The recent upheaval in Nigeria’s banking sector, marked by the Central Bank of Nigeria (CBN) dismissing the boards of Union Bank, Keystone, and Polaris, has ignited a spectrum of reactions. While some stakeholders downplay the potential negative impacts, others stress the need for a judicious approach to the unfolding situation.
On January 10, the CBN wielded its regulatory authority, ousting the board and management teams of three prominent commercial banks for severe violations of financial regulations. The apex bank cited non-compliance with provisions of the Banks and Other Financial Institutions Act, 2020, as the basis for the dismissal.
Johnson Chukwu, Group Managing Director/CEO of Cowry Asset Management Limited, provides insights into the funding dynamics of these banks. Chukwu suggests that the three banks might have been funded by a special purpose vehicle rather than generating funds from their balance sheets. He remarks, “It is a known fact in the banking industry that those three banks were funded by a special purpose vehicle that they may not have generated from their balance sheet.”
Chukwu further explains that lifting the veil of incorporation, i.e., understanding the root of the transaction, becomes crucial. If the government funded the banks, the ownership dynamics need clarification. He comments, “For me, the intervention did not come as a surprise.”
Muda Yusuf, CEO at the Centre for the Promotion of Private Enterprise, emphasizes the importance of fairness and justice in navigating the regulatory review. He underscores the centrality of confidence in the banking system, stating, “The main pillar of the banking system is confidence, and this makes the financial system very sensitive to developments that could undermine the confidence of depositors and investors.”
Yusuf articulates the delicate balance needed in handling investigations involving these banks. He urges discretion, caution, and care to prevent negative signals that could jeopardize the stability of the financial system.
Ayodele Akinwunmi, a Relationship Manager at FSDH Merchant Bank Limited, acknowledges the regulatory authority of the CBN in taking such actions. Akinwunmi notes, “The CBN has the power to do what was done,” while also highlighting the CBN’s assurance of the safety of depositors’ funds in the affected banks.
Bunmi Lawson, Managing Director/CEO of EdFin Microfinance Bank, underscores the importance of continuous and targeted communication to bank customers regarding the impact of the takeover. She emphasizes the necessity of reassuring middle to low-income households to prevent the spread of rumors that could destabilize the banking system.
In the realm of customer opinions, a Union Bank customer, Boluwatife Kolawole, expresses concerns about unnecessary deductions and contemplates changing banks. He shares his frustration, stating, “I get unnecessary deductions on my account, and I’ve had a situation where I have had to email the bank incessantly.”
Queen Ibaningo, another Union Bank customer, expresses a level of trust in her bank, stating, “I generally don’t feel safe with banks because you can’t be too sure, but I’ve never heard any issues about Union Bank.”
Hussein Aromashadun, a Polaris Bank customer, remains unfazed by the development, citing the CBN’s assurance of deposit safety. He comments, “The CBN has the records; It’s our money, and it is safe.”
Tajudeen Kamorudeen, a Keystone Bank customer, echoes the sentiment of confidence. He asserts, “I have no cause for alarm, especially because I have no issues with the customer service.”
In the tech community, discussions revolve around the perceived minimal impact on day-to-day operations. Customers in this sphere express confidence in the stability of their banks despite the leadership changes. Asiwaju, a full-stack engineer on X (formerly Twitter), assures, “Sacking the board doesn’t in any way affect the staff nor the customers. The bank is still running its day-to-day activities, no cause for alarm at all.”
While the situation continues to unfold, these diverse perspectives highlight the nuanced landscape of Nigeria’s banking sector, where regulatory interventions evoke a range of reactions from stakeholders and customers alike. Clear and transparent communication remains paramount to navigate through this period and sustain confidence in the financial system.