Banks lose N10b to fraudsters
From Mathias Okwe,
Abuja
A GORY picture of the nation's banking sector was painted at the weekend by the Nigerian Deposit Insurance Corporation (NDIC) indicating that all is not well with the industry.
In its 2003 yearly report just released, the corporation said all growth indices of the industry were on the decline compared with the results of the previous years, while fraudulent activities on the other hand were on the increase.
In the report signed by the NDIC former chairman, Senator Ibrahim Kazaure, the corporation reported that insured banks' liquidity for instance deteriorated sharply during the year as their liquidity ratio decreased from 69.15 per cent in December 2002 to 47.40 per cent in December 2003, showing a drop of about 25 per cent.
Similarly, it revealed that insured banks' profitability declined in 2003 as banks recorded a profit before tax of N82.32 billion compared with the N93.20 billion in year 2002.
The report stated further: "Insured banks' total assets grew by 12.9 per cent from N2,980.49 billion in 2002 to N3,365.21 billion in 2003. That was nine per cent less than the growth experienced between 2001 and 2002.
"Also, total deposits of insured banks grew by 15.4 per cent between 2002 and 2003, indicating a decline in the growth rate when compared with the rate of 20.6 per cent attained between 2001 and 2002.
"The adjusted shareholders' fund also decreased by 8.16 per cent from N229.89 billion as at December 2002 to N211.11 billion by the end of 2003."
The report attributed the bad situation in the industry to the poor corporate governance in some of the insured banks.
It stated that many banks, during the period under review, continued in sharp and unwholesome practices, including weak or non-existent board, oversight of the activities and operations of the banks. As a result of these loopholes, the report pointed out that a total of 850 incidences of fraud were confirmed in the banking sector during the period, involving the sum of N9,383.67 billion up from the 796 cases in the preceding year, depicting an increase of about 6.8 per cent.
The corporation similarly estimated the expected loss at N857.46 million as at December 2003.
The report reads further: "Some boards had apparently abdicated their supervisory roles to their management and were often unaware of the poor financial condition of their banks.
"Also, some had failed to institute appropriate internal controls and sound management information systems in their banks. The weak internal control systems had facilitated frauds and forgeries in some insured banks."
It pointed out that in view of the critical importance of good corporate governance, the regulatory authorities in 2003 released a circular on the subject, which all insured banks were expected to implement.
In line with the overall mandate of the NDIC, the report said the corporation continued with the supervision of insured banks through both on-site examination and off-site surveillance.
A new department known as Special Insured Institutions Department (SIID) was created in the corporation in order to facilitate effective oversight of community banks and primary mortgage institutions.
The depositors will start to enjoy, with effect from 2004, deposit protection and guarantee hitherto enjoyed only by depositors of universal banks.
The NDIC report revealed that through the Field Examination Department (FED), it conducted the routine examination of 29 banks; target examination of one bank; special examination of seven banks and specially investigated 20 banks, bringing the total number of insured banks examined to 57 in 2003.
In addition to the on-site examination and off-site surveillance, the NDIC liquidated 34 failed banks earlier closed between 1994 and 2000.
It explained that the liquidation of Savannah Bank of Nigeria Plc. and Peak Merchant Bank Ltd., which licenses were revoked by the Central Bank (CBN) on February 15, 2002 and February 22, 2003 have been put on hold due to pending litigation.
The report also said the NDIC, during the period, declared 100 per cent dividend (full recovery) for the uninsured depositors of nine closed banks as at December 31, 2003.
It listed the affected banks as: ABC Merchant Bank Ltd; Alpha Merchant Bank Plc; Amicable Bank of Nigeria Plc; and ICON Ltd (Merchant Bankers).
Others are: Kapital Merchant Bank Ltd; Nigeria Merchant Bank Ltd; Pan African Bank Ltd; Premier Commercial Bank Ltd and the Rims Merchants Bank Ltd.`
