Business
Jobs losses loom as Nigerian banks battle to escape extinction
There is panic in the Nigerian financial sector over massive job losses as banks battle to meet the recently announced minimum capital requirements by the Central Bank of Nigeria.
The National President of the Association of Senior Staff of Banks, Insurance and Financial Institutions, Olusoji Oluwole, expressed these concerns during an interview with Channels Television on Monday.
He said the Association had already informed the CBN and the Ministry of Labour about the impact of the recapitalization exercise on workers in the sector.
“We are very aware of what happened in the past during such recapitalization programmes, the last being in 2005. We knew that some banks had to pull it through themselves, some through mergers, others through acquisition.
“It has an impact on the employment of workers; because of that experience, we have proactively acted by informing the Central Bank of Nigeria and the Ministry of Labour of the likelihood of the programme on our members.
“When things like this happen, there are bound to be jobs lost. We expect that there will be a lot of fairness in the actions of the banks and to ensure that our members are well protected and compensated”, he said.
DAILY POST recalls that the CBN raised the minimum capital requirements for commercial banks with international authorization, National Spread Regional, Merchant Banks, National Non-Interest Banks, and Regional Non-interest between 100 and 900 per cent last Thursday.
What the 2024 Recapitalization exercise means
With the move, the CBN proposed to achieve the $1 trillion economy of President Bola Ahmed Tinubu’s government.
Also, the bank said the exercise would engender the emergence of healthier banks with the capacity to underwrite larger levels of credit/loans.
The development came nearly 19 years after the apex bank had last conducted its recapitalization exercise in 2005 under former President Olusegun Obasanjo and Prof Charles Soludo as CBN governor.
According to reports, over 5,000 staff members of affected banks such as Oceanic bank, Fin Bank, Spring Bank, Union Bank, Intercontinental Bank, Stanbic IBTC, and others lost their jobs.
This is why the announcement of the 2024 recapitalization programme sent a shockwave across the country’s banking sector.
Banks’ available options
CBN had given all the banks 24 months, starting from April 1, 2024, to kick the ground running in meeting the new set capital benchmark.
Within the set period, Nigerian banks have been boxed into Injecting fresh equity capital through private placements, rights issue/or offer subscriptions, mergers and acquisitions( M & As) and Upgrades or downgrades of license authorization options.
It is left to banks to explore either option to escape extinction.
Controversy clause
Unlike in the 2005 recapitalization exercise, CBN placed a caveat that 2024 minimum capital requirements shall only comprise paid-up capital and share premiums, ruling out the shareholders’ funds.
The non-inclusion of the Shareholders’ Fund had raised dust among the sector’s players.
In his statement reacting to the development, Johnson Chukwu, CEO of Cowry Assets Management Limited, faulted the exclusion of retained earnings and advised the CBN to align the new capital requirements with industry dynamics to facilitate a seamless transition.
Will Nigerian Banks Survive 2024 Capitalization?
With the development, the top ten Tier 1 and 2, namely Guaranty Trust Bank, Zenith Bank, United Bank of Africa, Access Bank, First Bank of Nigeria, EcoBank, Stanbic IBTC, First City Monument Bank, Fidelity, Sterling and others, will have raised over N3.3 trillion minimum capital base in 24 months.
Meanwhile, Ernst and Young, a global financial services company, had earlier predicted that about 17 banks would survive recapitalization.
“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital,” it said.
Financial Experts Reactions
Speaking to DAILY POST on Monday, a renowned economist and former President and Chairman of the Council of Chartered Institute of Bankers, Prof Segun Ajibola, said many banks may be unable to meet the current requirements, especially the family-like banks in terms of ownership and operation.
The economist said that a successful banking recapitalization exercise could benefit the Nigerian economy if well implemented.
According to him, with the exercise, Nigeria’s domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements. However, he said the country needs to be mindful of how the ownership of Nigerian banks can be ceded to foreign interests.
“The recapitalization of Nigerian banks by their owners is no doubt an exercise that is long awaited due to the current value of Naira, and by extension the size of the bank’s financial position, when viewed globally. The current value has constrained the banks’ capacity to handle large ticket deals even within the domestic economy.
“Many banks may be unable to meet the current requirements, especially the family-like banks in ownership and operation. There may be voluntary and involuntary mergers and acquisitions.
