2000年-世界发展银行全球_Nigeria___Financial_Sector_Review_Volume_1_Overview_and_Macro-Financial_Environment_37页_206kb

Summary of Nigeria Financial Sector Review (Volume 1)

Core Content

This report provides a comprehensive review of the Nigerian financial system, focusing on the macro-financial environment and the overall structure and performance of the financial sector. It is part of a three-volume analysis, with Volume 1 addressing the general overview and macro-financial issues.

Main Findings

1. Overview of the Financial System

• Nigeria has a large and diverse financial system, including 89 commercial and merchant banks, over 1000 rural community banks, 7 DFIs, 229 finance companies, and various insurance and pension institutions.
• Despite the apparent diversity, commercial banks dominate the sector, accounting for 93% of non-central bank assets.
• Traditional bank deposits are the primary form of financial savings in Nigeria.
• The financial system is not effectively supporting real sector development and is not yet fulfilling its potential to drive economic growth.

2. Financial Sector and Poverty Alleviation

• The financial system's inefficiencies hinder poverty alleviation:
  • A chaotic housing finance industry leads to inadequate housing for many Nigerians.
  • SMEs face unreliable access to long-term and short-term credit due to underdeveloped leasing and poor performance of community banks and DFIs.
  • Rural areas, where most of the poor reside, lack sufficient financial infrastructure to support development.
  • The fragmented pensions industry fails to provide adequate protection against poverty in the event of the primary income earner's death or retirement.

3. Macro-Financial Environment

• Inflation dropped from 73% in 1995 to 6.8% by end-1999, indicating improvement in the macro-financial environment.
• However, recent data show a deterioration in macroeconomic conditions, with real GDP growth slowing to 2.4% in 1998 and a current account deficit of 3.5% of GDP.
• Fiscal deficits were 4.7% of GDP in 1998 and 8.3% of GDP in the first five months of 1999, exceeding IMF projections.
• Monetary policy is functioning reasonably, and financial repression has been largely ended, with real interest rates on savings becoming positive.

4. Banking System Performance

• The commercial banking system has significantly improved in terms of capital, non-performing loans, and profitability.
• Aggregate banking system capital increased from -74% to +5% of risk-adjusted assets.
• Non-performing loans dropped from 34% to 18% of gross loans.
• Insider lending decreased by 66% in absolute terms.
• Non-interest expenses fell from 12.8% to 10.3% of average total assets.
• The banking system is now in a position to resume its role as an engine for economic growth.

5. Structural Improvements in Banking

• The four largest banks control only 38% of system assets, indicating a more balanced distribution.
• The number of government-controlled banks has decreased from 20 in 1996 to 10 in 1998.
• 23 banks are listed on the stock exchange, and foreign banks are playing an increasing role with a 4% market share.
• The CBN has eliminated regulatory differences between commercial and merchant banks, which is a positive step.

6. Banking Supervision

• The supervisory framework is generally in line with Basel standards, with 9 principles fulfilled, 11 largely fulfilled, and 5 unfulfilled.
• The CBN and NDIC share overlapping supervisory roles, leading to fragmentation and inefficiency.
• Recommendations include:
  • Clarifying roles and responsibilities between CBN and NDIC.
  • Implementing a "housecleaning" process to license or close non-compliant institutions.
  • Enhancing IT systems and automation.
  • Increasing minimum capital requirements.
  • Incorporating credit information into supervisory procedures.
  • Strengthening governance and oversight of insider and related party lending.

7. Development Finance Institutions (DFIs)

• DFIs are in a serious financial crisis, with combined losses of N2.1 billion in the most recent fiscal year.
• Accumulated losses amount to N10.2 billion (44.5% of assets), and net worth is negative at N5.8 billion.
• The gross loan portfolio stands at N17 billion, with 78% non-performing.
• DFIs are not a major source of financial risk to the system but are inefficient and prone to waste.

8. Recommendations for DFIs

• Restructure and reorganize DFIs, particularly NERFUND, NIDB, and NACB, which have potential for success.
• Liquidate the other four DFIs, with NEXIM's functions merged into NERFUND.
• Strengthen DFIs by:
  • Placing them under the Ministry of Finance and appointing commercially oriented boards.
  • Ensuring competent CEOs and commercial standards.
  • Increasing minimum capital requirements.
  • Seeking private participation and debt capital from non-governmental sources.
  • Conducting audits and revising operational policies.
  • Eliminating subsidized interest rates.

9. Community Banks and Rural Banking

• Community banks have limited outreach and are generally undercapitalized and inefficient.
• 354 out of 1368 community banks have been closed.
• Only about 200 are profitable, and most of the remaining 380 are likely insolvent.
• Constraints include:
  • Board-controlled lending rates.
  • High costs of using commercial banks as correspondents.
  • Insider lending and portfolio concentration.
  • Lack of economies of association.

Key Information

• Currency Equivalent: N1 = 105 US$
• Interest Rates: Real interest rates on savings have become positive.
• GDP Growth: Real GDP growth slowed to 2.4% in 1998.
• Fiscal Deficit: Reached 8.3% of GDP in 1999, higher than IMF projections.
• Banking System Capital: Improved from -74% to +5% of risk-adjusted assets.
• Non-Performing Loans: Reduced from 34% to 18%.
• DFIs Performance: 78% of loans non-performing, negative net worth, and significant losses.
• Recommendations: Focus on restructuring DFIs, improving banking supervision, and addressing inefficiencies in community banks.

Conclusion

The Nigerian financial system, while diverse, is dominated by commercial banks and lacks the depth and efficiency needed to support real sector development and poverty alleviation. The report highlights the need for structural reforms, improved governance, and better oversight to enable the financial system to fulfill its role as a driver of economic growth. Key areas of concern include the underperformance of DFIs, the inefficiencies of community banks, and the overlapping roles of regulatory bodies. The recommendations aim to strengthen the system through legal, structural, and operational reforms.