The lafferty rating and Nigerian banks
In terms of their overall quality, Lafferty Bank Ratings reports that Nigerian banks rank well among banks across the world. A cross-border comparison shows that Nigeria ranks about 34.0, higher than South Africa which ranks 30.0, Canada 23.0, United States 20.0, Australia 22.0, and Europe 18.0.
Nigerian banks’ financial ratios are particularly good and Michael Lafferty, chairman, Lafferty Group, reckons that the banks’ overall ratings will improve considerably when they devote more attention to the qualitative aspects of their annual reports, including clear statements on their strategies and how they will be achieved, culture, customer satisfaction, etc.
In the retail banking segment, Nigeria is said to be the largest market for Retail Banking Academy (RBA), which was launched in 2011 as a response to complaints by client banks across the world regarding the nonavailability of profesional retail banking education. The country accounts for about 20 percent of the current body of RBA candidates. Over 5,000 bankers in some 80 countries are said to be currently studying for the RBA qualifications in retail banking and cards and payments.
Currently, Nigeria reportedly has one fully qualified Certified Retail Banker, who has successfully completed the requirements to achieve full certification, and Lafferty says that number will potentially rise to 30 in the coming year and in two years’ time, Nigeria will have up to 74 Certified Retail Bankers working in the sector. Nigerian banks are also said to be at about the same stage of development in retail banking as their Indonesian counterparts, though they lag in the areas of cards and payments.
This is indeed some cheering piece of good news, and we commend Nigerian banks for this. But we believe more can be done, especially given that retail banking is a sure way of enhancing financial inclusion which will in turn promote economic development and wealth creation.
Experts have said that the future potential of Nigerian banks lies primarily in retail banking. A report by Afrinvest Securities Limited, “Nigerian Banking League: The Fate of Small Players”, released in 2014, states that the future of the Nigerian banking industry largely depends on the capacity of institutions in the sector to compete in the retail and small and medium enterprises (SMEs) lending space.
In recent times in Africa, attention has also been seriously shifting to retail banking. Only recently, senior retail bankers from 14 African countries met in Cape Town, South Africa, and agreed to establish Retail Banking Councils for Africa (RBCA) with the aim of promoting the development of retail banking across the continent – particularly through the growth of deposits and banking penetration.
This is why we call on banks in the country to continue to invest in retail banking. They should continually innovate and come up with new ideas and approaches to expand access to formal financial products and services targeting the unbanked and under-banked population. It is heartening that some Nigerian banks are already displaying great passion for retail banking and are committing funds to research, capacity building and the development of infrastructure to harness the vast potential in that segment. We urge those who have not keyed in to do so immediately.
We also believe Lafferty’s point that retail banking can only reach its full potential if it is run through a separate bank, whether as a stand-alone or within a broader banking group, is worth considering.
Furthermore, much as we agree with the opinion of experts that Nigeria is now well-placed for the take-off of transparent consumer lending, we also subscribe to the view that for this to happen successfully, central bankers must learn as much about retail banking as they already know about the capital markets, investment banking and corporate banking.
More specifically, bankers should “study the lessons of the many banking crises we have been through, reflect on how other (wholesale) financial industry cultures can corrupt retail banking and do great damage to society, and put Nigeria on the road to having the world’s first truly professional retail banking system”.