Chief Executive of Proshare Nigeria, Mr Femi Awoyemi, has spoken of the urgent need to comprehensively reform the Central Bank of Nigeria (CBN) to ensure it is in good position to respond to the challenges of national economic management.

Awoyemi says the current structure of the apex bank makes it function more the protectionist big brother of the banking system and does not lend itself to effective management and supervision of the Nigerian economy.

The Proshare CEO was speaking on the topic, “Liquidity and Credit Portfolio Management: How Nigerian Banks can Win Anew” at the maiden edition of BRANDish Meeting of Minds held at the White House Hotel, GRA, Ikeja Lagos.

He held that the history of the Nigerian apex bank has made it over-protective of the banking system as against its primary duty of managing the overall integrity, growth and prospects of the national economy.

“The CBN needs to redefine its role as an economist rather than a ‘senior’ bank to other banks in the system. The job of the Central Bank is not just managing the banks. In the case of Nigeria, the Central Bank is actually functioning like another bank, sometimes doing things like donating money to charities as if goodwill is a critical deliverable. In countries where your see achievements around their banking sector, you will realise that they have actually done one common thing – reform their central bank,” he stated.

Awoyemi pointed out that the current protectionist disposition of the apex bank over banking system is not just ineffective but antithetical to CBN’s role as an industry regulator and warned that if the current players in the system do not watch and follow developments in the world to reinvent themselves, the banking system will face a major disruption from outside the system that may challenge the very relevance of banking in Nigeria.

“Technology is disrupting several things in the world and banking is not an exception. Uber has disrupted the taxi system in many parts of the world and same would happen to the banks. It is important to note that banking started in Nigeria over 100 years ago but have been unable to cover the country beyond the cities. But just a few years after the arrival of the GSM licensees, they have been able to reach practically all corners of the country.

While banks have been able to gather just over 25 million customers, the GSM people have amasses well over 100 million lines. What this means is that the telecom people have worked a lot harder than the banks in deepening their roots and connecting with the market. I am not sure the CBN will succeed for a long time in preventing the disruption by the banking industry by the telecom and other industries,” he said.

The Proshare CEO submitted that unlike it is popularly believed, banks in Nigeria cannot support the real sector because, as he put it, the long term funds needed to drive the economy is not with the banks.

He also said banks are also facing challenged from the mono product, oil economy that the country runs, saying this has “exposed banks to cyclical downturns as slide in the oil prices affects the fortunes or otherwise of the banking system.

“The consistent use of monetary sterilization instrument has affected standard deposit facility. The standard deposit facility is a measure of excess liquidity. The use of monetary sterilisation or TSA has led to a liquidity famine.

Therefore more than ever the fiscal side should improve liquidity using the banks as a channel of credit,” he said.

He called for more improved metrics in measuring risk, wider or broader universe of credit allocation so as to minimise risk and improve standard deviation of portfolio or distribution on credit, roper macro policy to reduce structural impact on credit cost and an over-hauling of the interest rate term structure such that credit do not reside in soft allocations alone.

Update news