Your source of Free Articles Your source of Free Reprint Articles and Content! Login

Find an Article:, your source of Free Articles about: Business Ethics

Banking Sector Consolidation and Strategies for Generating Superior Return in Nigeria.

Banks consolidation in nigeria

To look into the banking sector consolidation exercise in Nigeria are to see into the future of Nigerian economy. Bank as a financial institution deals primarily in money. It constitute the financial framework of a nations economy, with the major concentration of helping to pool savings and excess liquidity from millions of individuals and firms within the country and to make them available to those who require them for various purposes.Banks in-group has commenced the integration of various processes and are to appoint consultant that will facilitate that will facilitate the integration exercise. New ideas, inventions and adjustment have to be installed in banking sector to satisfy customer’s need since they are not independent but partially dependent to meet the standard required of them. The consolidat! ion exercise in the country is also to tackle the need for customers derived banking.

It is also going to change the shape of banking in the country. They are being tested and equipped to compete with the international banking sector .it will build confidence on the mergers in that the bank’s focus will be on electronic banking and eradication of counter banking. It would also mean training bank staff to be fast and doing and adaptable in any millennium banking strategies ‘Catch them young’ is to be considered the ideology of these mergers and to open a way for Nigerian banks not to be held guilty of dropout in the international banking sector. The banking sector could be seen as survival of the fittest in this consolidation era.. Consolidation of the banking sector in Nigeria is to enable banks to compete globally and embrace innovation in their intermediation functions. Suggesting that the surviving banks would provide a final solution to funding for the productive sector of ! the economy. Banking sector believe that new investments will be attracted to the sector through consolidation and most of it might come through capital market. With the ultimatum at the last count, many banks had concluded plans or arrangement to raise capital base while others are in a race against time to beat deadline and for few who felt that they couldn’t meet up; are up and doing. Several banks are on their toes, to guard against any hideous fallout from the exercise.

Those caught napping are trying to win positions with the mega brand names that have emerged with direct and hopeful approval from the central bank (CBN) and Securities and Exchange Commission (SEC). They are sure to be approved which signifies the end of consolidation. The primary objective of the merger is to consolidate banks equity holdings in its subsidiary and related banks toward evolving into unified banking institution that would maintain a premiership positions in the post bank. Consolidation era.! The proposed mergers are expected to eliminate the duplication of administrative and marketing effort and result in more efficient utilization of assets. The consolidation in banking sector is aimed at recognizing the effort and to attract investors into the banking sector.Financial sector reforms, especially the requirement for Nigerian banks to re-capitalize to the tune brought about consolidation in banking sector. The policy has had as much impact on the Nigerian capital market development within a period of one year, that is the ongoing banking sector consolidation exercise and there is an ample evidence that it could be the best cost effective bank consolidation programme on any country in the history of country wide banks merger and acquisition in the world.

The 25-billion minimum requirement for the banks announced by the central bank of Nigeria (CBN) are to benefit banks that survive it, in a way of holding huge public sector deposit and may ! be permitted to hold some foreign reserve deposits. Having the target of competing globally but also embrace innovation in their intermediation functions. The surviving banks are holding hope that national economy hang on them and would provide a final solution to funding for the productive sectors of the economy. Arrangement is said to be on, that there will be automation process rendition of returns by banks and others through electronics financial surveillance system, E-fass. The belief of central bank is centered or anchored on the fact that such singular and approved policy may have as much impact on the Nigeria capital market development within the intended period and beyond, the ongoing banking sector consolidation exercise that the 89 banks in Nigeria had concluded and is concluding by the deadline giving them, there is proof that it could be the best cost-effective bank consolidation programme of any country of the world. Nigeria has meant much for them with such imme! asurable policy.

Learning bank to provide an efficient means of exchange for investors and customers. Banks are to be alert to any hole that would come up as a result of not having full dependency on themselves, to be up and doing and to mastermind their business.Gladly, Nigerian banking sector is walking to restore the dignity of Nigeria economy to restore to dignity of Nigeria economy, it is going to be tough, it is going to be difficult. Adjustment has to be made, plans are to be made and implemented, factors have to be raised and put in place and more importantly the country has to face with beating of inflation and low flow of cash. It is not for bad because they are to smile with the new exercise and policy. No success is to be recorded in banking sector if the country did not pass through a little time of change like this. Economy is exercising authority over Nigeria at this consolidation exercise period.Bank constitutes !

