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<\/a><\/p>\nChris Agabi<\/p>\n
28 November 2011<\/p>\n
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Lagos \u2014 There are about 104 financial houses in Nigeria and only 22 of them are healthy, the Central Bank of Nigeria (CBN) has said.<\/p>\n
They lack focus, capacity and the sub-sector may possibly be extinct in the near future if they do not retool their operations, the CBN’s Deputy Governor, Financial System Stability, Kingsley Moghalu said at the weekend in Lagos.<\/p>\n
In a key note address at the international workshop on the operations of finance companies in Nigeria, Moghalu expressed gross dissatisfaction with the activities of the finance companies, saying they have failed to create a niche for themselves in the Nigerian financial system.<\/p>\n
He said: “A recent on-site examination of finance houses sub-sector by the CBN revealed that only 22 finance companies or 21 percent of the 104 licensed companies were considered to be sound. 10 were marginal while 2 were unsound. However, 20 were technically insolvent. 22 others were either inactive or had ceased operations totally.”<\/p>\n
He listed some factors that have contributed to weak financial performance of the finance companies to include; “high level of non-performing loans, which had impaired the capital base; high level of non-performing inside-related credits; other forms of insider abuse and mismanagement; gross undercapitalization in relation to the level of operations and poor cooperate governance and weak board oversight.<\/p>\n
“Meddlesome interference by principal shareholders, particularly in finance companies owned by banks; persistent operating losses and weak management evidenced by poor asset quality, poor credit administration and inadequate controls.”<\/p>\n
Moghalu said two decades after inception, the finance companies sub-sector is yet to attain its optimal potential.<\/p>\n
He said: “Rather than playing its expected role of financial intermediation for the middle tier of the economy, the sub-sector had shown an apparent lack of capacity to develop appropriate products that will be attractive to that segment of the market.<\/p>\n
“The sub-sector had also failed to create a niche for itself in the Nigerian financial system and has instead seen itself as being in direct comparative advantage and put the sub-sector in grave danger of possible extinction.<\/p>\n
“The void created by the sub-optimal performance of finance companies was filled by the resurgence of the activities of illegal fund managers (wonder banks) which also posed very serious challenge to the sub-sector.”<\/p>\n
The CBN deputy governor also said the situation is raising serious concern for all stakeholders and called for prompt action to reverse the trend and ensure that the sub-sector refocused to deliver on its mandate and complement other subsectors of the financial system in contributing to the real sector of the Nigerian economy.<\/p>\n
He said CBN is ready to support stakeholders in this regard.<\/p>\n
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