Essays on selected contemporary issues in the Nigerian Banking System

Author: Umaru Ibrahim, FCIB, FCIoDN, mni

Book Review by: Hashim I. Ahmad, Former Director of Research NDIC

The financial system serves as a lubricant to the workings of other sectors in any economy. This is because the sector plays an intermediary role by providing a platform where funds are moved from the surplus units to deficit units of the economy. The stability of the financial system is therefore paramount in exercising its intermediary role. The financial system is made up of subsectors, which are interconnected, but suffice it to say that the banking sector is the dominant subsector of the financial sector, and that partly explains why it is the most regulated subsector of the financial system in Nigeria.

The banking sector in Nigeria had witnessed a series of transformations since independence and in the recent past as a result of the economic problems faced by the country, which paved the way for the adoption of the Structural Adjustment Programme (SAP) prescribed for the country by the IMF. The SAP ushered in liberalisation of the economy, including the financial system, which brought about monumental growth in the number of banks and bank branches in the system. However, the increase in the number of banks was not proportionally matched with the increase in the number of qualified personnel in the system. The consequences of such a situation resulted in inefficiencies that led to serious distress setting in and the collapse of a good number of the banks. In any case, that situation was earlier envisaged, and that was why an institutional arrangement was put in place to address some of the effects of the liberalisation of the system. One of such initiatives was the setting up of a deposit insurance scheme to address issues around the failure of banks, including ameliorating the effects on bank customers.

The deposit insurance scheme setup in Nigeria at that time was a novel idea on the entire African continent, even though subsequently a number of countries hadd set up the scheme to be in tune with global best practice. At the time the deposit insurance scheme was set up in Nigeria, there was virtually very little or no literature on the scheme in the country and indeed Africa. Therefore, the scheme had to leverage the experiences of countries that adopted the schemes across the globe. It is pertinent to note that there was no concerted effort at documenting such experiences in book form by countries that pioneered the establishment of the scheme. These and other considerations informed the formation of this book by the author.

The author of this book, in the person of Umaru Ibrahim mni, FCIB, FCIoDN, is an accomplished public servant and the third Managing Director/CEO of NDIC in the series of those who led the Corporation since its establishment in 1989. He was one of the pioneer staff and the first managing director to be appointed from within the corporation. His working career in the NDIC spans over four decades in the managerial cadre, out of which one year was as acting managing director/CEO and 10 years as substantive managing director/CEO. Umaru was, during his term as Managing Director/CEO of NDIC, elected to the Executive Committee of the International Association of Deposit Insurers (IADI) and also Chairman of the Africa Regional Committee of IADI. He was also a pioneer member of the board of Asset Management Corporation of Nigeria (AMCON), as well as a member of the board of Chartered Institute of Bankers of Nigeria (CIBN) and Financial Institutions Training Centre (FITC). Before joining the NDIC, Umaru worked with the Kano State Government and rose to the position of Permanent Secretary.

Umaru attended the prestigious Ahmadu Bello University, Zaria, for his first degree in political science. He also obtained a master’s in public administration (MPA) from the same university. Umaru attended many management development, leadership, strategy and corporate governance programmes locally and overseas, organised by internationally acclaimed training institutions such as the London Business School, Wharton Business School, USA, INSEAD, France, IMD, Lusame, Switzerland, University of Cranfield, UK, Ashridge College, Templeton College, Oxford University, and National Institute for Policy and Strategic Studies, Kuru, among others. He also attended technical courses in the areas of banking, deposit insurance and finance, organised by the Federal Reserve Bank of the USA, the Federal Deposit Insurance Corporation of America, etc. Umaru, a Member of the National Institute (MNI), is a Fellow of the Chartered Institute of Bankers (FCIB), Fellow of the Enterprise Risk Management Professionals (FERMP), Fellow of the Nigeria Institute of Management (FNIM), Fellow of the Chartered Institute of Directors Nigeria (FCIoDN), and Chairman of the Global Emeritus Risk and Compliance Professionals, Nigeria.

Considering the profile of the author, which was a combination of decades of knowledge and practical experience, he has what it takes to put together this book as part of his contribution to the development of literature on deposit insurance and banking.

The Book, Essays on Selected Contemporary Issues in the Nigerian Banking System, is an attempt to fill the gap in the literature on deposit insurance by bringing together in a book form, papers and speeches presented at different time and at different fora by the author. The topics in the book cover burning issues of deposit insurance, banking crisis, corporate governance, mobile payment services and consumer protection.

The 224-page book has a table of content, a preview of chapters and a list of abbreviations and acronyms to guide readers and give them the convenience to navigate through the texts. The book has a foreword written by the former Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed, which is a mark of its endorsement. The book is organized into twelve chapters sequentially arranged to ensure seamless flow of ideas.