“One only hopes that the situation of 2005, when banks formed ”unholy alliances” and strange bedfellows, those with conflicting orientations, cultures and governance practices, were forced together to save their shareholders from total loss, etc. Some banks may seek downgrades as a way out of pollution and dilution of their shareholders.
“It remains to be seen if the domestic economy can cough out the funds required to meet the required capital.
“However, the flow of foreign funds to the Nigerian economy by the existing and would-be shareholders will be a welcome development if it happens.
“There is a need for the authorities to assure potential investors of stable and consistent investment and exchange control policies for a safe and predictable investment environment, among others.
“The definition of what constitutes capital under the Basel Accord is shifting from Tier I to Tier III. As said earlier, it is hoped that the domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements.
“Again, one is mindful of the extent to which the ownership of Nigerian banks can be ceded to foreign interests.
“A successful banking recapitalization exercise can have a beneficial impact on the Nigerian economy. It can help to rejuvenate the overall growth of different sectors of the economy through appropriate, timely funding of economic activities.
“Yes, it has the likely effect of crowding out investments in other suitable areas of the economy. It can lead to some job losses. But the overall benefits outweigh these side effects if successfully executed”, he told DAILY POST.
On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said that the real issue is that Nigeria’s soaring inflation has weakened the value of money over time, which makes recapitalization imperative and inevitable.
He, however, urged that the exercise be done to minimize shocks and disruptions to the banking system and the economy.
Yusuf added that the apex bank should caution all players in the banking sector against predatory and other anti-competitive practices in the industry because of the recapitalization policy.
He told DAILY POST: “The last major review of the minimum capital requirement was done in 2005, some 18 years ago. That was under President Olusegun Obasanjo, with Prof Charles Soludo as CBN governor.
“But since then, the value of the minimum capital has been significantly eroded by inflation. For instance, the official exchange rate in 2005 was about N130 to the dollar.
“This meant that the N25 billion for a national bank, for instance, was equivalent to $192 million. The naira equivalent today is about N250 billion. The International Banking license would be about $384 million, an equivalent of about N500 billion.
“The capitalization requirement has not increased materially in real terms when adjusted for inflation.
“The real issue is that inflation has weakened money’s value over time, making recapitalization imperative and inevitable.
“The essence is to ensure the safety of depositors’ funds, strengthen the financial system’s stability, deepen the banking system’s resilience and reposition the bank to support growth.
“Reports from the Central Bank of Nigeria attest that Nigerian banks have good soundness indicators. The industry Capital Adequacy Ratio as of January was 13.7 per cent, above the prudential threshold of 10 per cent.
“The Non-Performing Loans as a ratio of total loan assets was 4.81 per cent as against the prudential threshold of 5 per cent, which is also positive. The liquidity ratio is 40.14 against the prudential minimum of 30 per cent, which also reflects a healthy position.
“The summary is that based on the financial soundness metrics, Nigerian banks are judged to be generally healthy.
“However, this does not diminish the need for regulatory authority to ensure that this soundness and stability are preserved and improved, especially because of the recent macroeconomic headwinds.
“This, perhaps, is what informed the current policy of the CBN to review the capital base”, he stated.
Similarly, the CEO of SD & D Capital Management, Mr Idakolo Gbolade, said the recapitalization exercise will allow Nigeria to maintain its leading role in the African continent.
“The recapitalization of banks in categories is long overdue”, he told DAILY POST and advocated for the expansion of our economy.
“The time frame is very adequate as well. Some international banks have already envisaged this process and have started making provisions early enough. Banks that cannot meet the new capital requirements have mergers and acquisitions options.
“Nigeria has the highest GDP in Africa, and for us to maintain that position and operate a trillion-dollar economy, the banks must be adequately capitalized.
“A trillion dollar economy must have local capacity to initiate and execute million dollar transactions locally without foreign intervention in key areas of development like oil and gas, steel production, mining, mega construction projects and Public Private Partnerships with the government.
“This can only materialize if we have adequately capitalized banks that can rise to the occasion. Nigerian banks also need to take pride in Africa regarding capitalization because Nigerian banks are not among the most capitalized in Africa.
“Therefore, this new recapitalization policy will adequately position our banks for the emergency economy in Nigeria or Africa and worldwide.
“The exclusion of shareholders’ funds as additional Tier 1 capital shows the CBN wants to distinguish fresh funds from existing funds which could be subject to regulatory infractions because shareholders’ funds is not a statutory capital base”, he told DAILY POST.
