Monday, November 28, 2011

Only 22 finance houses are safe •CBN alerts, says no bailout for them •Finance houses seek CBN’s intervention

THE Central Bank of Nigeria (CBN) has disclosed that the recent on-site examination of the sub-sector by the apex bank revealed that only 22 finance companies out of the 104 licensed were considered to be sound; 10 were marginal, while two were unsound, adding that 20 were, however, technically insolvent; 33 others were either inactive or had ceased operations totally.
The apex bank, however, ruled out any bailout fund for troubled financial houses in the country.
Deputy Governor, Financial System Stability (CBN), Dr Kingsley Moghalu, while speaking at the international workshop on the operations of finance companies in Nigeria, held in Lagos last week, stated that the apex bank did not have any plan to extend intervention fund to the sub-sector, stressing that CBN’s immediate plans were to roll out comprehensive reforms with a view to repositioning and transforming the sub-sector.
The CBN deputy governor observed that it had become imperative to redefine the roles of finance companies in the emerging financial landscape envisaged in the Financial System Stability (FSS), noting that the apex bank was committed to turning the sub-sector into an efficient financial intermediation vehicle to operate at the middle tier of the nation’s financial system.
“We don’t have bailout plans for finance companies. We are about to unveil comprehensive reforms for the sub-sector to be able to add value to the banking system. That’s why this conference was organised to get stakeholders’ inputs into the coming blueprint for the sector.”
He said the reforms were not coming too late, stressing that CBN could not reform every sector of the financial system at the same time, because human capital was limited.
“After bringing the commercial banks’ reforms to a comfortable position of stability, then we can extend the reforms to other financial institutions,” he stated.
In his opening remark, president, Finance Houses Association of Nigeria (FHAN), Mr Eddie Osarenkhoe, had lamented that a great number of the licensed finance houses had closed shop, owing to the global financial crisis and the distressing operating environment.
He, therefore, solicited for intervention fund to help revitalise the operators’ businesses and deepen their capacity to fund critical projects in the economy.
Osarenkhoe noted that the choice of the theme of the workshop, “Finance Companies: Relevance in Nigeria’s emerging financial system,” was quite apt as it appropriately captured the quagmire and despondency which pervaded the system currently.
He lauded CBN’s plan to sanitise the sub-sector, stating that the current approach would create the critical enabling linkages between and amongst all the sub-sectors in the system and promote the seamless leveraging of all the sub-sectors on the resources and competences of each other.
Meanwhile, Finance companies in the country, under the umbrella of Finance Houses Association of Nigeria, (FHAN) have called on the apex regulatory body of the banking sector, Central Bank of Nigeria (CBN), to come to their rescue before the sub sector goes into extinction.
The plea was contained in the opening remark by the president of the association, Mr Eddie Osarenkhoe, at the international workshop held in Lagos at the weekend.
According to him, it was highly regrettable that the sub sector that has great growth potentials if properly positioned, has been negatively affected by the financial crisis and harsh operating environment.
He listed the challenges facing the sub sector as absence of a robust institutional framework and regulatory environment, paucity of loanable funds, inadequate capitalisation and shallow business opportunities. Others, he said, include poor executive and managerial capacity,  negative public perception and low level of information and communication technology infrastructure.
The FHAN president posited that for the finance companies to deliver on their mandate and contribute meaningfully to the nation’s economy, the activities of wonder banks and “loan sharks” must be checked, stating that there was need to initiate a robust definition of roles relevant in the emerging financial system architecture.