He framework of a nations economy. They cannot be idle and at the same time meet with what is expected of them. They must seek for ways to maintain the country’s confidence in them. They must look for strategies to generate superior returns; banks must adopt under listed practical suggestions if they are to maintain the unscrappable confidence in them. Mobilization of current account is a step to be taken since current account demands that the customers deposit their money and pay some commission to the bank to enable it covers the cost of operating such an account. The mobilization, which will go a long way to initiate businessmen, industrialist and others who would want to operate with current account largely make constant withdrawal and payment. With the use of teller money can be deposited to this account both internal and external.Moreso, mobilizing customers to open and to operate with saving account will generate mon! ey for the bank. Since the bank operateswith current account largely make constant withdrawal and payment. With the use of teller money can be deposited to this account both internal and external.

More so, mobilizing customers to open and to operate with saving account will generate money for the bank. Since the bank operate with a passbook and can be operated directly by the owner, but someone else could pay in money into the account, though a popular type of account operated by many persons especially those with low income. Commercial banks should increase deposit requirements to enable hefty business operators to take interest in it and adopt it as a banking plan. The operation of banks encourages savings. They provide facilities for savings, people could save money .By performing this role they help mobilize capital which can then be lent to investors. They therefore encourage capital accumulation, which help to speed! up growth development and profit to the bank.

Time or fixed account should also be indigenized and merited, as the best strategy the bank should adopt in raising money. money Deposited into it cannot be withdrawn. Bank previously operating with that type of account usually fix period which sometime maybe one year six months or three months as the case maybe. Before the money can be withdrawn with firsthand notice to the bank, banks can use this money to transact business with well trusted companies, individuals or businessmen which should not exceed the withdrawal months depending on the number of customers operating with the account and the money involved. Consolidated banks should act as agents of payment on behalf of their customers. Some customers have regu! lar payment to be made and to be made to.

The issue of many transfer which many indigenous or foreign expatriate banks have not adopted or yet to be adopted should go a long way to generate superior returns to the bank. The fertilized idea of this, which some banks have made available for sometime, have exposed them to foreign and local business transaction. Some of these foreign hard earned currencies, which are of greater value to our money, increase bank gain and open an opportunity for future business transaction. Also, mobilizing customers to make regular payment such as rent, insurance premium, school fees, Nigerian telecommunication (Nitel) and national electric power authority (Nepa) bills and Private Corporation. Business transaction is to be considered by banks when looking for strategies for generating superior returns. A ‘standing order’ can be left with the bank, which will make the regular payment on his behalf; the account of the customer is debit by the amount p! aid, including commission charged. Also, firms and organization can make payment to its workers through a bank.

Which suggest that the amount of the workers can be credited on a regular basis according to the amount due to them. This will attract the worker to open an account with the current bank. The federal government pay the national youth service corps(NYSC) through united Bank for Africa (UBA) suggesting that all branches of UBA will put a smile on their face hence corpers can withdraw their money through its branches nationwide. Banks can also ensure that forms are obtainable from them, for example, West African Examination Council (WAEC) National Examination Council (NECO) Joint Admission and Matriculation Board (JAMB) etc. when these form are sold by the banks, they generate more income. Customers also can instruct his bank to pay his creditors. Banks should ensure that to generate superior returns they should adopt collection of cheques, bills of exchange and other ins! trument of credit on behalf of their customers if the system is to continue.

Sadly because of problems that indigenous commercial bank face like, social pressure and commitment of banking personnel that make bank give out loans and advances, which are not in line with normal banking procedure. The policy was staked because some managers adopt a liberal loan policy in order to meet the demand of their friends,’ relatives etc. it has resulted in a high incidence of bad dept when indigenous bank and commercial banks are compared with their foreign counterpart. It also opens opportunity for wealthy people to use their connections to get loans. Which sometimes are not repaid. But the above policy or reason does not rule out the idea of the consolidated banks to act a lending agent to customers. They should avoid using bank for running of charity organization for their friends, relatives or connected individuals rather they can give deposit loan to ! borrowers who have the necessary collateral security such as stock and share certificate, life insurance policy, landed property and fat pay check from other banks.