The National President of the Association of Senior Staff of Banks, Insurance and Financial Institutions, Olusoji Oluwole, expressed these concerns during an interview with Channels Television on Monday.
He said the Association had already informed the CBN and the Ministry of Labour about the impact of the recapitalization exercise on workers in the sector.
“We are very aware of what happened in the past during such recapitalization programmes, the last being in 2005. We knew that some banks had to pull it through themselves, some through mergers, others through acquisition.
“It has an impact on the employment of workers; because of that experience, we have proactively acted by informing the Central Bank of Nigeria and the Ministry of Labour of the likelihood of the programme on our members.
“When things like this happen, there are bound to be jobs lost. We expect that there will be a lot of fairness in the actions of the banks and to ensure that our members are well protected and compensated”, he said.
DAILY POST recalls that the CBN raised the minimum capital requirements for commercial banks with international authorization, National Spread Regional, Merchant Banks, National Non-Interest Banks, and Regional Non-interest between 100 and 900 per cent last Thursday.
What the 2024 Recapitalization exercise means
With the move, the CBN proposed to achieve the $1 trillion economy of President Bola Ahmed Tinubu’s government.
Also, the bank said the exercise would engender the emergence of healthier banks with the capacity to underwrite larger levels of credit/loans.
The development came nearly 19 years after the apex bank had last conducted its recapitalization exercise in 2005 under former President Olusegun Obasanjo and Prof Charles Soludo as CBN governor.
According to reports, over 5,000 staff members of affected banks such as Oceanic bank, Fin Bank, Spring Bank, Union Bank, Intercontinental Bank, Stanbic IBTC, and others lost their jobs.
This is why the announcement of the 2024 recapitalization programme sent a shockwave across the country’s banking sector.
Banks’ available options
CBN had given all the banks 24 months, starting from April 1, 2024, to kick the ground running in meeting the new set capital benchmark.
Within the set period, Nigerian banks have been boxed into Injecting fresh equity capital through private placements, rights issue/or offer subscriptions, mergers and acquisitions( M & As) and Upgrades or downgrades of license authorization options.
It is left to banks to explore either option to escape extinction.
Controversy clause
Unlike in the 2005 recapitalization exercise, CBN placed a caveat that 2024 minimum capital requirements shall only comprise paid-up capital and share premiums, ruling out the shareholders’ funds.
The non-inclusion of the Shareholders’ Fund had raised dust among the sector’s players.
In his statement reacting to the development, Johnson Chukwu, CEO of Cowry Assets Management Limited, faulted the exclusion of retained earnings and advised the CBN to align the new capital requirements with industry dynamics to facilitate a seamless transition.
Will Nigerian Banks Survive 2024 Capitalization?
With the development, the top ten Tier 1 and 2, namely Guaranty Trust Bank, Zenith Bank, United Bank of Africa, Access Bank, First Bank of Nigeria, EcoBank, Stanbic IBTC, First City Monument Bank, Fidelity, Sterling and others, will have raised over N3.3 trillion minimum capital base in 24 months.
Meanwhile, Ernst and Young, a global financial services company, had earlier predicted that about 17 banks would survive recapitalization.
“In a worst-case scenario, i.e., given a capital multiplier of 15, about 17 out of 24 banks would not meet the new minimum capital,” it said.
Financial Experts Reactions
Speaking to DAILY POST on Monday, a renowned economist and former President and Chairman of the Council of Chartered Institute of Bankers, Prof Segun Ajibola, said many banks may be unable to meet the current requirements, especially the family-like banks in terms of ownership and operation.
The economist said that a successful banking recapitalization exercise could benefit the Nigerian economy if well implemented.
According to him, with the exercise, Nigeria’s domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements. However, he said the country needs to be mindful of how the ownership of Nigerian banks can be ceded to foreign interests.
“The recapitalization of Nigerian banks by their owners is no doubt an exercise that is long awaited due to the current value of Naira, and by extension the size of the bank’s financial position, when viewed globally. The current value has constrained the banks’ capacity to handle large ticket deals even within the domestic economy.
“Many banks may be unable to meet the current requirements, especially the family-like banks in ownership and operation. There may be voluntary and involuntary mergers and acquisitions.
