Service Delivery in Nigerian Banks After Consolidation
In a paper titled “Financial System Strategy 2020 – The Next Development Threshold”, (whatever happened to “Vision 2010”, you might ask?), at the Nigeria Television Authority’s 2nd National Lecture Series, the Central Bank Governor, Professor Chukwuma Soludo was recounting the “dividends” of recapitalization and consolidation, the most popular reform in the thirteen-point reform agenda for the financial service sector. According to him, the Nigerian banking industry is the fastest growing in Africa. Some of the already visible benefits of the regulatory-induced consolidation exercise are the “emergence of 25 strong and reliable banks, the soundest the banking sector has ever been, with no unsound bank and that the 25 banks now the size of the first and the second largest bank in South Africa combined”.
He wanted us to compare this achievement with the situation before the recapitalization exercise, when, according to him, the size of all the eighty nine banks existing at the time were not up to the size of the number one bank in South Africa, ABSA (Amalgamated Banks of South Africa). It must be admitted, however, that very little has been heard of from some of the 25 banks since the expiration of the recapitalization exercise in December 2005 – you hardly even read about them in the pages of newspapers!
The governor continued: “20 out of 25 Nigerian banks are now in top 100 in Africa, and indeed, 17 out of top 40 and four in top 10. Expect 20 out of 25 Nigerian banks in top 1000 in the world by end of 2006 (there was none in 2003)”. Other benefits of the financial service sector reform, according to the governor, included growth in assets, deposits, credit, profitability and network of branches. Hear him, “since 2004 astounding performance on capital adequacy and liquidity ratios is good, size of non-performing loans as percentage of total loans declined significantly. The banking sector is the dominant sector in the Nigerian Stock Exchange (NSE) and indeed is the key driver of the recent phenomenal growth of the exchange”. As the statistics show, the performance of some of the banks in this area has deteriorated of recent, suggesting that the investing public are still watching the industry with some skepticism or outright suspicion.
Professor Soludo also mentioned other progress made in the banking sector which included “zero tolerance to infractions and poor rendering of statutory returns, transparency, accountability and new corporate governance framework, re-alignment of incentive structure away from rent-seeking and dependence on pubic sector deposits and trading in forex, and efficient financial intermediation”. He also mentioned that the apex Bank was awaiting a survey on whether the consolidation exercise has created more job opportunities in the industry, just as another survey reported that there was increase in the banks’ branch network.
Interestingly, the CBN governor left out non-performing areas of the banks post-consolidation such as share price, poverty alleviation, SMEs, sectoral allocation, and legacy issues like non-performing risk asset and outstanding sundry and suspense debit items. These figures definitely ran into billions in the books of all the banks and the Asset Management Company the apex bank proposed to address these thorny issues is yet to take off.
At the end of the marathon speech, more than half of the audience gave the governor a well-deserved standing ovation for the good presentation.
There was no doubt the “dividends” the governor identified were encouraging and sweet to the ears, but the fact of the matter is that transacting banking business with our banks is still a nightmare in Nigeria today.
The banks’ banking halls are still congested, long queues exist thirty days in a month, transfers are always delayed, customers still experience system downtime, and withdrawals (either through ATMs or across the counter) are a nightmare, not to mention credit processing and account opening.
Even some of the banks’ CEOs or their representatives that were called upon to respond to the governor’s long speech missed the point as they only concentrated on picking holes in the 2020 Vision Strategy, avoiding the present situation on service delivery in the banking halls of the banks. Of course, I did not expect them to shoot themselves in the foot!
The summary of it all is that it appears the banks are declaring mind-boggling figures as Profits Before Tax (PBT) and mobilizing deposit liabilities at the expense of both suspecting and unsuspecting customers. Beyond the attractive figures, what the consolidated banks would have as a sharp competitive edge over their competitors to guarantee market dominance is how efficient their service delivery is and how customer-friendly their range of products is.
Some of the reasons for the recapitalization was to increase the capacity of the banks to develop the economy, eliminate the “distress-syndrome” that characterized the banking industry, re-position the banks for global challenges, and restore depositor confidence. There was no doubt the banking sector was badly in need of reform – the regulatory-induced recapitalisation and consolidation was the only available drastic option given the prevailing circumstances.