They should tactfully subject the customer to open up a direct loan. Bank demand interest on the loan taken and it is being paid additionally, the banks to generate superior returns, they should enlarge the idea of giving loan facilities to current account customers in the form of overdraft. In acting as lending agent, the commercial bank can discount bills of exchange and hold them until they mature. To reach the heart of these ones they need to update them with lending information and encourage them to consider it, as they are out to transact business with them. Banks should hang on government by lending money to them when the need for that arises by purchasing government treasury bills. They made effort by acting as an intermediary and borrowers, mobile capital and give it to those who can make effective use of it in p! roductive ventures, thereby speeding up their profit and related economic development out to maximize profit by trading in money.

For bank to increase profitability they have to attract more depositors from people by offering to pay them interest on their deposit. They deposit attracted, the more they could lend out and increase their profit. This might not be done necessarily by only money deposit; it can also be done by helping in safekeeping of their customer’s valuables. Those valuable can be in form of costly jewelry and important documents such as wills, shares certificate and educational certificates. All the banks in Nigeria have facilities for this but have for decades lack the vision. They should resurrect this idea and seek for ways to perform this function effectively. Adopting this system will create a practicable desire on the customers to pay any amount ! charged to them by the bank since the security of some of these customers are endangered. Customers assume industriousness,, devotedness and commitment of bank based on their act as referee as to the integrity and financial standing of their customer. They should try to recommend their customers to foreign firms who require indigenous business partners for carrying out their business, it also include giving financial and technical advice to their customers in matter relating to investment.

Advising their business customers operation on how best to carry out their business operation, how to raise capital for business, whether to start a new business or to expand the existing one etc. it is important in international trade and helps accelerate economic development. These actions will melt the heart of customers and they assume that the particulars bank has their interest at heart. Compensating the bank with grand customers, awareness, opening an account with them and strong recommend! ation of the bank to others will not be over emphasized to them.To avoid running the risk of being a drop out in the banking sector, and the problem of capital shortage, they should intensify help in foreign exchange transaction thereby facilitating foreign trade and travel, they do this by selling foreign currencies to importers. Ensuring that anyone who wishes to travel abroad could purchase travelers cheques from them. These enable customers and people to settle their international indebtedness bearing in mind that they face very stiff competition from foreign banks, they should try and grease their face so as to patronize indigenous businessmen who are going to prefer foreign banks with better banking facilities.

Since in Nigeria, public confidence in indigenous banks is not very high and some of them cannot attract as many deposit as foreign-owned banks, so to attract more on ! ‘high trade’ customers and to control the lion’s share of the banking business they should try to take risk required, but positive. These include helping directly in the productive sector of the economy. They can own shares in commercial, agricultural and industrial ventures or could set up business on their own. By being concerned in business and by participating in business concerns, enough capital is provided for raising the level of production in the economy by more especially on their profit. Directly too, banks can act as agents that purchase stock and shares for their customers. Selling of shares and stock to their customers on behalf on issuing houses. They therefore ease transferability of securities and help in pooling resources for investment. With joint effort of the issuing house and the issuer (bank) they ensure that staked customers are attracted in buying the shares in bulk. The money generated from selling of this stock and shares should be used in transacting bu! siness and then pay. The customers with the part of the profit generate.

As a strategy to generate superior returns consolidated bank must ensure that they made themselves important agent for carrying out government monetary policy like the use of open market operation. It constitutes buying and selling of government securities, like treasury bills and bond from and to the business organizations. Though it will lead to the fall of the amount of money left in the banks still they should act as a watchdog to know when the central banks wants more money to be in circulation. They should act fast by selling securities to the central bank and receive their payment. If the security is not stipulated or mandated or said to be shared equally, they should ensure that they buy it in bulk to enable them record higher in profit and to use the surplus money bought in business transaction, it ! increase their power as the lender and money in circulation will increase. They must also be increased bank rate during inflation. They should not be reminded to increase their own interest to record equilibrium.

