Thursday, 10 November 2016

Curious NIPOST Savings Bank

Written by the Editorial Board of The Guardian Newspaper

While innovators in other lands are finding solution to their dilemma in these times of disruptive technology, it is curious how Nigeria’s state actors deal with quest for innovation and manage change with the way they dust up old projects that did not add value to the country’s gross domestic product (GDP).

That is why it is a bit surprising the other day that the Minister of Communications, Mr. Adebayo Shittu was reported to have confirmed that he had submitted a proposal to President Muhammadu Buhari for the establishment of a NIPOST Bank. The bank, according to reports, would provide banking services in the rural areas of the country through a network of over 1500 postal agencies that would be used as banking halls. According to Shittu, “this innovation would require new workers and a new management structure to operate.” It is not clear, from the minister’s mission statement why he declared that his proposal for the bank is an “innovation.” There is nothing innovative about this proposal. For the purpose of clarity, Post Office bank had been with us for close to a century but without substantial benefits. Public records show that Post Office Savings Bank was established via the Post Office Savings Bank Ordinance of 1923. The bank,which operated as an arm of the Post and Telecommunications Department was set up to facilitate mobilisation through the network of post offices. In 1974, by Decree No. 38, the bank became legally known as Federal Savings Bank with a separate Management Committee. The performance of the bank, from available records, was far short of expectations. The inefficiencies associated with the Post Office permeated the bank so much that service delivery and its image were nothing to write home about. Furthermore, the bank lacked operational flexibility, streamlined processes, competitive services and rates. However, in 1990, the bank again transformed into FSB International Bank Plc, which was thereafter acquired by Fidelity Bank Plc in 2005 when the Central Bankof Nigeria (CBN) directed consolidation of banks in the country.The foregoing debunks the impression created that the minister’s proposal is an “innovation.” If anything, it is an attempt to re-incarnate Post Office Savings Bank.

Notwithstanding the foregoing, the minister’s proposal should not be discountenanced simply because the Post Office Savings Bank failed. Rather, it should be subjected to robust due diligence to confirm the feasibility and viability of the bank. Besides, the economic, social and other benefits that will accrue must necessarily out-weigh identified and foreseeable demerits.

As rightly pointed out by the minister, among the benefits that will be derived from the bank are the provision of banking services in the rural areas to enhance financial inclusion, enablement of funds transfers from urban to rural dwellers, encouragement of savings by the people in the rural areas and creation of employment opportunities. In this regard, other benefits include reducing rural-to-urban migration, inculcation of banking habits, availability of micro-credits for rural economic activities, improvement in the effectiveness of monetary policies and even narrowing the underground economy by delimiting the informal sector of the economy. These benefits are accruable if the bank is licensed and efficiently managed in the overall interest of the people and the nation.

Therefore, the proposal should be forwarded to the CBN to ensure that due process is followed. This is to prevent a situation whereby the communications ministry becomes a bank ‘regulator’ as we have had in the case of universities of agriculture that are being supervised by the Federal Ministry of Agriculture instead of the Federal Ministry of Education.

In this regard, critical areas that CBN must pay close attention to in assessing and evaluating the proposal should include:owners and ownership structure, board and management structures, minimum capitalisation and sources of capital, target market, operational strategy and technology.

Besides the above, however, the CBN is expected to think outside the box especially by considering other alternatives to an outright banking licence for a NIPOST Bank. For instance, the CBN can consider the proposal under its agency banking arrangement. In other words, the proposed bank may be integrated with the Bank of Agriculture (BOA), which is rural in nature and can expand its reach through the post offices. This will even assist government in reconsidering its intentions to set up a new Bank of Agriculture that has been curiously proposed. It will also not be out of place to consider the NIPOST Bank proposal within the context and framework of microfinance banking.

Above all, government should not resort to bank ownership again through the back door of NIPOST Bank. It is a settled matter that government has no business in any business including banking. If the CBN gives a nod to this, it should be established strictly as a business that should return profits to the shareholders. Meanwhile, it is worth noting that the huge funds that have started accruing to the Ministry of Communications through the 50 kobo Stamp Duty charges being collected on its behalf by banks should not be the reason for the proposal to set up NIPOST Bank. The existing system whereby banks collect and render returns to the government is a better guard against fraud and corruption than when the money is collected directly by the ministry via its own bank. So, there is nothing innovative about reviving an old bank that restructuring of the banking sector has long settled.

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