This presentation highlights how effective risk management has aided the restructuring of the financial services sector, and thereby allowing for continuous growth in the economy

1. Effective Risk Management
Reshaping Financial Services in Nigeria
Presented by:
Eneni Oduwole
Group Head, Operational Risk Mgt
Guaranty Trust Bank Plc

2. Outline
• 10 year review
• Outcome
• Impact on FDI Inflows
• Financial Services Reforms
• Basel Compliance Initiatives
• Your Concerns
• Evolving Trends
Eneni Oduwole - NIFEx USA, 2013

3. Our Story…
S/
N
2003
1
No. of Banks
2
Categorization of Banks
3
Capital Requirement
4
Type of Regulatory
Supervision
5
Close supervision of Nonbanking Financial Services
6
Basel Compliance
7
2008
2013
89
24
20
Non-existent
Proposed
In place
N500m
($3.03m)
N25b ($151.52m)
Based
on Category
Compliancebased
Introduced
Risk-based
Conducts
Risk-based
Minimal
Stricter
measures
Closely
monitored
Mostly a myth
Nice to have
Strategic
Introduced
Advised
Mandated
No RM Function
Introduced
Fully Functional
Compliancebased
Intro of
Risk-based
Risk-based
CBN’s Supervisory Role:
- Enforcement of RM
- Competence
- Approach
Eneni Oduwole - NIFEx USA, 2013

4. Our Story (cont’d)…
S/
N
2008
2013
- Categorizations
Non-existent
Proposed
In place
- Supervisory scope
8
2003
Mostly banks
Minimal for
Non-Banks
Strict across
board
Existence of
Owner-Managers;
Tenor-less
Minimal
Incidences;
Tenor-less
Non-existence;
Max. of 10years
(CBN Rule)
Glamorous
Overblown
Stream-lined
Undefined by CBN
Checked by CBN
Stipulated
$67.66b /
$357.36
$207.12b/
$1,370.00
$262.62b /
$1,052.34
- Foreign Reserves
$7.46b
$53.60b
$47.06b
- Inflation Rate
13.8%
11.6%
8.0%
Financial Institutions:
- Board & Management;
Tenor of Chairmen/MDs
- Compensation
- Skill set of Key Staff
9
The Economy:
- GDP / GDP Per Capita
Eneni Oduwole - NIFEx USA, 2013

5. The Outcome…
• Increased business activity in Nigeria with annual growth rate of 7%
• Increased Public-Private Partnerships for Infrastructural Growth
• Revival of moribund sectors such as Telecoms, Agriculture, Power
• Nigeria was No. 1 FDI destination in Africa both in 2011 and 2012; Foreign
Private Capital Inflow increased from $6.14b between Jan – May 2012 to
$10.00b for the same period in 2013
• Resuscitation of the Capital Market
• Institution of a Sovereign Wealth Fund with initial capital base of $1billion
• Licensing of more international banks
• A Nigerian Bank featured in Africa’s Top 10 most profitable banks in 2013
Eneni Oduwole - NIFEx USA, 2013

6. FDI Inflows to Some African Countries in USD billions
(2010 - 2012)
Foreign direct investment (FDI) to Africa increases, defying global
trend for 2012; FDI flows to African countries increased by 5% to
US$50 billion in 2012 even as global FDI fell by 18%
- UNCTAD/PRESS/PR/2013/026
Eneni Oduwole - NIFEx USA, 2013

7. 4 Pillars of Financial Services Sector Reforms
• Pillar 1: Enhancing the quality of banks
– Implementation of Risk-based supervision
– Reforms to regulations and regulatory framework
– Enhanced provisions for consumer protection
– Internal transformation of the CBN
• Pillar 2: Establishing financial stability
– Strengthening the financial stability committee within the CBN
– Establishment of a hybrid monetary policy with macro-prudential rules
– Development of directional economic policies and counter-cyclical fiscal
policies by the Government
– Further development of Capital markets as an alternative to bank
funding
Eneni Oduwole - NIFEx USA, 2013

