I’m reading commentary on the denouement the Central Bank of Nigeria (CBN) just engineered in the nation’s banking space, and it’s déjà vu and ennui together, all over again!
“Size” is back in play.
“Going forward, we believe size, liquidity, capital, and efficiency will define the champions in the emerging banking landscape, and the healthy banks will have first mover advantage.” Thus one of the more serious commentaries on recent developments in the banking sub-sector.
Who recalls the 2004/2005 analogy with South African banks? The selfsame reason behind the apex bank’s decision then to up the minimum share capital for the nation’s banks? According to those who know about these things, before the N25 billion minimum capital base was agreed for Nigerian banks, the 89 banks then operating in the country were not as capitalised as the fourth biggest bank in South Africa.
So we set ourselves the goal of having Nigerian bank(s) among the top 50—100 banks in the world by 2015.
Before the 2008/2007 global financial and economic crisis, a couple of them had gotten into the top 1000. But significantly, even then, the best of them combined were still not as capitalised as the fourth biggest South African bank. It helps not to forget that the Johannesburg Stock Exchange is several (obscene) times the size of Africa’s biggest 14 stock exchanges (the Nigerian Stock Exchange inclusive) combined.
Evidently what matters in this equation is the size of the host economy itself. Banks will grow if the economy does well; stagnate if the economy refuses to grow; and shrink if the economy shrinks. Thus, this unstinting focus on the size of banks in the country is so diversionary as to be almost criminal. In the absence of key macro-economic reforms, the truth is that despite the CBN’s best efforts, the banking sector will continue to stumble from one crisis to another.