Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, on Thursday listed the lack of a Unique Customer Identifier in the country and the need for the buy-in of key stakeholders as challenges faces the survival of credit bureaus in Nigeria.
Delivering a keynote address on "reporting, regulation and risk management: repositioning the Nigerian Financial System," at the launch of CRC Credit Bureau Limited in Lagos, the CBN Governor noted the absence of a unique identifier. "This", he said, "will make consolidation of credits and credit information from the various credit bureaus on a customer difficult if not impossible."
As a first start to ensure the nation has a liable data-bank on which further infrastructure would be built, the Governor warned that no new credit would be extended to anybody unless the person has a national identity card. This would however take effect when the National Identity Scheme finally takes off.
Ahead of this, the CBN also plans to implement the credit bureau operation guidelines, beginning with the issuance of a "circular directing banks and other financial institutions to have data exchange agreements with at least two licensed credit bureau and compulsorily obtain credit reports from them on all current and intending borrowers."
Other measures to address the challenges and achieve international best practice in credit bureau operations, he said, include liaison with the National Identity Management Commission (NIMC) to enhance the National Identity Card project.
Ahead of this, there would be a nationwide awareness programme on credit bureaux operations to get the buy-in of other stakeholders, especially the non-financial sectors in addition to offering technical assistance by organising capacity building programmes for the personnel of the licensed credit bureaus.
The CBN, he continued, will develop an appropriate reporting "format for lending institutions and bureaus for full compliance and ease of regulation and monitoring by the CBN," aside ensuring that risk management and corporate governance tenets are strictly adhered to by licensed credit bureau, supported by guidelines.
The credit bureau, he added, is part of measures to ensure adequate reporting, repositioning and strengthening of the Nigerian Financial System to avoid the pitfalls that led to the events of August 14. Comprehensive minimum disclosure guidelines for December 2009 accounts are being finalised and will be issued soon, just as the apex bank may be considering the proposal by the Nigeria Deposit Insurance Corporation to impose tenures for bank chief executives. This is hinged on the belief that CEOs before the end of their tenures will voluntarily start succession plans.
"For a long time, the CBN underestimated the risks building up in the system, and the gaps in our consolidation were such that we did not have a clear view of the risks and implications of activities outside our own regulatory remit being carried out by the subsidiaries. There was too much emphasis on size and glamour, too much emphasis on quantity and, too little emphasis on quality. There clearly was a lack of understanding of the basic fact that banking is about much more than capital. It is perhaps more importantly about good management and governance. Banking is a business of trust."
He however did not spare the regulators, noting that there were gaps in the supervision of banks, leading to the lapses that resulted in the sack of the management teams of eight of Nigeria's 24 banks.
For example, he admitted, "that since consolidation in 2005, the Central Bank did not conduct a single routine examination of the 14 banks allocated to it under the sharing arrangement with NDIC. Also, some evidence exists that concerns expressed by staff of the Banking Supervision Department and the NDIC about the dangers of margin lending and bubble capital."
Speaking on the need for adequate credit information on borrowers, Victor Osadolor, an executive director and Chief Financial Officer, United Bank for Africa, lamented that relative anonymity of a majority of Nigerians. This, he said, has constrained banks to grant credits with little or no information, following which credit penetration is under 30 per cent, adding that even in the cases of the few, who get facilities, "there is evidence of misleading credit ratings and decisions, adverse borrowers selection and moral hazards, leading to high credit defaults."