The recent banking sector crisis that led to the classification of nine banks as weak by the Central Bank of Nigeria cost the country about $15bn, the World Bank has said.
This was contained in a World Bank report titled, “Achieving Nigeria’s Financial System Strategy 2020: Making Finance Work for Nigeria,” which was released in Abuja on Thursday.
A statement issued by the World Bank Lead Economist, Mr. Ismail Radwan, said that the report made recommendations on how to strengthen banking supervision and improve risk management and financial disclosure.
“It was only after the CBN’s bold actions that a political consensus emerged to tackle weaknesses in the banking system. It is not difficult to see why this will be of great importance to Nigeria’s future growth and development. The banking sector crisis is estimated to have cost Nigeria about $15bn, leaving a few families untouched,” the statement said.
It said, to achieve the vision of making Nigeria Africa’s financial hub by the year 2020, further reforms of the financial services system, especially the banking sector, needed to be carried out.
According to the report, in key areas such as banking, insurance, capital markets and the corporate sector, the international standards of reporting need to be adopted.
The report said, “In the short term, bank supervision needs to develop rapidly its capacity to meet the challenges posed by the rapid growth and increasing complexity of the banking system. For this purpose, it is recommended that efforts to implement risk-based supervision be accelerated.
“Over the medium term, bank regulation and supervision frameworks need to be brought into line with international standards. Steps to enhance credit information systems need to be adopted. The lack of a fully functioning credit information system is not conducive to increased access to finance and exacerbates risk for financial intermediaries.”
It also said that establishing an efficient system of collateral registration was necessary to reduce the costs and risks of lending.
According to the report, current regulations limit the types of acceptable collateral and impose a complex and expensive system of registration charges.