“One only hopes that the situation of 2005, when banks formed ”unholy alliances” and strange bedfellows, those with conflicting orientations, cultures and governance practices, were forced together to save their shareholders from total loss, etc. Some banks may seek downgrades as a way out of pollution and dilution of their shareholders.
“It remains to be seen if the domestic economy can cough out the funds required to meet the required capital.
“However, the flow of foreign funds to the Nigerian economy by the existing and would-be shareholders will be a welcome development if it happens.
“There is a need for the authorities to assure potential investors of stable and consistent investment and exchange control policies for a safe and predictable investment environment, among others.
“The definition of what constitutes capital under the Basel Accord is shifting from Tier I to Tier III. As said earlier, it is hoped that the domestic economy will enjoy the patronage of existing and new local and foreign investors to meet the capital requirements.
“Again, one is mindful of the extent to which the ownership of Nigerian banks can be ceded to foreign interests.
“A successful banking recapitalization exercise can have a beneficial impact on the Nigerian economy. It can help to rejuvenate the overall growth of different sectors of the economy through appropriate, timely funding of economic activities.
“Yes, it has the likely effect of crowding out investments in other suitable areas of the economy. It can lead to some job losses. But the overall benefits outweigh these side effects if successfully executed”, he told DAILY POST.
On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said that the real issue is that Nigeria’s soaring inflation has weakened the value of money over time, which makes recapitalization imperative and inevitable.
He, however, urged that the exercise be done to minimize shocks and disruptions to the banking system and the economy.
Yusuf added that the apex bank should caution all players in the banking sector against predatory and other anti-competitive practices in the industry because of the recapitalization policy.
He told DAILY POST: “The last major review of the minimum capital requirement was done in 2005, some 18 years ago. That was under President Olusegun Obasanjo, with Prof Charles Soludo as CBN governor.
“But since then, the value of the minimum capital has been significantly eroded by inflation. For instance, the official exchange rate in 2005 was about N130 to the dollar.
“This meant that the N25 billion for a national bank, for instance, was equivalent to $192 million. The naira equivalent today is about N250 billion. The International Banking license would be about $384 million, an equivalent of about N500 billion.
“The capitalization requirement has not increased materially in real terms when adjusted for inflation.
“The real issue is that inflation has weakened money’s value over time, making recapitalization imperative and inevitable.
“The essence is to ensure the safety of depositors’ funds, strengthen the financial system’s stability, deepen the banking system’s resilience and reposition the bank to support growth.
“Reports from the Central Bank of Nigeria attest that Nigerian banks have good soundness indicators. The industry Capital Adequacy Ratio as of January was 13.7 per cent, above the prudential threshold of 10 per cent.
“The Non-Performing Loans as a ratio of total loan assets was 4.81 per cent as against the prudential threshold of 5 per cent, which is also positive. The liquidity ratio is 40.14 against the prudential minimum of 30 per cent, which also reflects a healthy position.
“The summary is that based on the financial soundness metrics, Nigerian banks are judged to be generally healthy.
“However, this does not diminish the need for regulatory authority to ensure that this soundness and stability are preserved and improved, especially because of the recent macroeconomic headwinds.
“This, perhaps, is what informed the current policy of the CBN to review the capital base”, he stated.
Similarly, the CEO of SD & D Capital Management, Mr Idakolo Gbolade, said the recapitalization exercise will allow Nigeria to maintain its leading role in the African continent.
“The recapitalization of banks in categories is long overdue”, he told DAILY POST and advocated for the expansion of our economy.
“The time frame is very adequate as well. Some international banks have already envisaged this process and have started making provisions early enough. Banks that cannot meet the new capital requirements have mergers and acquisitions options.
“Nigeria has the highest GDP in Africa, and for us to maintain that position and operate a trillion-dollar economy, the banks must be adequately capitalized.
“A trillion dollar economy must have local capacity to initiate and execute million dollar transactions locally without foreign intervention in key areas of development like oil and gas, steel production, mining, mega construction projects and Public Private Partnerships with the government.
“This can only materialize if we have adequately capitalized banks that can rise to the occasion. Nigerian banks also need to take pride in Africa regarding capitalization because Nigerian banks are not among the most capitalized in Africa.
“Therefore, this new recapitalization policy will adequately position our banks for the emergency economy in Nigeria or Africa and worldwide.
