The Central Bank of\u00a0Nigeria (CBN) will\u00a0start comprehensive reforms of the Finance Houses subsector in 2012, its Deputy Governor, Financial Systems Stability, Dr. Kingsley Moghalu, has said.<\/span><\/p>\n The sector, still wallowing in neglect and lacking clearly defined operational structure, has been relegated to the background.\u00a0<\/span><\/p>\n But Moghalu said the apex bank wants to see Finance Houses that are strong, efficient and able to perform their constitutional roles in the economy.\u00a0<\/span><\/p>\n Achieving these, he said, require comprehensive reforms of the subsector that would enable it to carve a niche for itself in the financial services sector.\u00a0<\/span><\/p>\n Speaking at the weekend during an international workshop on the Operations of Finance Houses in Nigeria, with theme: Finance companies:Relevance in Nigeria\u2019s emerging financial system, \u00a0Moghalu said a blueprint for the sector is being fine-tuned by stakeholders and would touch issues, such as recapitalisation, minimum capitalisation, category of operators \u00a0and clearly defined roles for the sector. \u201cI would want to assure you that strategic reform in the finance companies sub-sector is of paramount importance and is imminent,\u201d he reiterated.\u00a0<\/span><\/p>\n He said a recent on-site examination of the Finance Houses sub-sector by the CBN revealed that only or 21 per cent of the 104 licenced companies were considered to be sound. Twenty were seen as technically insolvent, 33 were either inactive or had ceased operations, among others. He said factors, such as high level of non-performing loans, gross undercapitalisation, poor corporate governance and weak board oversight, meddlesome interference by principal shareholders, persistent operating losses, weak management among others contributed to the weak financial performance of Finance Houses.\u00a0<\/span><\/p>\n He said the CBN is working on re-positioning and transforming the sub-sector into an efficient financial intermediation vehicle to operate at the middle tier of the \u00a0financial system.\u00a0<\/span><\/p>\n However, he ruled out chances of securing a bailout for the sector, adding that the apex bank cannot reform every sector of the financial system at the same time, given that human capital is limited.\u00a0<\/span><\/p>\n The deputy governor said \u00a0after stabilising the commercial banks through reforms, it is time to move into reforming the finance houses sector of the economy.\u00a0<\/span><\/p>\n \u00a0He said the sector has not shown enough capacity to develop appropriate products that will attract investors to the market. \u201cThe apparent lack of focus on its areas of comparative advantage has put the subsector in grave danger of possible extinction. 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 serious challenge to the sub-sector,\u201d Moghalu said.\u00a0<\/span><\/p>\n