Not even minding previous accolades for some Nigerian banks by international institutions like Fitch Ratings, Forbes and Banker magazines, a scathing report by The African Report surfaced recently, claiming that only four banks in Nigeria are healthy. But how are Nigerian authorities like the CBN, NDIC, as well as operators, taking the report?

Expectedly, the report during the week tending to suggest that most Nigerian banks have been put in much more peril by a combination of factors, including their over-exposure to margin loan in the stock market, oil and gas, as well as the telecommunications industry, has attracted reactions, mostly outright condemnation. Amid all of these outrage, the France-based The African Report, insisted on the genuineness of the report, even as many wonder the source of data used therein, even when governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, said in a recent interview with the Financial Times that a capital and assets audit exercise of banks to find out their true health status had started and would last between six and eight weeks.

The Punch, a national daily on Tuesday quoted from The Africa Report, a publication of the Paris-based Groupe Jeune Afrique, to the effect that only four of Nigeria's existing 24 banks are indeed strong, while nine others are categorised as satisfactory. Six others are said to be shaken, leaving four others as stressed (distressed?).

The strong banks were listed as First Bank of Nigeria (FBN) Plc, Guaranty Trust Bank (GTBank) Plc, Diamond Bank Plc and Skye Bank Plc; those in the "satisfactory" category are United Bank for Africa (UBA) Plc, Zenith Bank Plc, Afribank Plc, Citibank Nigeria, Equatorial Trust Bank (ETB) Limited, Fidelity Bank Plc, PlatinumHabib Bank (Bank PHB), Stanbic IBTC Bank, and Standard Chartered Nigeria Bank.

On the list of "shaken" operators are Union Bank of Nigeria Plc, Access Bank Plc, Ecobank Nigeria, First City Monument Bank (FCMB) Plc, Oceanic Bank International Plc and Sterling Bank Plc; just as the quartet of Finbank Plc, Spring Bank, Unity Bank Plc and Wema Bank Plc were listed as weak. The report noted that the four are "on the ropes" and could either "sink" or allow themselves to be "swallowed by other (stronger) banks".

The report noted that most of Nigerian banks had been plagued by a combination of margin loans to stock market operators and investors, which has not been helped by the crash in share prices beginning from March 6, last year; oil price plunge from a high of about $149 per barrel at the international crude market; as well as the huge public sector debt. As if to corroborate the extent of exposure of Nigerian banks to the capital intensive telecoms sector, Starcomms Plc, a major operator in that industry, told its shareholders on Wednesday in Abuja that it enjoyed medium to long-term facilities totally about N31.23 billion from Zenith Bank, FCMB, Fidelity Bank, GTBank and FBN last year. This is in addition to a N9.91 billion facility from Huawei Technologies Company Limited. Of this amount, about N851.30 million is said to be outstanding as at year-end. Ecobank Transnational Incorporated had also few weeks ago blamed its poor profit level last year to the exposure of its Nigerian subsidiary, Ecobank Nigeria, to the stock market and telecoms sector.

The report is believed to have created fear in the banking populace at a time the regulators are fighting to assure all that the situation arising from the global economic meltdown is under control and would not escalate to a distress in the industry. The situation may have successfully created panic among bank customers, many of who spoke of plans to withdraw their deposits from banks so as not to be beaten once more. The worry also in several quarters is that the bid to increase the banking population is under severe threat.

In a swift reaction, the Nigeria Deposit Insurance Corporation (NDIC) urged all to discountenance the report outright, since it has no basis and lacks credibility on the subject matter. The NDIC seemed to be reacting based on the fact, according to industry watchers, that only it and the apex regulator in the industry had credible data to correctly judge the health status of Nigerian banks at any time. There are those who write off the report as fake, unbelieveable, or that the source must have been paid, based on the classification of the banks and what they see as the reality on ground.

"Tell the public to ignore the report. We don't know the basis or criteria they used in arriving at that report," pooh-poohed spokesperson of the NDIC, Hadi Sule Birchi, in a telephone chat during the week.

An official of the CBN confided in Sunday Independent on Tuesday, hours after the newspaper report that the bank had received a barrage of enquiries on the issue already, that the report is mischievous.

"How can an obscure magazine in far away Paris, which does not know anything about our banks, come out with such report and you believe it? CBN has no official statement about it. The governor will address the issue next week at the MPC (Monetary Policy Committee) meeting," he said.

At the meeting of Tuesday, July 7, industrialists and economy watchers are expected to get a feel of what the business environment would look like in the following months.

"I believe Nigerians can tell the strong banks from the weak ones in this country, and would not require one unknown publication to try to confuse them," barked one obviously angry banker.

The Association of Corporate Affairs Manager of Banks (ACAMB) was also one of the first to raise alarm on the report, expectedly because the membership is drawn from spokesmen of the various banks and the regulators, hence the decision to respond as a group rather than haphazardly.

The statement jointly signed by Eddy Ademosu, the group's president; and Emeka Anaeto (publicity secretary) disagreed with "the rating on a number of grounds, which bordered on ethical issues, professional competencies and historical antecedents".

The group also questioned the source of the information relied on in the report, adding that "the acceptable and recognised authorities in this regard remain the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC), which have the facts and figures on the state of health of the industry".

Earlier ratings on the industry by international and reputable organisations, which the group aligns with, it said, gave credence to the viability and healthy state of Nigerian banks. The statement noted, for example, that "early this year, Forbes, a leading global magazine, listed selected Nigerian banks among the list of 2,000 biggest companies in the world; attributing the success story to the outcome of the reform and consolidation in the industry. In the same vein, African Business Research Limited, a research- oriented consultancy, specializing on Africa financials corroborated the position of Forbes, explaining that the Nigerian banking industry was stable, vibrant and capable of meeting its financial obligations to all stakeholders.

