By Ademola Alawiye

Wednesday, 26 Jan 2011

Chairman, First Bank of Nigeria Plc, Mr. Ajibola Afonja, has said that the full recovery of the banking sector will depend on the growth of the domestic credit market.

According to a statement from the bank, Afonja in his inaugural address said, “Full recovery in the banking industry will depend on how far the market for domestic credit grows after the crisis signalled by the Central Bank of Nigeria’s special audit of banks in the country.”

He noted that the main measure of success of these reforms would be the degree to which they reduced the domestic cost of doing business.

He pointed out that as the CBN focussed more on the maintenance of the stability of the financial system as a whole, it should begin to deploy a lot more policy instruments along with its traditional use of interest rate movements.

He said, “We have already seen a toughening of loan-loss provisioning covenants in response to the build-up of systemic risks over the last couple of years. However, going forward, as concerns over financial stability over the business cycle drive increased cooperation amongst the diverse regulatory authorities in the financial services industry, further tightening of loan to value ratios, and reserve requirements might be implemented as we see a transition from a focus on individual financial institutions to a focus on the whole industry.”

He added, “As government remains committed to ensuring that the economy is on course, I expect to see renewed regulatory concern about the elevated levels of public sector borrowing. This in turn should lead to improved lending to the private sector over the medium-term.”

On how to enhance shareholders’ value, he said, most often shareholders value was assessed in terms of financial performance, especially the impact on stock market figures of the quarterly earning numbers.

He, however, said, “The main consideration from the shareholders’ perspective is knowing that the money invested earns higher returns than from any other investment.”

 

Source: Punch