THE banking consolidation marked the birth of a new era in banking services in Nigeria and formed a cardinal point in the financial services reforms being embarked upon by the government of Nigeria.
The process led to the transformation of 80 weak and struggling banks to 25 consolidated banks. The country has also witnessed reforms in the pension administration system, insurance sector and capital market. Beyond any doubt, more reforms and recapitalisations are still on the way.
In a bid to transform the newly consolidated banks to more virile, capitalised, stable and internationally competitive mega entities, the onus is on stakeholders to address the various deficiencies and shortcomings that led to the non-performance, weakened and liquidated status of the pre-consolidation era. The increasing spate of global competition in the banking and financial sector calls for adequate human resource realignment, technology integration, stakeholders concern and monitoring and supervision.
There is therefore the need to address the issues of skill gap in Nigeria's financial services sector and propose solutions and various mitigation processes. For the consolidated banks and other players in the financial services sector to render higher value and for the economy to benefit from the pre-conceived opportunities of consolidation, adequate and required skills have to available.
The need for adequate skills in the handling of financial services operations cannot be over-emphasised. The virtue of a professional banker is the possession of systematic knowledge and proficiency in a given field. This systematic knowledge constitutes the soft and hard skills that professionals trade for their placement and positioning. Skill shortages exist when employers have difficulty filling job vacancies or specialised skill needs at current levels of remuneration and conditions of employment.
Global competition and new technology have changed the type of skills demanded by businesses and its impact on skill formation. Training is no doubt the key tool in solving skill shortage problems. It is difficult for businesses to train workers quickly enough to meet new skill requirements at the expected proficiency level. Other interventions can be used to address these shortcomings include:
- Skill training programmes continually developed and adapted to meet rapidly changing skill requirements
- Upgrade and renewal of existing workers' skills
- Recognised pre-qualifications for new entrants to job markets
- Mentoring and coaching
- Job rotation initiatives to drive on-the-job training
- The provision of required skills by the financial institutions, regulatory bodies, professional bodies and educational institutions.
These skills are diverse. However, they can be narrowed down to a few which are critical and have been observed to be in short supply within the Nigerian financial services sector:
- Credit risk management
- Product sales and marketing capacity
- Information and communication technology skills
- Structured finance, and Real estate project evaluation skills.
Credit Risk Management (CRM) is the process of identifying, analysing and managing risk in an investment to aid profitable investment decisions. According to the Chief Risk Officer of Royal Bank of Canada, "risk itself is not bad. What is bad is risk that is mismanaged, misunderstood, mis-priced, or unintended."
Prior to the consolidation of Nigerian banks, most banks did not give adequate attention to CRM due to lack of competence and inadequate controls by the board and regulatory agencies. On the other hand, some executives intentionally undertook unmitigated risk investments in order to perpetuate fraud.
These unwise decisions led to so many bad credits that eventually crystalised a systemic distress of many banks. For example, the non-performing credits of Nigerian banks increased from N316 billion in 2004 to N356 billion in 2005. The asset quality of the banking sector actually deteriorated in 2005. Provision for bad and doubtful debts increased from N94.2 billion in 2001 to N138.8 billion in 2002, N227 billion in 2003, N256 billion in 2004 and N282 billion in September 2005. Availability of competent and proficient skills will no doubt mitigate some or all of these problems.
The Nigerian financial supermarket comprises few ranges of product portfolios, which are often replicated by all other institutions with different brand names. The industry currently lacks the required number of marketers and sales technocrats that can adapt to the continually changing and highly stimulating area of sales. The financial services industry requires marketers that can identify quality clients and discern the inherent needs of their targets, with a bid to working with the back office (research analysts, investment bankers and others) to satisfy the clientele need.
The new recapitalised status of Nigerian banks has engendered the need for the introduction of innovative products that will attract various segments of the population. There is the need to design and deepen the products suit as opposed to the current replication and plagiarising of products going on in the market.
Nigeria's un-banked population is still high as about 90 per cent of the populace transact businesses in cash. The 90 per cent are the people that the marketers need to seek out and stimulate their interest in the banking sector. To drive the above stated initiatives, Nigeria's financial institutions require proactive sales and marketing teams with the following guidelines:
- Develop a marketing strategy, execute marketing and sales programmes to increase banking penetration (deposits, loans, mortgages and credit cards) with new wealth management clients.
- Innovate product development
- Benchmark and evaluate the effectiveness of marketing programs and return on investment, and
- Leverage all client communication channels, both offline and online, to support marketing and sales.
The global financial services industry has emerged to become a village, square with constantly changing medium of communication and closing transactions. In Nigeria, electronic banking and payments services methods are still at the teething stage. For the country to be globally competitive and tap from the inherent opportunities that exist in Internet banking and other related services, there is the need for all financial services organisations to develop a robust Information and Communication Technology (lCT) platform.
Currently, the deployment of ICT in the local organizations is plagued with "no Internet access," "server is down," "financial institution not available," and "services currently not available," among other responses from the systems. Sending money to family members and business allies in the hinterland through branch network Internet banking is another nightmare. A few characteristics of efficient deployment of ICT in the financial services industry will:
- Enable banks to reach a wider clientele within short periods of time
- Decongest banking halls, resulting in bankers seeing to the needs of customers more quickly and effectively
- Lead to good and efficient management
- Give competitive edge over other non-ICI banks
- Ensure time effectiveness - saving both customer and bank enough time
- Enhance opportunity to bank at any time of the day, and
Minimize human error.
Services that could be delivered with the aid of functional ICT include:
- Internet banking - where customers make transactions outside the banking hall with the help of a computer with Internet access. SMS banking - making banking transaction with the support of a cell phone
- Telephone banking
- Receiving statement of account via e-mail, and
- Slip-free transactions - customers making deposits and withdrawals without filling any forms.
In order to offer the stated opportunities, skill upgrade of ICT staff in financial services industry is inevitable.
Most Nigerian banks are well exposed to retail and consumer banking products and other generic banking products. This is because of the short-term life span of these products and the fact that the banks have funds that could only be invested on a short-term/medium-term basis.
However, structured finance and its other appendages (investment banking, infrastructural finance, among others) is an evolving field that requires multi-disciplinary approach and in-depth understanding of financial modeling. Presently, few banks, and in rare cases smaller firms, have competence in this field that is easily dominated by offshore financial services company or their subsidiaries in Nigeria.
Structured finance and investment banking products are typically big transactions that have a long gestation, delivery and returns period but could have a tremendous impact on the society and are profitable. There is the need to train and expose financial services staff to the intricacies of this tailor-made finance tool which transverses the collateral debacle and opens win-win opportunity vistas for the lender and borrower.
Real estates have the potential of continuous appreciation and yielding of good returns to holders. It is typically large-scale transaction with a long delivery period and seldom goes wrong. There is a gradual awakening towards the opportunity in this sector, especially with the on-going land use reform acts being undertaken by the current government. Players in the financial services market need to beam their searchlight to tap the juicy opportunities that exist in the sector.
Dabiri is the former MD/CEO of Sterling Bank Plc.