Lagos – The outgoing Managing Director of First Bank of Nigeria, Mr Stephen Onasanya, says banks should be stronger to be catalysts to fund the development of the real sector.
Onasanya said this at the Chartered Institute of Bankers of Nigeria (CIBN) Third Valedictory Lecture in his honour on Tuesday in Lagos.
He spoke on: “Banks, Bankers and Imperatives for Sustainable Banking”.
Onasanya said banks should focus on their roles as catalysts for funding and development, rather than chasing profitability by all means even with destructive tendencies.
On the exchange rate, Onasanya said that the CBN stance was clear on that and should be respected and accepted in the light of full support for the government.
He said that there had been two major developments that changed the financial service industry landscape in the country.
Onasanya said that the first was the 2009 stress test of domestic deposit money banks by the CBN, while the second was the rebasing of the economy.
He said that the first development drew attention to the importance of systematic stability in an industry with fewer players, while the rebasing resulted in 75 per cent increase in the size of the economy.
The banker said that these developments were stimuli to the industry to play bigger roles in domestic economic activities.
According to him, rates are responding to liquidity glut in the banks’ vaults as the CBN appeared minded to keep rates down as its contribution to revamping the economy.
The banker, however, said that forcing rates below the market clearing function could be a disincentive to credit creation process.
Onasanya said that if the cost of doing business went down, banks could find their structures supportive of lower interest as there would be increase in the number of financially viable and bankable businesses.
“We are confronted with a much different and robust reality.
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“In part, the fall-out from global prices for the nation’s primary export commodity is culpable in the redefinition of the space within the domestic bank operations.
“As domestic output falls precipitously, the apex bank finds itself driving increasingly contradictory policy initiatives,” Onasanya said.
On firmer local currency, he said that the CBN had pursued administrative measures that had tightened liquidity and kept the official rate near constant for quite some time.
Onasanya said that the apex bank had loosen monetary conditions as it tried to bring bank lending rates down in support of real sector growth in a decelerating economy. (NAN)