Though their lending ability will come to low ebb, leading to a reduction in the amount of money in circulation and risk of inflation, still if central bank should reduce their rate it will benefit both commercial banks and the customers. Borrowing will be encouraged and money increased. But the above suggestion is given to enable the bank to adapt to any new development and employing strategies to generate superior returns. Central banks gives directions and moral suasion to commercial banks on the size and type of loan to be given to any sector and also they gives directive on weather to continue in giving loan if the sector is not responding. So, if these policies are made available to the banks, they should adhere to it to avoid running the risk of loosing the business. Suggestions like restricting lending habits or adopting a more liberal loan policy needs to be paid attention to, bearing in mind that other banks are accountable and answerable to the central bank.It haunts the motivation of every concerned individual that there is banking inefficiency resulting from a lack of skilled personnel and management. Lack of skilled personal is due partly to the general shortage of skilled manpower in West Africa and inadequate fund to pay the salaries of highly qualified personals and management.

If the personnel are not efficient, banking business in seriously handicapped. The suggested major censes is that some indigenous banks tend to have affiliation only with ethnic origin. Directly, this mental attitude affects banking operation. Some banks may choose to employ people from a geographical area, or lend money or even frown at seeing another! staff from a different region presiding over the bank and will result it to enmity. Some of these banks do not consider educational background, the person’s accessibility in the banking sector, the managerial ability of the person and even the general rule guiding the banking sector. These hampered the smooth operation of the bank, reduce the speed of bank extension and result in to low income.
Politically too, some indigenous bank tend to have political affiliation. This too affects banking operations. Political pressures sometimes make them depart from the normal banking procedures for guarantying loans.

Loans are given to these politicians; sometimes they do not meet with the requirements. Political parties most often finances their campaign with loans from these banks and when they fail they will put a hard knock on paying back to these banks. And some politicians who do not lean completely on the security of these banks, they tend to tr! ansfer the money abroad. Those banks that they feel have better facilities for modern banking business. So, for consolidated banks to meet up with these belly filled customers they must work hard to retain these customers and they can be retained by giving employment based on merit and not being tribalistic. More to that they should be careful not to give out loan to political parties who do not meet up with the requirement for giving loan. Being fast to dictating bank officials who are bent to enrich themselves by corruptly embezzling money in defrauding their customer.

Another step the consolidated banks in Nigeria should take is the creation of money by commercial banks involving the multiple expansions of bank credits. Following the assumption in the process of credit creation like acting as a unit lf a bank should be independent work! ing on its own cannot create money, unless it is monopoly and which sometimes are practically impossible with the nature of economic development in Nigerian banking sector. If the bank stands to maintain independent, it will loose money to other banks. More to that, the law requires commercial banks to keep only a fractional part of the amount of money deposited with them as reserves. If they were required to keep 100% of the amount deposited with them as reserves there would be nothing to lend out and it would be impossible to make money with this idea The total amount of money created enticingly depend on the legal reserves requirements. The lower the reserve requirement, the greater the amount that can be created. With these processes there must be no leakages in the process of credit creation. All money borrowed from one bank is deposited in another bank.

So, money rotates and when it rotates in all the banks they gain, in order words generate superior returns. The issue still! revolves on the willingness of people to take loans and advances. Because if there are many people who are willing to borrow and have met the necessary requirement, the ability of banks to create money will be high. But if there are few people who want to take loans, credit creation will be low. But for the high taking of loan and low taking of loan, all depends on the bank. If they have the idea of generating superior returns they will look to it that these ones are sorted out and implant in them on why they need loan to fast forward their business.Banks should seek to be competitive with foreign and indigenous banks. Building and maintaining a competitive spirit in banking sector will speed up the profit growth of the bank. Seeking to establish business with the help of marketing department who should be dedicated and promising staff who have the interest of the bank at heart not! those that will bent on seeking for a selfish gain. Going into the job market and seeking the heart of these resourceful customers will enhance the generating of superior returns. With the modern system of banking that includes electronics banking system, banks should seek to open websites.

