Political tension prevents CBN from constituting board
The Central Bank of Nigeria (CBN) is yet to constitute its board of director after it dissolved its former board in 2015.
The CBN disclosed this in its draft of 2017 annual report released on Wednesday. President Muhammadu Buhari had in April 2017 requested the confirmation of the appointment of five non-executive directors of the Board of CBN.
An economist who pleaded for anonymity said it just means their corporate governance is not efficient although most Nigeria government agencies do not have board anyway.
It is really about corporate governance issues and it also as a result of the fact that the senate has not confirmed board members.
Meanwhile the board of an organisation is suppose to ensure that the corporate governance is well put in place but in case of these Nigeria parastatals, the board are just there as an internal organ and the decision are made by the management and not the board as it is done in the case of private organisations, the Economist said.
Although it does not really have any negative effect because the really important people are the CBN governors and the senate president and the rest. These board members are just politically appointed to fill in the positions.
The report noted the failure by two banks to comply with the requirements of the Code on composition of the board, board meetings, subsidiary cross directorship, holding company, succession planning, remuneration policy, limits of authority and risk management.
It revealed that nine banks did not comply with the requirements on ethics and professionalism, as well as, rights of other stakeholders, adding that all banks complied with the requirements of the code on size of the board, separation of duties and disclosure and transparency.
Also under corporate governance, three banks did not have an approved strategy document, while those for some banks were not robust and comprehensive.
The draft annual report revealed that Capital Adequacy Ratio (CAR) of Deposit Money Banks (DMBs) declined to 10.2 percent as at December 2017 compare to 14.8 percent in December 2016. The regulatory benchmarks for banks with national and international authorisation are 10 percent and 15 percent respectively.
The decline was as a result of reduction in total qualifying capital, due to impairment from non-performing loans. Similarly, asset quality, measured by the ratio of non-performing loans to industry total, worsened to 14.8 per cent and was above both the benchmark of 5.0 per cent and 12.8 per cent in 2016. Accordingly, the banks were directed to intensify debt recovery, realise collateral for bad debts and strengthen risk management.
”The low capital adequacy ratio may impair banks’ ability to create credits”, said Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited.
However, Akinwunmi said there are opportunities in the Nigerian capital market for banks to raise qualifying capital to boost their lending capabilities if there are good risk assets in the country.
The banking Industry Non-Performing Loans ratio (NPL), further deteriorated to 14.8 per cent at end-December 2017, from 12.8 per cent in 2016. At this level, the industry NPL ratio remained significantly above the maximum regulatory threshold of 5.0 per cent. The industry average liquidity ratio (LR), however, improved from 43.9 per cent in 2016 to 45.6 per cent at end-December 2017 and remained above the regulatory minimum of 30.0 per cent by 15.6 percentage points.
Under consumer protection the report indicated that the CBn imposed sanctions, on 17 banks, for failure to comply with regulatory directives.
The number of complaints received from consumers against financial institutions fell by 11.5 per cent, from 2,656 in 2016 to 2,349 in 2017, with claim value of N22.23 billion, US$2.57 million and €6,940.00. Of this number, complaints against banks and other financial institutions (OFIs) accounted for 2,284 (97.2%) and 65 (2.8%), respectively, compared with 96.0 and 4.0 percent in 2016. The complaints included ATM dispense errors, based on use of debit/credit cards, excess charges, disputes on international trade guarantees, loans, unauthorised charges and account management issues.