have the requisite skills and knowledge to continually grow the bank, while ensuring that the bank/organisation is able to effectively compete domestically, and in the long run become a global institution.

Bank directors have therefore challenged the deposit money banks to think outside the box to fund the identified sector or real economy as an antidote to the current crisis resulting from dwindling oil price.

Analysts, in corroboration, say banks can fund some sectors that have already been identified during the GDP rebasing, such as telecoms, entertainment and services, among others.

“The banks depend on taking money in and lending it out. So, anything that depresses income or taking money in is bound to affects the banks’ bottom-line. The banks have to think out of the box and look for ways of doing business properly, and that is funding the real economy,” Sonny Kuku, president, Bank Directors Association of Nigeria (BDAN), said in an exclusive interview recently with BusinessDay at the association’s annual forum in Lagos.

He admitted that the oil price saga was expected and predictable, but was concerned that government did not take it into consideration before fixing the price for the budget.

“We should reduce the cost of governance, reduce unnecessary cost of importation, things that we do not need. We should look inward like the India and China did. It means there will be no luxury goods or it will be reduced only for those who can afford it so that we can conserve that foreign exchange and use it to develop,” he said.

According to him, the real economy should be developed by focusing on small and medium enterprises and investing in infrastructure, saying “and government should take their hands off these businesses and do regulation. They should do regulation, security, infrastructure and social development; every other thing should be left for the private sector to do.”

Presenting a paper on ‘Competing Globally From The Boardroom: Reviewing Benchmarks For Nigeria Bank Directors,’ at the 2014 BDAN forum in Lagos, Ayodele Othihiwa, partner, KPMG Professional Services, said to compete globally from the boardroom, an organisation must put its ‘governance house’ in order.

“With effective, sound and well respected board, lenders, both local and offshore, will recognise the competitive advantage that this creates for the institution, particularly with respect to access to capital,” he said.

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To him, local and foreign investors will respond positively to evidence of an effective management of the institution, and this would support the institution’s ability to compete and excel in the global market space.

To Kuku, competition has always been contentious in banking, and regulators have traditionally tried to restrict competition in the industry with the aim of avoiding excessive risk-taking. “A fully-fledged liberalisation process was later put in place in many countries and there was consequently a notable increase in bank failures.

“To avoid further crisis in the industry, there is the need to ensure that strong boards govern our banks. There is also the need for these directors to be well remunerated for the challenging roles they play,” he said.