“The exclusion of shareholders’ funds as additional Tier 1 capital shows the CBN wants to distinguish fresh funds from existing funds which could be subject to regulatory infractions because shareholders’ funds is not a statutory capital base”, he told DAILY POST.
Source: Daily Post
The Nigerian banking sector is facing significant challenges that could impede its growth and innovation.
Tony Elumelu, Chairman of UBA Group, has said that high regulatory and compliance costs are placing undue pressure on banks, potentially stifling the sector’s ability to contribute to Nigeria’s economic growth, indicating that the Nigerian banking sector is facing significant challenges that could impede its growth and innovation.
Elumelu said this during his keynote speech at the CIBN 17th Annual Banking & Finance Conference on Tuesday.
He noted that despite the sector’s critical role in Nigeria’s economy, employing millions and supporting countless businesses, regulatory challenges remain a significant concern.
He urged stakeholders, including government agencies, regulatory bodies, and banking institutions, to engage in meaningful dialogue to create a more collaborative environment.
Elumelu said: “The sector employs millions, provides crucial financial support to countless businesses, and generates income for millions of shareholders. However, the sector faces challenges that impede its growth and innovation, including regulatory and high compliance costs.”
Other key issues
Elumelu tackled several pressing issues beyond the challenges facing the banking sector.
He highlighted the critical need for Nigeria to address its infrastructure and energy deficiencies, stressing that reliable access to electricity is fundamental for economic growth. Without it, industrialization and education remain severely hindered, preventing the country from unlocking its full potential.
Elumelu also discussed the national security crisis, calling for decisive action to ensure safety for citizens and attract investment. He argued that a secure environment is essential for economic prosperity, as it allows businesses and agriculture to flourish without fear.
Also, the empowerment of youth entrepreneurs was a focal point. Elumelu emphasized the importance of creating an enabling environment for young Nigerians to start businesses, thus driving economic growth. He called on the government and private sector to invest in youth initiatives, ensuring that opportunities are created locally to stem the tide of migration.
Elumelu concluded by stating the impact of his business and philanthropic efforts through Heirs Holdings, UBA Group, and the Tony Elumelu Foundation. These entities are making significant contributions to power, energy sufficiency, job creation, and youth entrepreneurship across Africa, embodying his vision of Africapitalism, which is economic development driven by the private sector for social good.
What you should know
Nairametrics earlier reported that the Central Bank of Nigeria (CBN), alongside law enforcement agencies, would closely monitor the Nigerian banking sector’s recapitalization efforts to prevent the influx of illicit financing into the sector.
In a circular, the CBN made clear its intention to apply its robust anti-money laundering regulations vigorously. With the collaboration of relevant law enforcement agencies, the bank aims to ensure that the capital raised during the recapitalisation process is free from the taint of illegality.
Banks are required to conduct comprehensive anti-money laundering screening checks.
This includes Know Your Customer (KYC), Customer Due Diligence, and monitoring suspicious transactions to prevent the use of illicit funds in the recapitalisation exercise.
Also, the Economic and Financial Crimes Commission (EFCC) is poised to take legal action against top executives in Nigeria’s banking sector over allegations of financial crimes, including money laundering and fraudulent practices.
In a strategic move to reduce fuel costs and provide Nigerians with an affordable alternative to petrol and diesel, President Bola Ahmed Tinubu has made Compressed Natural Gas (CNG) available for vehicles at N230 per litre.
This initiative offers a cheaper and cleaner alternative to petrol, which currently sells for over N900 per litre, reflecting the President’s commitment to lowering the cost of living and alleviating the pressures of fuel subsidy removal.
The Presidential Compressed Natural Gas Initiative (PCNGi), launched under President Tinubu’s directive, aims to deliver wide-reaching benefits by significantly cutting fuel costs.
The introduction of CNG as a fuel source aligns with the government’s drive towards energy diversification and is designed to bring immediate relief to Nigerians, especially those who depend on transport for their livelihoods.
As part of this initiative, President Tinubu has ordered the distribution of one million free CNG conversion kits to commercial vehicles involved in transporting people, food, and goods.
These kits, along with free installation, will be rolled out over the next 18 months, helping the transport sector transition to CNG and benefit from significantly lower fuel prices. The distribution of these kits will be conducted in collaboration with key partners, ensuring nationwide accessibility.
In the first phase of the initiative, PCNGi will begin the immediate distribution of 10,000 free conversion kits this week.
