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Banker hail hike in takeoff capital

by Business News Report

Bankers and finance experts have hailed the federal government’s decision to double the minimum take off capital requirements for banks which took effect from January 21 this year.
There were, however, mixed feelings as to government’s decision to grant practising licences to 23 new banks at a go.
A survey conducted by The Republic showed that while a large section of the sector hailed the entrance of the new banks some feared that the development may lower standard of banking practice in the country.
The poll however revealed an across-the-board commendation of increase in capital base to nip incidence of bank failure that may follow increase in number of banks operating in the country.
The Republic exclusively reported Thursday, February 18, of presidential approval to the 23 banks to commence operation this fiscal year, 1988.

The new directive increasing initial capital base requirement of new banks was also reported alongside story of a review of the 19-year old banking act.
Under the directive which has since been communicated to the Central Bank, new commercial banks are expected to have a total capital outlay of N10 million while new merchant banks are expected to have N6 million before being considered for licence.
Alhaji Abubakar Abdulkadir, the managing director of Nigeria Industrial Development Bank (NIDB) argued that increase in number of banks would lead to unnecessary proliferation of mushroom banks,.
He also expressed serious fears over availability of adequate manpower to help in setting up the new banks.
Mr. Anthony Addis, the managing director of Financial Merchant Bank lauded the approval given to the 23 new banks saying it is a step towards ensuring “better and efficient banking services”.
He however expressed concern over availability of sufficient trained personnel that will be needed to manage the new banks.
He feared that ths may result into a situation where banks overhead cost may rise through unjustifiable increase in emolument of staff in order to retain their services.
To avoid the probable situation Mr. Addis suggested that government makes it compulsory for new banks to have technical partners to assist in operation.
He however described the increment in the initial capital outlay of new banks as a welcome development which will discourage quack investors.
A research economist with Union Bank who demanded anonymity also expressed satisfaction with the government decisions on the new banks and increase in minimum deposit.
The two policies he said are important complementaries in the task of avoiding cases of bank failures in the country.
A director of Rims Securities, Lagos, Mr. S.B. Olayemi also hailed the approval granted the new banks saying “it would give relief to individual bank holders.”
He predicted that establishment banks wold lose many customers due to envisaged aggressive marketing strategies the new banks will adopt.
A First Bank of Nigeria executive director felt that the 23 new banks are still not enough to bridge the present under-bank situation in the Nigeria economy.
He argued that this is unlikely to have substantial effect on present one bank office to 102,000 persons unlike in India with 52,000 customers to one branch and Britain where 4,000 persons uses one bank office.
Financial experts at the Central Bank of Nigeria also saw increase in numbers of bank as a good idea but feared that this may result in sub-standard bank services.
The officials suggested community type of banking as obtainable in India and Indonesia instead of the proliferation of banks.
Commenting on the issue the managing director of public finance and management consulting group, Mr. Paul Erihri described the decision licensing more banks as “most welcome”.
According to him, the development will make banks to brace up and justify huge profits annually through a high class customers service.
Recently, the federal government granted 23 banks licences to operate in the country out of which 15 are commercial banks and 8 merchant banks.
The initial capital outlay for new commercial banks was increase from N5 million to N10 million while prospective merchant banks are to have N6 million instead of former N3 million as capital base.

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