Even though some of the mergers are of strange bed fellows and some seized the opportunity to highjack some banks through questionable circumstances, hostile takeovers and acquisitions, it also provided an opportunity for some “equals” to come together to achieve synergies through consolidation. In other words, the recapitalisation and consolidation exercise turned out the good, the bad, and the very ugly; only time will tell whether the “dividends” as enumerated by the CBN governor and the mind-boggling figures the banks present in their financials are no fluke.
Poor service delivery has been the bane of the banking industry long before re-capitalisation. While the era of “arm chair banking” is extinct, that of “tally number and mat” is still with some of the banks after consolidation. That is why I have my personal opinion about the benefits of the re-capitalisation exercise the CBN governor took a long time to enumerate, avoiding what the customer is today facing in the various branches of our banks one year after.
Scholars have described “service” as “any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything”. Therefore service delivery is simply the channel through which a bank sells its various products, either through e-banking or across the counter at a mortar and brick outlet. The “intangibility” is the customer’s expectation that the bank meets by selling a draft to him, honouring his bill of payment on demand, accepting his cash deposit, or effecting a transfer, among others. The conclusion is that even with recapitalisation and consolidation, most of the twenty five banks have failed in this essential medium that is actually behind the figures they declare year in, year out, leaving their customers with mouths agape.
The reasons for this poor service delivery among the banks are legion, and as we shall see below, some of them are deliberate and calculated as strategies to maximize the bottom-line and minimize overhead costs.
One of the reasons for the poor service delivery by some of the banks is congestions and long queues. Most of the banks’ banking halls are always congested throughout the month. This situation leaves the halls stuffy, untidy, and choking as the air conditioners have been rendered ineffective. Passing in front of some of these banks before they open their doors to the customers at eight o’clock one will see customers blocking the main gate – some even form queues from there. If you will be patient enough for the gate to be opened you will see some potential Olympic 100 meters sprinters in front, all in an effort to reach the service counter before others.
The customers are doing this simply because they know what they would go through if they missed that “front-runner” opportunity. At a peak period withdrawal or cash deposit may take you three hours on the average, and God help you if you present a “third-party” cheque! This situation brings us back to the “tally number and mat” days as one of the banks in those days tried to differentiate itself from other banks in cashing their customers’ cheques.
The congestions in the banking halls create long queues that even make the queue markers provided in the halls useless. Sometimes these queues extend outside the halls, creating a filling station or pension-payment outlook. That is why some companies that are conscious of their man hours are always complaining that their staff capitalize on such congestions to attend to their personal errands since the delays customers experience in banking halls are well known to all levels of workers.
It is worth mentioning that some of the serious banks have realized the negative effect of this and are already expanding their banking halls to accommodate the increase in customers. On the other hand, some of the banks with retail banking strategy are yet to realize the need for them to expand the banking halls of their branches to make the environment more comfortable for their teeming customers.
Even as some of the consolidated banks have made serious efforts to integrate by adopting a common banking application software customers have continued to experience incessant system down time for on-line services such as withdrawals, deposits and transfers, among others. These banks only enjoy placing adverts daily claiming that they are on-line, real-time across their branch network in the country.
In some of the banks a simple cash deposit from one branch to another at different locations takes as long as two weeks! As if this is not inconveniencing enough, some of them have the un-professional habit of cutting short their banking hours on the last day of the month to run end of month processing – they enjoy paying lip service to “best practices” in banking in the twenty first century.
A robust and effective network system has been identified as one of the challenges the consolidated banks would grapple with to guarantee efficient and timely service delivery. There is no doubt incessant system downtime in the banks is affecting business as opportunities are changed or lost, margins shrink, customers’ integrity and confidence are eroded, and re-order levels of goods are not met, among other things.
Staffing in most of the banks is inadequate. As a result of this, a staff may be overloaded with jobs meant for three staff or more. This becomes obvious when the same staff is called upon to attend to a customer at the point of delivering a service on another product to a different customer. “No company can expect to beat the competition unless it has the best human capital and promotes these people to pivotal positions.”
When you come close to such staff you would discover that they are nonchalant, de-motivated, frustrated, un-interested, and therefore just hanging on before another job opportunity comes up. Such staff must have sat for an aptitude test on another job opportunity or even attended interview and are awaiting the result. When they eventually leave they hardly give one month’s notice – they make sure that they leave an equivalent of a month’s salary in their accounts. This explains why some of the banks recorded or are still recording high percentage of staff attrition. It will be interesting to see the result of the employment opportunities the consolidation brought about, as the CBN governor seemed to suggest.