These kits will be provided at no cost to transport operators through key national transport associations, including the National Union of Road Transport Workers (NURTW), Moove, Uber, and the Kaduna State Transport Authority (KSTA).
This will enable commercial drivers to switch their vehicles to run on CNG, easing the cost burdens for both transporters and the public.
The distribution process is supported by PCNGi in partnership with NIPCO Gas, which will manage the conversion process through a network of authorized conversion centers across Nigeria. These centers will provide the necessary infrastructure and services to ensure a smooth transition for vehicles switching to CNG.
By adopting CNG, Nigeria is embracing a cleaner, cheaper, and more sustainable fuel alternative that benefits both the economy and the environment. The government’s goal is to distribute the full one million conversion kits by the end of 2025, ensuring Nigeria’s commercial transport sector is fully equipped to adopt CNG and reduce dependence on costly petrol and diesel.
Some of the 184 active conversion centers include Kojo Motors, Surulere; OttoXpress Limited, Ikoyi; AutoMedics Limited, Ilupeju; Briscoe Nigeria Plc, Rivers; Rolling Energy Limited, Kwara State; Nsik Oil and Gas Company, Akwa Ibom; NITT, Gombe; NITT, Ekiti; NIPCO Gas, Ibafo; NIPCO Gas Ltd, Abuja; NIPCO Gas, Sapele; and BOVAS in Idimu-Ikotun, Lagos, among many others.
The Nigerian Aviation Handling Company Plc (NAHCO) has secured the bid to provide passenger and cargo ground handling services for Emirates Airlines at Lagos International Airport, as the United Arab Emirates carrier ramp up efforts to resume flights into the country.
Emirates Airlines halted flights into Nigeria in October 2022 because it could repatriate funds accruing from ticket sales held in the country.
The carrier will resume flight on October 1, 2024 after a two-year hiatus.
In a statement, signed by its Assistant General Manager, Corporate Communications, Mr Tayo Ajakaye, NAHCO said the renewed contract underscores the company’s unrelenting commitment to delivering exceptional ground handling services and highlights its role as a critical partner in Nigeria’s aviation industry.
The agreement with Emirates Airlines, Ajakaye said reinforces NAHCO’s position as the trusted service provider to some of the world’s leading airlines.
“We are honoured to welcome Emirates Airlines back to Nigeria and to continue our longstanding relationship with this important Airline. Securing this renewal is a testament to NAHCO’s consistent quality of service and the trust our partners place in us. We look forward to further strengthening valued partnerships and continuing to set the standard for ground handling in Nigeria,” said Dr. Seinde Fadeni, Chairman of NAHCO Plc.
Prince Saheed Lasisi, Group Executive Director – Commercial & Business Development at NAHCO Plc stated, “Our successful renewal of this contract with Emirates Airlines is a reflection of the hard work and dedication of the entire NAHCO team.
“We are proud to be the preferred ground handlers once again for Emirates as they resume their flights to Nigeria. Our focus remains on delivering world-class services that meet and exceed the expectations of our airline partners.”
Mr. Indranil Gupta, Group Managing Director /Chief Executive Officer of NAHCO PLC noted that it was a privilege to have been chosen once more by Emirates Airlines for their ground handling needs at Lagos Airport, and to extend the company’s successful partnership with one of the world’s leading Airlines.
He expressed optimism about the company’s future and reaffirmed NAHCO’s commitment to supporting the growth of the company’s airline partners in Nigeria.
– Business owners lose millions as banking operations grind to a halt
– Medical emergencies stall as bank’s failed upgrade locks users out of their funds
– Angry customers storm branches, threatening to shut down operations if issues persist
It has been a season of silence from the vaults of Sterling Bank, but it is not the peaceful, solemn quiet of prosperity. Instead, this silence stretches like an unending night, where livelihoods flicker and die, and the urgent hum of commerce is stilled.
For two weeks now, customers of Sterling Bank have watched in growing frustration as the bank’s digital arteries have choked under the weight of its new core banking system. The promises of innovation and ease have soured into a painful experience for millions, and in the heart of Lagos, anger simmers, ready to erupt.
“I’ve been unable to open the One Bank app for over five days,” lamented one customer in a social media post, reflecting the sentiments of many who have been left at the mercy of a system that seems to have forgotten them.
Across Nigeria, the story is the same: businesses unable to pay suppliers, individuals struggling to make critical payments, and ordinary people left counting the cost of an institution’s technological failure.