Chapter one of the book covers risk management in the Nigerian banking industry. In this chapter, the author brought his experience in risk management as a chief executive of a regulatory agency and a Fellow of the Enterprise Risk Management Professionals of Nigeria, as well as a member of Global Emeritus Risk and Compliance Professionals, to bear. He underscores the crucial role played by risk management in taming the tide of crisis in the banking industry nationally and globally. The author stressed the fact that regulators in the banking system should continue to ensure that banks develop and implement effective risk management frameworks so as to ensure stability in the nation’s financial system.

Chapter two of the book discusses the development of microfinance banks (MFBs) in Nigeria and the regulatory roles of NDIC. The author’s interest in microfinance stemmed out of his desire as the chief executive of the NDIC to promote financial inclusion by extending banking services to the grassroots. The contributions of NDIC in the capacity development of the staff of microfinance banks through collaboration with CBN and CIBN to run a microfinance certification programme for the Board, Executive, and operators of MFBs were highlighted.

In chapter three, the issue of mobile payment services in Nigeria is extensively discussed. The benefit of this chapter is to create awareness about mobile payment services and its importance in the promotion of financial inclusion in Nigeria. The NDIC under the leadership of Umaru Ibrahim took keen interest in mobile payment services and came up with a number of initiatives, which included the extension of deposit insurance coverage to the subscribers of mobile money operators through the pass-through deposit insurance.

Chapter four of the book is also about financial inclusion and the role played by the NDIC in promoting it in Nigeria. The effective supervision coupled with continuous review of coverage levels enhances confidence in the banking system and helps improve financial inclusion.

Chapter five is about consumer protection in Nigeria and the role of deposit insurance. Depositor protection is the core mandate of the NDIC. All the activities undertaken by the Corporation, such as deposit guarantee, supervision, claim resolution and liquidation, as well as financial literacy, are geared towards depositor protection.

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In chapter six, the strategies for addressing customer complaints in banks are extensively discussed. This is also another angle to depositor protection. The author highlighted the various initiatives provided by the regulatory agencies in the system, including the NDIC, in addressing customer complaints. The idea is to give protection to the customers, thereby boosting their confidence.

Chapter seven discusses emerging issues in corporate governance. As a member of the boards of the NDIC, AMCON, FITC and CIBN, the author’s knowledge and experience have been amply demonstrated.

In chapter eight, the author discusses the role of corporate social responsibility (CSR) in poverty reduction and economic development in Nigeria. He underscores the need for corporate entities to give back to society, particularly to the communities where their businesses operate, with a view to alleviating poverty. The author shared the experience of NDIC, which, even though a government agency and a member of the bankers’ committee, seriously advocated banks to give back to the communities they operate in. The corporation promoted CSR through the financing of projects in high institutions of learning in Nigeria.

Chapter nine of the book is about the role of deposit insurance in official safety nets and stakeholders’ protection during banking crises. The author highlights the importance of safety-net arrangements within a country’s financial system and shares the roles played by the NDIC as one of the components of safety-net arrangements in Nigeria during banking crises. The author stressed the fact that apart from the need for prompt intervention, there is the need for strong collaboration amongst the various components of the safety-net arrangement for any crisis to be addressed appropriately within the system.

Chapter ten discusses financial system resilience in a globalized economy: prospects, threats and benefits to the Nigerian financial sector. The author underscores the interconnectedness of economies in the world and the need for global collaboration to make individual financial systems resilient to shocks at the global level. He shared the experience of Nigeria in terms of the institutional arrangement and their efforts whenever there is crisis within the national and global economies.

In chapter eleven, the experience of Nigeria in bank failure resolution is highlighted. The author examines the various measures available for authorities to use in resolving bank failure in their domain. He shared the various strategies deployed by the NDIC in resolving bank failures in Nigeria and the challenges faced.

Chapter twelve discusses the issue of sustainability in banking practice in Nigeria. The author stressed the fact that although sustainable banking was applied informally in Nigeria, the concept was embraced formally through the release of a written declaration by the Bankers’ Committee in October 2011. He highlighted the various initiatives put in place by both the CBN and NDIC in ensuring that Nigerian banks comply with the principles of sustainable banking practice for the betterment of the system.

On the whole, the book is a clear demonstration of the author’s passion for intellectualism and knowledge sharing as well as his desire to contribute to reducing the dearth of knowledge on deposit insurance in particular and the banking industry in general. The book is rich in literature on deposit insurance and consumer protection and is written in lucid language devoid of technical jargon capable of confusing readers. The book further enriches the author’s earlier publication entitled “Control and Management of Distressed Banks in Nigeria: A Case Study of the Defunct First African Trust Bank (FATB). The author’s objective is to communicate the principles of deposit insurance and related issues to the various stakeholders as widely as possible. It is therefore my ardent belief that students, academicians, and other stakeholders in the financial system will find the book very useful.

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