How can nigerian banking industry ensure profitablility and liuidity in the on going merger syndrome and accui

Question

How can nigerian banking industry ensure profitablility and liuidity in the on going merger syndrome and accuisition

Answer 1

Like the banking industry of most developing economies, the Nigerian banking industry has oligopolistic structures. Even within the industry, there is what I will like to describe as the "oligopoly of oligopoly". It should therefore not be surprising that the profitability of well-managed banks can be said to be at the supernormal level in a sustainable manner. That is only obeying the law of economics.

In the industry, the few banks operating within the "oligopoly of oligopoly" structure are making their profits in billions while many others are operating in millions. Still, there are still other players who are depending on other banks for survival, although they may still be counting their profits in millions. Incidentally, the adverse operating environment is dealing the greatest blow on the real sector. It is therefore not surprising that a barrage of criticisms have been levelled against banks for making "huge profits" in an economy where other sectors are dying. For instance, Owualah, (1996) observed that,
"In the recent past, "bank bashing" in Nigeria widened both in scope and audience. The charges against banks were not only serious but in legion. They were accused of contributing to the huge depreciation of the Naira exchange rate. The huge profits posted by even the newest entrants in the industry in an economy that was severely depressed and in the face of increasing competition in the financial services market was perceived by the public as defying economic logic" .

Osahon, (1999) also argued that,

"Nigerian banks are simply officially licensed extortion agencies living off the sweat of their hapless victims. They sit atop their pent house offices nibbling away like rats at their captive customers hard-earned deposits to declare increasing mouth-watery annual profits in a viciously depressed economy".

Osahon went further to allege that

"our banks are not operating as banks but as money collecting points officially licensed to drain their customers of their resources. They are not empowering the economy or funding productivity. Rather, they are simply stealing from their customers' accounts to declare staggering profits from year to year while their customers are closing down their factories".

Owualah and Osahon are actually not alone in this apparently outlandish thinking. Even the Federal Government has not spared the banks. Chief Kola Jamodu, the Minister of Industry, (2002), made the following observations in the recently organized sixth Fellows and Associates forum of The Chartered Institute of Bankers of Nigeria.
"It is a fact that the banking industry today is despised by the generality of our people. Our people cannot understand how the banking industry can continue to thrive in the face of the general industrial distress and individual poverty. They see the sector as not adding much value that can justify its continued prosperity, leading therefore to a general feeling that the industry thrives on the basis of unethical, if not fraudulent, exploitation of the inherent weakness in the economy. In spite of this generally evident public feeling about banks, it is surprising that the industry has not risen up to adequately address this perception".

The implication of the foregoing criticisms is that the woes of the economy have been heaped on banks probably because of the nature of the industry and the regulatory requirement that compels them to publish their accounts. Two facts that are not always taken into consideration in levelling these criticisms are banks' high level of capitalisation and their large asset base. The profits may diminish to an insect size if related to capital employed or asset base. What is more, one can say without fear of contradiction that the banking sector employs the best brains in this economy and it will make nonsense of intellectual resources if it does not translate to improved bottom-line.

The banking sector remains the most regulated activity sector in the economy in order to serve the customers better, whereas the customers appear to be digging the grave to bury the same banks. These banks are owned mostly by private entrepreneurs who have committed enormous resources to break the barrier to entry and, like investors in the other sectors of the economy, they naturally expect adequate returns on their investments.

Other sectors of the economy may not be performing well not necessarily because they are not empowered by banks but more because they are facing hostile operating environment. With epileptic electricity supply, poor communications system, inadequate transportation system and above all insecurity of lives and properties, it will be very difficult for operators in some other sectors, especially the small and medium scale sub-sectors to survive. Although the adverse environment affects banks equally, they have to a large extent been able to take care of the problems on their own.

The real sector even faces more difficulty of containing the menace of smugglers and the impact of foreign goods cheaply produced and dumped on the Nigerian economy to compete with expensively locally produced goods. This sector therefore requires more than just empowerment from the banking sector to make it. An enabling environment that will protect it from all hostilities is what they need more than anything else.

Generally, the Nigerian banking sector has advanced more than the other sectors in information technology and that has increased efficiency in banking operations. There is no doubt that with increased efficiency, more profit will be posted by banks and that invariably may lead to greater criticisms unless something is done to carry along the other sectors. Improving the operating environment is imperative to making economic projects bankable.

Comparing the Nigerian banking industry with that of the developed economies in terms of profit differentials may seem going a little bit to the extreme. As a matter of fact, the real sector operators in developed and emerging economies operate in environments that foster growth thereby making it possible for them to post profits that make them attractive to banks, even qualifying them to borrow as prime customers.

Answer 2

Well you have to go back to history, when Nigeria broke independence in 1876 from Somalia, they declared themselves a free democratic republic, but soon it was the European colonist came there in search of diamonds and gold...and so it goes to address your question

Answer 3

It Can't. Simply because the scammers can't translate to English properly

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