The three Nigerian banks that made the Forbes list this year included First Bank, ranked 1,375th in the world; while UBA and Intercontinental Bank were placed 1,560 and 1,798 in that order. Also, Agusto & Co, in its 2009 bank rating reports, listed Nigeria's 10 biggest banks as Zenith Bank, UBA, First Bank, Oceanic Bank, Bank PHB, Access Bank, GTB, Skye Bank and Union Bank. But Fitch ratings had earlier in 2007 ranked Intercontinental Bank as the biggest bank in the country.

"Various Fitch Ratings, an equally reputable international agency, as well as the respected international Banker Magazine, have equally accredited the Nigerian banks healthy, showing strong presence in the global ratings of banks," ACAMB asserted.

Such report like the latest by the African Report, the group cautioned, could have ulterior motive, warning that the Nigerian press should not allow themselves to be used by the foreign media to cause confusion in the country, even as they continue to protect theirs. Patriotism, ACAMB said, is needed at a time like this to wade through the unfolding global economic turmoil.

Also condemning the report, former national president, Association of National Accountants of Nigeria (ANAN), Dr. Samuel Nzekwe, told a national daily during the week that it was a calculated attempt to put the industry in disarray, while urging the Federal Government and the regulators to douse the tension. The source of the report, he insisted, must be verified to ascertain its authenticity, stressing that the industry was too sensitive to be toyed with.

"The criteria used by the magazine should be ascertained. It is not enough to state that a particular bank is safe or distressed. You cannot stay in Paris and write what you like. Such reports are counter-productive, not only to the sector but also to the economy," he said.

A national daily reported Olu Akannmu, Senior Vice President, Retail Banking at Bank PHB, as agreeing that there is no reason to believe the report, just as Segun Akintemi, General Manager, Businness Optimation, at Skye Bank, while reacting rather calmly to the report, noted that although his bank was not operating in isolation, it's not ideal to judge or categorise banks in such a manner as The African Report had done.

"I am not disputing the content of the report, but CBN had said all 24 Nigerian banks are strong. Though some may be stronger than others, there is no trace of distress. I think we should just give the new governor time to settle down," he added.

While not in a hurry to comment on the report, a source reacting to the report through a blog, cautioned that not all that glitters is gold, hence the need to get answers by asking, for example, the source of the data, parameters and benchmarks used to evaluate the banks, especially profit after tax not before tax, liquidity ratio and others as a direct result of the global financial crisis that began two years ago.

"As an economist, (I am aware that) financial and economic variables tend to fluctuate overtime due to external shocks, and that could cause a structural change. Economic decision-makers, market-watchers and speculators didn't realise the effect of inertia until strong and stable financial institutions like Northern Rock in the UK, Fannie Mae, Merrill Lynch and American Insurance Group, all in the United States, fell out of the market with only a FG bail-out plan and stimulus plan to hope on.

"If you are in the field, you would understand that no bank would want to show the consumers that all is not well. (Some will chant all manner of slogans) in a bid to stay afloat. All those income statements and balance of sheet being published on the dailies are inverse reflections of the in-thing. I could go on and on because the debate has not even started yet," the blog wrote.

The report in contention, according to another source, may not also be too different from similar fears expressed by Lamido Sanusi at recent a book launch, when he reportedly noted: "For instance, as at the last count, the banking sub-sector still accounted for about 65 per cent of the capital market capitalisation of the Nigerian Stock Exchange (NSE), about 90 per cent of the financial system assets domiciled in the sector, while the private sector credit of about N8.12 trillion as at February 2009, was more than the combined spending by the three tiers of government."

Proshare NI, an online financial medium, also picked holes in the report beginning from its not being available on a continuous basis for everyone to make reference, just as it did not "confirm its target audience, source of information of corroborative data/bases" upon which it concluded the report.

"The development raises concerns both in terms of veracity of the publication as does the role of appropriate corporate communications of the CBN and NDIC, who are in better position to confirm the status of the banks. The pronouncements of the CBN governor since assumption of office might inadvertently have created substance for the believability of such a publication or any other. It is therefore incumbent upon the regulators (CBN, NSE, NDIC, SEC) to work together to create a common platform for managing market confidence.

"This, we believe, can be achieved through the enthronement of a disclosure driven reporting system that helps analysts, journalists, players and the investing public avoid such alarms. Our antecedents as a market in the time past make such a publication 'almost believable'. The way forward is for the market to define acceptable standards in disclosures," Proshare NI added.

One fact that cannot be glossed over in the industry today, according to sources, is another round of consolidation in the industry, coming after the feat achieved by Stanbic Nigeria Bank and IBTC Chartered Bank to form Stanbic IBTC Bank. There is also the lingering merger of Bank PHB with Spring Bank, following the acquisition of majority interest by the former, even as many continued to question the manner of the acquisition, insinuating that the deal was done under the table with the connivance of both the CBN under the immediate past governor, Professor Chukwuma Soludo, and the Securities & Exchange Commission (SEC) then under Musa Al-Faki.

Okey Nwosu, managing director Finbank, was quoted some months ago as saying that a new phase of market-induced consolidation was in the offing to enhance efficiency and profitability in the industry.

"Yes, discussions have started going on among the industry operators on mergers and acquisitions. This type of merger we are likely to see this time around may not be regulatory authority-driven, but it makes sense because it will lead to more profit and efficiency in the sector. This is the time institutions come together for greater efficiency and this has started happening in the U.S. In Nigeria, I see greater opportunity for mergers and acquisitions in the banking sector and it will happen soon," he had said.