'Finance Industry Yet to Record Real Growth'
By Nnamdi Duru
The Commissioner for Insurance, Dr. Oladipo Bailey, has stated that the finance industry was yet to record real growth and development in recent times, attributing the increase in turnover posted by operators in the sector to hyper-inflation.
He made this observation in an interview with THISDAY recently and restated his support for any government policy aimed at stengthening the nation's finance sector.
Bailey, who was reacting to enhanced capitalisation prescribed for banks by the Central Bank of Nigeria regretted that the nation's finance industry is yet to witness real growth and development as the nominal increases in income recorded were as a result of hyper-inflation.
He then ruled out the possibility of the type of reluctance to merger that was witnessed during the just concluded recapitalisation exercise in the insurance industry recurring saying, "if they are reluctant to merger they will not be reluctant to die. CBN left them with no option, it is shape in or shape out".
On the impact of banks' recapitalisation on the insurance industry, Bailey said, "definitely, capitalisation will not remain same. We are not allowing new companies to come in at this level of capitalisation, insurance companies' capitalisation will go up".
On the percent increase to expect, the Commissioner said, "capital of insurance companies does not serve the same purpose as capital of banks".
The Commissioner for Insurance also gave words of assurance to bank workers and the banking public that the status quo would not be significantly distorted. He said that in the short run, employment and volume of business in the sector would be constant.
He maintained that surviving banks would definitely reabsorb employees laid off by liquidated banks even as he maintained the the businesses of the latter would be transferred to the former, necessitating increased demand for manpower by the former which would be left with no option than to reabsord already trained but displaced manpower in the industry.
He also reationalised the quantum leap in capitalisation prescribed by the apex banking institution arguing that CBN must have conducted its researches well to arrive at that figure.
Bailey argued that the hike in banks' capitalisation is capable of bringing down the exchange rate of the Naira as well as banks' lending rate, reduce the administrative costs of banks and help the industry develop itself on the way of providing succour for the manufacturing and real sectors of the Nigerian economy.
The prescription according to him, would ensure that professionalism is entrenched in the industry and at the end of the day translate to good things for the economy.
"The teaboys and teagirls in banking today would be shown the way out while the real whizkids and professionals would take over from them. At the end of the day it will be good for the economy", Bailey said.
He also noted that there is proliferation of banks in the system while underscoring the need for CBN to tidy up the system.
He stated his believe that with this pescription, CBN is encouraging mergers between existing banks and expecting to have between 12 and 18 banks when the new regulation would be fully implemented.
He argued that the nation's finance industry is yet to witness real growth and development as the nominal increased recorded were as a result of hyper-inflation and rule out the possibility of the reluctance to merge as witnessed during recapitalisation of insurance companies recently recurring saying, "if they are reluctant to merger they will not be reluctant to die. CBN left them with no option, it is shape in or shape out".
The Commissioner traced unethical practices perpetrated by banks including but not limited to inside dealings, round tripping, and indecency in the conduct of bankers to the cut-throat competition which has its roots in the number of players but advised that the number should be determined by the volume of business available and aimed at stemming the tide of bank failures as witnessed in the nineties.
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