Lagos — Only seven banks in the country are healthy, according to the Nigerian Accounting Standards Board (NASB), contrary to the widespread view that all the 24 banks are strong.
The NASB is Nigeria's financial reporting watchdog.
It stated that from its examination of the books of the banks, their weaknesses would have been glaring to the regulators and the public if the uniform year-end rule had been enforced.
NASB Technical Director, Jim Obazee, told financial journalists at the weekend that only two of the healthy seven banks qualify as market makers.
His words: "Four banks were captured by the study as still in transition to healthy condition, meaning that they are not yet there; 11 banks were found to be merely existing, meaning they are not strongly footed for the role they assume to be playing.
"The study identified two weak banks that have to be strengthened to protect the industry."
Obazee is also the Moderator of International Accounting of the American Accounting Association (AAA), and a member of the United Nations Committee on Trade and Development (UNCTAD)
He said Nigerian banks engage in a number of malpractices that hide their true financial position from the regulators, and that most of their claims concerning their rankings are baseless calculations that deceive the public.
"The situation in most of the banks is that when the liabilities are properly accounted for, the over N1 trillion balance sheet claimed by some of them amounts to nothing in terms of net worth."
He stressed that a uniform year-end fixed in any month other than December will help to sanitise the system.
Since most companies' year-end fall in December, the pressure of work is unbearable for the five major auditing firms if banks also end the year the same month, said Obazee.
He added that any other month from March is ideal as a common year-end.
"Notwithstanding the shortcomings of the common year-end, it remains the best practicable solution to effective monitoring, surveillance and regulation of the banking sector."
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Seven banks out of twenty-four banks earlier declared healthy are actualy so after undergoing professional scrutiny by seasoned accountants in NASB. This is news of paramount importance to the public but unfortunately the body of NASB decided to communicate this vital information in parables. In fact in encrypted parables and therefore unuseful information.
It is disheartening to see a statuory body like NASB created for public good behaved like this. Nothing stops the body for making its finding public since it is based on facts. What it has done is to send rumour and panic into our banking systems which will worry bank customers to the point of sleeplessnes. Before the icelandic bank problem started, the state of the bank was made known by a similar bodies to NASB and prevented new customers from locking their hard earned cash in investments managed by the bank.
By publishing the details of their finding, NASB will make banks affected to find remedy before the situation goes from bad to worst. It will also serve as a wake up call for the so called healthy banks.
If NASB is confident of its finding,it should put it in the public domain for use.
I feel the CBN should have the final say on issues of the financial market. However if NASB really has a contrary view I think they can by right air it,though must be backed with concrete facts. Failure to do this will lead to two serious consequences. 1. speculations resulting to massive withdrawals by frightened customers of the various banks. 2. Banks on list published suing this body for defamation.
Why don't you list the names of the seven (7) healthy banks? Given the current economic crisis roiling the global financial market, your report makes no sense if you have the numbers but failed to name them so the public can beware & take necessary precaution. That is part of the media's function to educate the public not put them in suspense and at risk of losing all their savings to some unscrupulous individuals. Is the First Bank of Nigeria amongst the 7 safe banks? That is all I need to know.