The only reason one could decipher why the banks allow this unhealthy situation in spite of the mind-boggling profits they declare, is because they are insensitive to their customers’ satisfaction and happiness – maximize income and minimize overhead cost, even at the expense of service delivery. Is it because we continue giving the lame excuse that our financial system is “under-developed”? How will it develop and attract global confidence if the key players in the system are allowed to operate the way it suits them?
Closely related to the inadequate staff situation is the shortage of experienced staff. As most of the banks prefer cheap labour through out-sourced companies or applicants with qualification such as OND, the branches lack experienced and tested staff capable, for example, of credit analysis, simple routine investigation, reconciliation, and budget preparation and analysis, among others. As a result the quality of their job is sub-standard, customers’ expectations are not met, error rate is high, and the operational risk of the branch is pushed beyond a tolerable limit.
Even where training sessions are organized, more often than not, they lack depth, the consultants hired to deliver lectures are out of tune with the realities of the bank, and the duration of such courses are too short for a result-oriented performance.
Service delivery has been an important issue among banks even before consolidation as it is the bedrock of banking. With consolidation, the expectation on the part of the banks is higher with benefits from synergies, human and material resources, and information technology.
However, what customers experience with the banks so far has been disappointing. Issues in service delivery like the ones enumerated above will be some of the banks’ undoing in the next few years.
The regulatory authorities, namely CBN, NDIC and SEC, must closely mark the banks so as not to create room for complacency that will jeopardize the banking industry again. The ritual “facts behind the figures” that the banks are fond of presenting to the unsuspecting customers, investors and the general public, should be well sucritunised by these regulatory authorities. By the way, we are yet to hear the outcome of the capital verification exercise embarked upon by the CBN after the recapitalization exercise. Or is it still on-going? With the disappointing discoveries in Lever Brothers financials a couple of years ago and the recent startling revelations in the financials of Cadbury Plc, the regulatory authorities, as a matter of urgency, need to look deeper into the mind-boggling figures in terms of deposit liabilities and profit before tax that the banks declare, relegating the issue of service delivery to the background.
It will be interesting to see the result of the survey of the impact of consolidation on employment as the CBN governor seemed to be highly optimistic. From all indications, one outcome is certain – the consolidation has created more jobs! The question then will be: what type of jobs? Do you call replacing a management staff with an officer, or an officer with an OND outsourced staff job creation? Is it job creation in real terms, or just mere horizontal or vertical movements within the industry?
Ironically, too, the banks have continued to roll out various products, from the convenient to the absurd all in an effort to win customers. Funny enough most of these products are only appealing in the pages of newspapers and on the television screens for the simple reason that the banks do not have the qualified manpower to drive them. Try them in some of the banks and you will learn the meaning of “the taste of the pudding is in the eating” the difficult way! They only lure us with ridiculous promotions if we choose to do business with them. Most of the banks are in the fore front of making us overnight “millionaires” through raffle draws.
Meanwhile, we have noticed with appreciation the rate at which Automated Teller Machines, ATMs, are being deployed at both the branches of the banks and other outlets like filling stations, shopping malls, restaurants, multinational companies, etc. However, customers of the banks that want to avoid the congestions and long queues at the branches are already being frustrated by the machines; it is either the machine jams due to lack of clean notes, or the machine will recognize the withdrawal by debiting the customer’s account without releasing the cash. Before the ATMs are fully deployed this service delivery has already started encountering challenges.
The regulatory authorities must beam their searchlights to the area of service delivery as much as they pay attention to the figures the banks submit to them. Otherwise customers and investors alike will continue to suffer in the hands of some of these banks that have relegated service delivery to the background.
The banks on their own part must realize that efficient service delivery is the gateway. It will be the dominant concern of their customers in a couple of years after all the banks will have overcome post-consolidation challenges. Being efficient to their top hundred or whatever number they use and leaving the majority small group that makes up their mass market is suicidal. The mass market groups are the ones that sell or destroy your bank. While you keep the top group in the comfort of your reception areas and managers’ offices to serve them and follow up their transactions to completion no matter the obstacles or challenges, at the end of the day the mass market group will erode your goodwill through negative comments and sharing their bad experiences at your branches with others any time your bank is mentioned.