Nigerian banks’ adoption and compliance with the Nigerian Sustainable Banking Principles is a welcome development and would go a long way in enhancing transparency and accountability in the banking industry, a finance analyst has said. The Nigerian Sustainable Banking Principles, also known as The Principles, are a set of doctrines or policies that the Central Bank of Nigeria has mandated the banks to comply with. They are guidelines approved by the Bankers’ Committee last year, after which the Central Bank issued a circular for its adoption. In September 2012, the regulatory body had issued a circular directing banks, discount houses and development finance institutions to implement the Nigeria Sustainable Banking Principles. The institutions were also informed that the Central Bank will subsequently issue reporting requirements to guide the reporting of their compliance with the Principles and Guidelines. The Central Bank said the principles are based on leading international sustainable finance standards and established industry best practice, but they are developed in line with the Nigerian context and development needs. “We have adopted a mitigation approach to our Business Activities and Business Operations in which we commit to avoid, minimise or offset negative E&S impacts where possible, At the same time, we have also sought to be pro-active about promoting positive development impacts where we can, recognising that the benefits to society can also drive business opportunities for Banks,” the Central Bank said. “We have taken a Principles-based approach which means that we have not prescribed specific implementation requirements or rules” it said, adding that the principles would be interpreted and applied by each Bank in a manner that provides for and is appropriate with the bank’s core values, business model and enterprise risk management framework. Last month, the regulatory body released exposure draft on its desired reporting template for banks operating in Nigeria. This, it says, is to ensure compliance with the Principles by the banks and in view of the need to ensure uniformity in reporting their implementation efforts towards the required compliance. According to the Central Bank, the adoption of these principles would enhance the adopting institution’s financial success over the longer term while ensuring that they remain environmentally and socially responsible. Ayodeji Ebo, Analyst at Afrinvest West Africa Limited, a management majority-owned securities firm involved in investment banking, securities trading, asset management and investment research with a focus on West African investment advisory and market research and analysis firm, said this development is a welcome one. “I feel the Central Bank had to come up with some comprehensive reporting package such as this for the industry, considering the past crisis. Looking at the phase of the crisis, the Central Bank came in with the help of the Asset Management Company (AMCON) to clean up the banks. Though the banks are now relatively healthy, Mr. Ebo said the banks still have work to do, such as growing their loan books, hence the need for a close watch by the regulatory body. “The Central Bank would not want to be caught unawares or be in shock should any unfavourable event break out so there is the need for close monitoring. It is a welcome development and it will go a long way to aid transparency in the sector” he said. The Banks’ 2012’s books were according to some analysts, uninspiring. For instance, Renaissance Capital, an investment bank, said the banks fourth quarter 2012 performance generally disappointing. It said this has unfortunately been the theme for Nigerian banks over the last few years and 2012 was no different. The firm said this highlights a prevalence of weak risk management in the sector, and is worrisome. “We expect investors have become weary of fourth quarter clean-ups. Regrettably, fourth quarter 2012 was not without its issues with several banks reporting higher than expected impairment charges. We find it frustrating that three years into the sector clean-up, we are still seeing last quarter adjustments to provisions and write-offs.
Posted on: Thu, 06 Jun 2013 21:01:12 +0000
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