The scenes outside Sterling Bank branches are becoming emblematic of the widespread discontent. Customers, once loyal, now throng the premises demanding explanations and solutions. At the Iyana Itire branch, tensions ran high as frustrated individuals vented their anger, some calling for mass protests and legal action against the bank. “We’ll camp outside here until they fix this,” one protester declared.
The frustration reached a boiling point. On Wednesday, a group of agitated customers gathered at the gate, threatening to shut down the branch if their issues were not resolved.
“We’ve had enough,” said one customer, visibly angry. The group issued an ultimatum: if their funds were not credited to their accounts within the next 24 hours, they would shut down the bank’s operations themselves.
The loss of trust is perhaps the most damning outcome of this crisis. Even as Sterling Bank promises to resolve the issues in the coming days and prepare for a grand rollout of its new software, the damage to its reputation is already severe. Many customers are unwilling to wait for the bank to “pacify” them; they are simply moving on.
The accusation that the bank was using customers’ funds for other purposes stoked fears of mismanagement, adding to the cloud of uncertainty surrounding the crisis. Many customers voiced concerns that Sterling Bank, by withholding their funds, was further endangering their lives and livelihoods.
“They’re using our money for business and giving us excuses about system upgrades. I can’t even access my account to pay for urgent medical treatment,” said a customer at the Abule Egba branch.
For many Nigerians, the bank’s failure is more than an inconvenience; it is a life-threatening issue. One of the most harrowing aspects of the crisis is its impact on those needing urgent medical services. “I was at the hospital, and I couldn’t pay for my mother’s surgery because the app wouldn’t work,” said a distraught customer, recounting her ordeal. “I had to beg for help, and still, I’ve not been able to access my funds.”
Business owners have also been hit hard. A once-thriving Lagos trader disclosed that he lost several key suppliers because he was unable to make payments on time. “They think I’m unreliable now. How do I explain that it’s my bank and not me?”
The consequences of Sterling Bank’s inefficiency ripple across various sectors of the economy, from small businesses to service industries, each of them tethered to the bank’s now-stuttering engine. For many, the breakdown has brought their operations to a grinding halt, forcing them to consider alternative banking options. “I’m done with Sterling Bank,” said one customer in line at a Lagos branch. “As soon as I get my money out, I’m closing my account.”
The root cause of this banking catastrophe lies in Sterling Bank’s decision to switch from the Temenos T24 core banking system, used by several major Nigerian banks, to SEABaaS, a custom-built application from Bazara Tech Inc. The upgrade began on August 30 and was intended to be a transformative step forward in the bank’s operations. But the transformation has been anything but smooth.
While the bank had notified customers of potential service disruptions during the migration process, it provided no specifics, leaving customers ill-prepared for the magnitude of the outage. Over two weeks later, many banking channels remain inaccessible, rendering customers helpless in critical moments.
SEABaaS, described by Bazara Tech as a “future-proof, platform-agnostic core banking SaaS solution” that promises AI capabilities, hybrid cloud infrastructure, and seamless user interfaces, was meant to elevate the banking experience. Yet, the very complexity and ambition of this system seem to have bogged down its rollout, sparking questions about whether the bank fully anticipated the risks involved in such a massive transition.
The parallels to international banking failures are hard to ignore. A botched system upgrade by the Royal Bank of Scotland (RBS) in 2012 left over six million customers stranded for days, resulting in the bank being fined £56 million. Sterling Bank’s ongoing issues may yet spiral into a similar crisis if they cannot swiftly resolve the technical problems that have left customers in the lurch.
“This has become a recurrent trend with the bank. We experienced something similar in the last quarter of 2023 and early quarter of this year. I think Sterling Bank has more serious issues. This is more than an operational glitch. To worsen the situation, the bank has refused to put money in its ATMs. The Central Bank of Nigeria (CBN) must intervene before the bank ruins its customers completely,” said Mr. Thomas, an engineer and customer at its Abule Egba branch.
For Sterling Bank, the stakes could not be higher. The ongoing network problems have caused untold damage to its customer base and, by extension, the wider economy. The services sector, in particular, has been hit hard, with transactions delayed or outright blocked due to the bank’s inefficiency.
