Banks must save our money from termites

Casmir Igbokwe

 

Akubuzo is a character in an Igbo novel I read in my primary school days. The name means wealth comes first. And the man is very rich. But in spite of his resources, he is stingy not just to other people, but also to himself. In other words, he starves himself of many good things of life. His account officer is himself; and his bank, an underground safe. One day, he opens his vault to savour the enormity of his wealth. To his greatest chagrin, he discovers that termites have eaten up his money.

 

Today, putting money in an underground safe belongs to the Stone Age. Nigerians have come to appreciate the importance of banks in a nation’s economy. The Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, amplified this view last week when he said that we could not have an economy without the banking sector. Nigerian banks, he noted, were our ambassadors in today’s global economy. If anything happens to them, the entire economy suffers.

 

This is why one gets worried whenever there is any negative signal emanating from our banks. In the last two weeks or so, there seems to be a resurgence of the unhealthy rivalry plaguing the industry. When I first saw a text message indicating that some banks would soon be distressed, I dismissed it with a wave of the hand. But the text messengers are not relenting. And there are different versions of the messages as there are different banks in the country.

 

In a front page report on Saturday, December 6, 2008, The Guardian adds, “Two versions of the messages made the rounds in the industry, with one of them listing as many as 12 banks, including three top players, as among those allegedly hit by liquidity crisis. The message also indicated that six more banks were joining the fold to swell the rank of distressed institutions in the industry, bringing the total to 18 out of 24 in the system.”

 

This is not the first time banks would loan out rumours to their customers. Prior to the consolidation of 2004, this ugly trend was prevalent. Hapless customers did not know what to believe until some of the weak banks actually collapsed. A retiree, who was a victim of the distress, called me recently to find out why the CBN had not paid back their deposits trapped in African International Bank. The old man apparently believed that as a journalist, I should be able to provide him the information. Hence, I assumed the role of the CBN Governor and appealed to him to exercise patience. Perhaps, I told him, he would receive his money as soon as a strong bank completed the process of acquiring the AIB.

 

Between September and October this year, similar rumours of distress among banks were rife. Some unknown individuals circulated text messages indicating that five banks selected as market makers to stop the bearish run in the stock market, have liquidity problems. Some reports blamed the situation then on desperate banks that were jealous of the successes of their bigger competitors. The CBN and the Chartered Institute of Bankers of Nigeria quickly stepped in to stop the ugly trend.

 

The question is: why will such a revered industry as banking engage in such an unhealthy competition? I believe it is because of the inordinate quest of many of them to be among the top 10. On many occasions, we have heard different banks claiming to be the number one bank in Nigeria. Some say they are bank of the year. Some claim to be the most capitalised. Others say they are the most profitable. And they parade all manner of funny awards to authenticate their claim. While the top five are playing against themselves, the rest of the banks are playing against them.

 

There are yet some others who will not want to be at the bottom. Hence, they engage in all sorts of fair or foul tactics to remain afloat. This is why most of them convert almost all their members of staff to marketers. They woo big clients and are ready (especially ladies) to do anything within their feminine powers to get the customers’ money.    

 

I’m sure our bankers realise that rumours of distress can be very damaging to their business. The often-cited example now is United Kingdom’s Northern Rock. The bank was as solid as the Rock of Gibraltar until sometime last year when stakeholders heard that the bank was having problems. Confidence waned and depositors rushed to withdraw their money. The bank has not recovered from that.

 

No doubt, confidence is very essential in the banking industry. As Soludo put it, “We create confidence with our mouth. We also destroy confidence with our mouth.” Our bankers should understand that competition is a fact of life. It is a fact of business. For instance, UAC hitherto dominated the sausage roll market. Today, Leventis and some others have come in to engage the company in a positive bullfight.

 

It is unfortunate that while the apex bank in the country continues to reassure the citizens that the global financial crisis will not significantly affect our banks, major operators engage in practices that may pull the industry down. Being expert rumourmongers and text message composers suggest that some of them don’t know what to do with their time. Since they pretend not to know that beating competition requires carving out a niche in the market, I wish to suggest some of the things they can do to win more customers.

 

One, all banks should consider reducing their lending rates. The Central Bank of Nigeria had, in August, reviewed downwards the Monetary Policy Rate from 10.25 per cent to 9.75 per cent. Despite this, bank customers still complain of high rate of lending. I understand the rate hovers between 19 and 21 per cent.

 

Two, it will be wonderful if our banks could reduce or even abolish a number of high charges on some transactions. Those who have current accounts will tell you that such charges range from COT, VAT on COT, and some other charges some customers have termed hidden.

 

In all, the CBN and the CIBN should call rumourmongers, SMS experts and other termites in the banks to order. Otherwise, we may wake up one day to discover, like Akubuzo, that our precious deposits are gone.        

 

We must not allow that to happen!

 

 

  

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1 Comment »

  1. 1
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