Business
Learn From Global Financial Crisis, Nigerian Banks Urged
Lead Banking and Capital markets director Mr. Emilio Pera, at Ernst and Young, a global leader in assurance, taxi transaction and advisory services has charged Nigerian banks to learn a great lesson from a global financed crisis which had gradually affected most financial sectors.
Pera who stated this at a one-day seminar on “Risk Management in Financial Institution: Imperative for Stakeholders,” added that there are a number of lessons. The banks should have learnt from the recent crisis.
Pera in his paper entitled “Lesson from Change: Regaining Balance in the Insurance Industry, however noted that despite the recent turmoil in Nigerian banking, African banks have generally weathered the global financial crisis relatively well as banks across sub-Saharan Africa, with the possible exception of Nigeria, have not felt collapse on a major scale. While some banks have faced the effect of slowing revenue growth and reduced trading income, this has not led to the collapse of any of the major banking institutions,” he said.
He added that as a lasting solution to the crisis banks must acknowledge that liquidity risk is a crucial task area that has to be given more attention since prior to the outbreak of the financial liquidity crisis, banks tended to concentrate on three major risk categories, which are credit, operational and market risk.
“This is increasingly going to be complemented by a fourth risk category, namely liquidity risk. I can tell you that major banks including some South African institutions, have incurred losses from proprietary trading positions which proved difficult to unwind in an illiquid market”, he said. He added that the fact that some major Nigerian banks had to be rescued by Central Bank intervention is due to those banks building up significant portfolio of credit with direct exposure to equity markets.
“This meant that those banks had taken on significant market positions, knowingly or unknowingly, even if the banks were not themselves directly exposed to stock-exchange equities” According to him, a credit risk issue arose as a result of the action of banks in that too much credit was extended to equities resulting in concentration risk. But in addition to that, liquidity risk was in all likelihood overlooked, or at very least under-acknowledged.
The facility will be disbursed through participating Microfinance Institutions (MFIs), which will in turn extend the loans to their customers, particularly SMEs, as they directly interface with businesses at the grassroots level.
The Executive Director of COMCIN, Mr. Micheal Ogbaa who represented the Chairman, Dr. Iredele Oyedele (FCA, FCCA), said the initiative is designed to strengthen micro-lending institutions and expand access to finance for grassroots entrepreneurs, particularly women and youths in the informal sector.
Ogbaa explained that COMCIN does not lend directly to individuals but works through its network of microfinance and cooperative institutions, which in turn provide loans to end users.
“We came together to advocate for the microfinance ecosystem. Commercial banks often exclude people at the grassroots, but our members are positioned to reach them. This facility will empower them to do more,” he said.
He noted that the loan scheme offers low interest rates and flexible repayment plans, making it more accessible to small business owners.
According to him, about 90 percent of beneficiaries are expected to be women, who play a key role in sustaining families and driving economic activities at the local level.
“Our focus is on traders, service providers, and players in the informal sector. These are the real movers of the economy. By supporting them, we are strengthening families and contributing to national development,” he added.
Ogbaa disclosed that eligible SMEs with proven integrity and business track records could access up to N5 million each through participating micro-lending institutions. The rollout has commenced in Lagos and will extend to Abuja, Enugu, and other regions, including the South-West, South-East, and North-East.
He said 12 micro-lending institutions have already benefited from the scheme, while 85 applications are currently being processed under the pilot phase.
“Our target is to reach at least 100,000 SMEs nationwide. We are building a platform that connects funding partners with credible micro-lending institutions, creating a reliable channel for financial inclusion,” Ogbaa said.
He added that COMCIN is also working to attract larger funding pools from development finance institutions and private investors, noting that successful implementation of the pilot phase would boost confidence and unlock more capital for SMEs.
“We have seen encouraging testimonies from early beneficiaries. As we demonstrate transparency and efficiency, more institutions will be willing to channel funds through us,” he said.
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