As the days drag on, more and more customers vow to close their accounts, and the specter of financial ruin looms large over Sterling Bank’s once-ambitious transformation. In the end, the bank may find that its quest for innovation has instead paved the way for an exodus—one that leaves a trail of disillusionment and distrust in its wake.
-TheCapital
The Independent Petroleum Marketers Association of Nigeria (IPMAN) says the price of petrol will determine if it will buy from the Nigerian National Petroleum Company (NNPC) Limited or Dangote Petroleum Refinery.
According to Ukadike Chinedu, national publicity secretary of IPMAN, in an interview with Punch on Monday, the association is prepared to buy from either Dangote or NNPC depending on the prices they offer.
Chinedu said the NNPC’s recent clarification that it is not the sole off-taker of Dangote products gives dealers the freedom to get their products from any cheaper source.
“Now that NNPC has said they are not the sole off-taker of Dangote petrol, it then means that the price of the product would determine where we are going to buy it. If NNPC imports the product and its price is cheaper than that of Dangote, we will buy from NNPC,” Chinedu said.
He said the situation reflects the implementation of the Petroleum Industry Act (PIA) and the government’s removal of petrol subsidy, with the pricing of petrol now determined by the principles of demand and supply.
Chinedu said this competition will eventually drive down prices.
On whether marketers had started making plans to import if the imported product is more affordable, he said Abubakar Maigandi, IPMAN’s national president, has initiated discussions with investors, with plans underway to secure funding based on the current market trends.
“So, we are talking with some foreign partners because you need to understand that independent marketers are the highest buyers of diesel from Dangote refinery because we control about 80 percent of the filling stations nationwide,” he added.
“So, if Dangote PMS is cheaper we will buy it, but if importation is cheaper, we will go for it.”
Similarly, Mustapha Zarma, national operations controller of IPMAN, said while the association has not yet contacted the Dangote refinery’s sales department on the price, it plans to do so soon.
‘DECISION TO BUY FROM NNPC, DANGOTE DEPENDS ON RETURN ON INVESTMENT’
Zarma said the decision to buy from Dangote or NNPC would be based on which supplier offers a better return on investment and required margins.
“We may contact the refinery’s sales department this week to find out the price,” Zarma said.
“If the price is competitive enough for one to buy and get his return on investment and the required margin, then we wouldn’t mind purchasing directly from him to complement what NNPC is bringing in or what NNPC would buy from Dangote.
“I believe that we are going to analyse the price of Dangote petrol and see the advantages of buying from Dangote viz-a-viz importation. Whichever we feel is cheaper will automatically attract everybody, especially if importation is cheaper.”
He stressed that competition would help prevent price monopoly, with the market determining local prices for refined petroleum products.
“That will bring about competition and I don’t think the government will allow price monopoly. They would want a competitive market where the laws of demand and supply would determine the local price of refined petroleum products, just like diesel is right now,” he said.
“And with that, there is going to be some kind of equilibrium in the pricing and there is going to be guaranteed sustainability of supply.”
On September 7, NNPC denied reports that it intends to become Dangote refinery’s sole distributor.
The company also said there is no guarantee domestic refining would lead to lower prices compared to global parity pricing.
NNPC said Dangote refinery and any other domestic refinery are free to sell directly to any marketer on a willing buyer, willing seller basis, which is the current practice for all fully deregulated products.
The Federal Government of Nigeria has debunked claims that it plans to increase the Value-Added Tax rate from 7.5 per cent to 10 per cent.
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, in a statement released on Monday, September 9, said that the VAT rate remains unchanged at 7.5 per cent, as stipulated in the nation’s tax laws.
The minister said, “The current VAT rate is 7.5% and this is what the government is charging on a spectrum of goods and services to which the tax is applicable.
“Therefore, neither the Federal Government nor any of its agencies will act contrary to what our laws stipulate,” Edun stated.
He also noted that the importance of maintaining a balanced tax system in Nigeria’s tax framework is key to the existing three key pillars- tax policy, tax laws, and tax administration.
“The tax system stands on a tripod, namely tax policy, tax laws, and tax administration. All the three must combine well to give us a sound system that gives vitality to the fiscal position of the government,” the minister said.
Describing the report that painted the government as trying to bring more hardship to the people as false, Edun said the FG through its policies have demonstrated that it is committed to creating a congenial environment for businesses to thrive.
“Today, VAT remains 7.5% and that is what will be charged on all the goods and services that are VAT-able,” he added.
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