•Slash personal loans to customers by N22bn
•5 banks fail CBN’s Corporate Governance test
By Babajide Komolafe
The Nigerian banking industry has recorded a mixed performance in customer services in the first half of 2020 with number of complaints over services failures and infractions rising while amount involved decreased significantly.
Meanwhile, the volume of banks’ consumer loans to customers has sustained a downward trend for the fifth consecutive months in October personal loans to customers went down by N22 billion during the period.
Further industry information also shows that five banks failed the corporate governance test while about 20 percent of all the banks failed to comply with the Central Bank of Nigeria (CBN) Code of Corporate Governance for Banks and the Guidelines for Whistle-blowing.
Complaints and refunds
Financial Vanguard findings show that while the volume of customers complaints rose by 34 percent, year-on-year to 2,051 in H1’2020, the amount involved dropped by 47 percent to N4.6 billion from N8.7 billion in same period of 2019.
The banks, however, refunded N2.67 billion to customers in H1’2020, indicating 63 percent decline when compared to N7.2 billion refunded to customers in H1’19.
In its analysis of complaints from bank customers in H1’2020, the CBN stated: “The Bank received 2,051 complaints from consumers of financial services providers in the first half of 2020, compared with 1,528 complaints in the corresponding period of 2019. Of the total 1,167 or 56.9 percent were complaints on electronic/card, while 125 or 6.1 percent were on excess charges. Other complaints were, mainly, on frauds, dishonoured guarantees and unauthorised deductions/transfers, among others.
“A total of 1,519 complaints, including those outstanding from 2019, were resolved in the review period, compared with 1,548 in the corresponding period of 2019. Total claims in the review period in local currency and foreign currencies amounted to N4.58 billion and $151,647.82, compared with N8.70 billion and $315,475.54, respectively, in the corresponding period of 2019.
“Relief was brought to many of the affected customers as the sums of N2.67 billion and $144,176.68 were refunded in the first half of 2020, compared with the N7.20 billion and $315,229.02, refunded in the corresponding period of 2019.”
The banks reduced personal loans to customers by N22 billion in October 2020 as the downward trend in lending to consumers continued during the month.
Financial Vanguard analysis of data obtained from the CBN Economic Report for October, showed that personal loans to customers dropped by 2.7 percent, month-on-month to N412 billion in October from N434 billion in September.
Similarly the total consumer loans fell further for the fifth month to N1.466 trillion or 2.1 percent in October, from N1.497 trillion recorded in the preceding month of September.
Thus banks’ lending to consumers (consumer credit) has fallen by N134 billion since May when it peaked at N1.6 trillion.
Attributing this trend to the contraction in the nation’s Gross Domestic Product (GDP) in the third quarter of the year (Q3’2020), the CBN in its October 2020 Economic Report said, “Consumer credit outstanding, at ¦ 1.466 trillion billion in October 2020, fell 2.1 per cent below the level at the end of the preceding period, but was 15.3 per cent above the level in the corresponding period of 2019.
“The ratio of consumer credit to private sector credit was 8.2 percent at end October 2020, compared to 8.1 percent at end-September 2020. The increase in the ratio was attributed, mainly, to the decline in rates on loans and advances disbursed to businesses and individuals by other depository corporations, in the wake of the contraction in 2020Q3 GDP and the effects of the COVID-19 pandemic.
“ A breakdown of consumer loans showed that retail loans rose by 7.6 per cent, while personal loans fell by 2.9 per cent at end-October 2020.”
5 banks fail test
In another development five banks have failed the Corporate Governance Assessment of the CBN.
Disclosing this in its report on banks’ compliance with its Code of Corporate Governance in H1’2020, the CBN said: “Banks’ Compliance with the Code of Corporate Governance In line with the CBN’s oversight function, most banks in Nigeria complied with the CBN Code of Corporate Governance in the review period.
“The bank concluded the Corporate Governance Scorecard Assessment on twenty banks, with fifteen banks rated “Acceptable”, four banks “Needs Improvement”, and one bank was rated “Weak.
“Consequently, more than 70.0 per cent of Nigerian banks largely complied with the CBN Code of Corporate Governance for Banks and the Guidelines for Whistleblowing. Furthermore, all banks complied with the recommendations made in the preceding year’s scorecard assessment. Following the outbreak of the COVID-19 pandemic and the subsequent travel restrictions imposed by the Government, as part of containment measures the onsite assessment for the first quarter of 2020 could not be conducted as scheduled. This was, however, compensated for by the off-site review of banks’ periodic submissions of Corporate Governance and whistleblowing returns.”