Websites contribute to 70 percent advertisement of bank. People can read their profiles, profits, loss, budgets and returns to know their stability. It also helps in the fastness of the business. Issuing of value cards, credit card and other cards also enhance the proficiency of a bank. Money can be faxed or downloaded once a payment is made from other banks with the help of this system.They should seek to be approved agent of money gram, which is believed to be the fastest, and safest way to send money worldwide. Today, banking customers has changed and they want bank to change too. They exp! ect to do business on their own terms, when where and how they please. They also expect to have simultaneous, single view access to all their account during just one telephone call or website visit, requiring that they should ask for access card to be provided to them. Banks should ensure that these cards are made available to customers at their expense, thereby selling the price for the card.

In Nigeria, E-point financial services - a sector specific customer relationship management (CRM) system. Consolidated banks can now move into integrated and secure online, wireless and electronics customer’s services swiftly and simply. More to that, banks can proactively identify sales opportunities when talking to customers through immediate access to prefigures complimentary product line. For consolidated banks to generate superior return still, they must work in the hole of possible loss of customers by being effective on strategies to be enhanced by the systems ability profile and work to! target competitor business.Customers appreciate banks consideration in the area of delivery. The banks ability to make particular delivery channels a part of product or service offerings, which can be priced accordingly. The fact that customers seek to get a seamless, cost effective service no matter, which way they choose to get business - whether via contact centers, private arrangement, intermediaries or even mobile text messaging. At the same time intensify significant cost savings through the product ability to segment and respond appropriately to different levels of customers value. Other important product ease and speed of implementation.

Like the use and application of CRM and OFX processes to support common banking services or process like payment of bills, transfers, balance enquiries and statement request. The above systems are designed to open up the banking enterpris! e by supporting banking industry standard message code. These products are constructed with the ability to deliver vastly enhanced cross and up selling powers, to control and minimize attribution, and give new muscle to customers claw back activities, these will make a huge difference to banking efficiency and profitability.Just as importantly customers will welcome personnel, single view banking experience the banks will give them through this new invented services. It allows customers to have a near door tailored services to their individual needs and ability to do that in real and due time. Customers should not be viewed on regard as name and number on an account. Rather as value and cared customers whom banks should embrace as and built profitable lifetime customers. Similarly, the interbank rate paid in the interbank market when banks borr! ow from and lend to one another in order to adjust their liquidity position.

Calling to the attention of co-consolidators, instead of looking for external help would go a long way to restore the hope of not loosing but making profit from the money borrowed or lend.In the least conferences, seminars and training are regularly organized by Nigerian economic sector. Bank should seek to send delegates to those gathering both national and international. Not to be forgotten is regular publishing of their profiles in national’s diaries. These increased customer’s trust and actions on them.

Finally, it has meant must good for Nigerians in banking sector consolidation. At least, Nigerians are to enjoy improvement in banking sector as other sectors in Nigeria are doing. Wit the consolidations bank are prepared to fend for themselves and to be more dedicated and efficient. Learned out processes will be carried out now as a way to get things! done. Banks use to work on these strategies to generate superior returns. It is no exaggeration if we say that Nigeria is ascending on high economic calling, with this policy.
Published: 2008-08-23
Author: emmanuel ugokwe

About the author or the publisher

Source: - Free Articles

Most popular articles from Business Ethics category
Buy this article  
Full Rights: 9.00

Article Categories
Arts and Entertainment Automotive Business   Advertising   Affiliate   Business (General)   Business Ethics   Business Etiquette   Careers   Communication   Customer Service   Economy   Entrepreneurial   Home Based   Jobs/Employment   Management   Marketing   MLM   Money Making Ideas   Networking   Online Business   Public Relations   Real Estate   Sales Communication Computer and Internet Finance Health and Fitness Home and Family Legal News and Society Pets and Animals Recreation and Sports Science Self Improvement Travel


Home | Submit an article | Benefits | Terms and Conditions | Top Writers | Contact-Us| Login

Copyright - Free Reprint Articles -