8. 4 Pillars of Financial Services Sector Reforms
(cont’d)
• Pillar 3: Enabling healthy financial sector evolution
– Creation of Asset Management Corporation of Nigeria (AMCON);
mopped up over N3.0trillion of Non-Performing Loans; received various
international awards for sanitizing the Banking Sector
– Universal Banking Model restructured into International, National,
Regional Banking categories with mono-line and specialized licenses
• Pillar 4: Ensuring the financial sector contributes to the real economy
– Banks now expected to engage the real economy through initiatives such
as:
 Development Finance
 Foreign Direct Investment
 Venture Capital
 Public Private Partnerships
In addition, the 3 Pillars for effective risk-based supervision stipulated in the
Basel II Guidelines are currently implemented in Nigeria
Eneni Oduwole - NIFEx USA, 2013

9. Basel Compliance
• Pillar 1: Min. Capital Requirements & Regulatory View
– Banks now required to determine risk weighted assets, and make a
holistic risk based capital charge covering Credit, Market and
Operational Risk charges
• Pillar 2: Supervisory Review & Internal Capital Adequacy Assessment
Process
– Banks conduct self assessments of risk profiles to ascertain required riskbased capital
– CBN/NDIC reviews and approves assessment processes adopted by
Banks, and advises on evaluated composite risk ratings
• Pillar 3: Market Discipline
– CBN published a minimum disclosure framework for public awareness of
proprietary risk management status by Banks
Eneni Oduwole - NIFEx USA, 2013

10. Concerns
• Ownership rights and Repatriation of profits unhindered
– These have been clearly defined by the Nigerian Investment Promotion
Council (NIPC), and it takes into cognisance the requirements of relevant
regulatory agencies
– Equal treatment of foreign and domestic private investment by most
sectors
• Effectiveness of Supervisory Framework
– Recruitment of skilled professionals by Regulatory Agencies
– Reduced regulatory volatility
– Review of Prudential Guidelines to encourage on lending to growth
sectors
– Increased alignment with best global practices (PCIDSS, ISO, BCI, DRI
certification, introduction of Sustainable banking principles in 2012)
– Stringent enforcement of AML regulation and monitoring; FATF visited
Nigeria recently with a view to certifying Nigeria to be AML-compliant
Eneni Oduwole - NIFEx USA, 2013

11. Concerns (cont’d)
• Socio-Political Issues / Stability of Government
– Successive change of government since 1999
– Resolution of Niger-Delta crisis through the Amnesty Programme
– Boko Haram currently being managed by the Joint Task Force; threats
contained in mostly the North-Eastern region of Nigeria; vibrant
economic zones such as Lagos, Abuja, Port-Harcourt, Onitsha are
insulated
– Introduction of National Identity Management System; to be fully
implemented in 2014
• Business Sustainability
– Close monitoring of business activities of financial institutions
– Allowing for different levels of capitalisation and business scope; this
allows institutions to be focused and strategic
– Existence of Credit Bureau for Banks to confer with on status of
borrowers industry-wide
Eneni Oduwole - NIFEx USA, 2013

12. Evolving Business Models / Strategies
•
•
•
•
•
•
Curtailed high risk lending
Lower NPL ratios (ranging between 2.9% - 5%)
Banks depend less on public funds but support real sector growth
Borderless banking (accounts can be operated globally)
Use of e-channels to service all customers
Innovative customer on-boarding (Social Media banking, Agent
banking)
Various Global Awards to the Governors of the Central
Bank of Nigeria for proactive and smoothly implemented
Financial Services Sector Reforms
Eneni Oduwole - NIFEx USA, 2013

13. 13
Thank you…
Contact details:
E-mail – eneni.oduwole@gtbank.com
Tel.: 234-8033045896
Eneni Oduwole - NIFEx USA, 2013

14. References
• Afrinvest Special Report on Nigerian Banking
Sector – July 2013
• World Bank Reports on Nigeria
• CBN Reports
• This Day Newspaper
• www.nipc.gov.ng
• www.indexmundi.com
Eneni Oduwole - NIFEx USA, 2013