COVID-19 and Nigerian Banks By Reuben Abati

The COVID-19 pandemic has reshaped the entire world – the future of everything and the world of work, but perhaps the most visible effect of this disruption is most felt in the financial services sector, the markets and the global economy. In this regard, the banking sector is one of the most gravely impacted. It would be useful to reflect a little on the extent to which this is so in Nigeria and the meaning of the multi-dimensional implications, and hopefully, someday, someone will take on the task of analyzing in greater detail, bank-customer relations and the role of the banks in the time of COVID-19 pandemic in Nigeria. I seek to provide a preliminary sketch, throw up a few posers and make some observations.

When on March 29, Nigerian President Muhammadu Buhari announced the imposition of an initial two-week lockdown on Lagos and Ogun States and the Federal Capital Territory, the three parts of the country that had then presented a higher COVID-19 sero-prevalence, he exempted healthcare workers, security personnel, pharmaceutical companies, oil company workers, the country’s food supply chain, the media, and other essential workers. His speech made no mention of the banks.

This omission was addressed the following day, March 30, by the Minister of Finance, Budget and National Planning and the Governor of the Central Bank who further informed the public that Nigerian banks/money markets would also be expected to provide essential services during the period of the lock-down. Obviously, during the period of the lockdown, Nigerians would need money either in terms of access to cash, or the completion of pending transactions, transfers, payments and savings. In April, the Federal Government further extended the lockdown by another two weeks and yet by another week, towards the end of the month. As it turned out, other states of the Federation relying on Section 8 of the Quarantine Act and enabling state laws also enforced their own versions of the lockdown.  Effectively, Nigeria became part of the global response to COVID-19. People were asked to stay at home, stay safe, follow guidelines, and avoid the risk of infection and transmission. It all happened so suddenly, so unexpectedly.  Nobody was prepared for it. There were reports of harvests of death in Europe, Asia, and the Americas. Fear gripped the world. Panic reigned. People asked the inevitable question: will humanity survive given the virulence of the virus? As people stayed at home and off the streets, they still needed to survive. Nobody had withdrawn cash or saved towards COVID-19. The importance of access to the banks and to cash was writ large; earning an income became a matter of life and death for households and businesses. The world thus found itself in a pre-historic Darwinian situation where only the fittest survived. The banks in Nigeria were not of much help. Their rating in terms of customer relations/support fell.

The banks simply refused to open their doors to customers. The few that pretended to do so in Lagos, provided only skeletal services. People were advised to make withdrawals using Automated Teller Machines (ATMs), but most of these machines had no cash supply, and where they had, long queues could be seen daily, without anyone observing the physical distancing guidelines. Digital banking transactions, which had been touted as the new way of the world, proved difficult. If you went directly to an open branch, you would be kept waiting by a gate man who knew nothing about banking. He would return later to tell you that the officer hidden inside the banking hall would need to contact someone at the Headquarters. Many account officers who attended to the middle class were also under quarantine. Their phones were switched off. A major pillar of the banking business – making the customer happy, collapsed. The bankers took their own survival more seriously. The customer was no longer king! COVID 19 is the great destroyer of all known norms. It has shifted paradigms and turned the table against all known norms.

When on one occasion, I had cause to protest, I was told that the banks were also being careful. They needed to protect their staff. They would not allow customers to bring the virus into their banking halls.  They had also recorded quite a few cases of fraud during the lockdown. So does that justify the scarcity of cash at cash points and the epileptic e-banking platforms?  It will be recalled that the Central Bank of Nigeria introduced a Financial Inclusion Strategy in 2016, the objective of which was to promote electronic banking and mobile money transactions. This led to the increasing digitalization of banking transactions in the country and the emergence of such features as the use of POS, e-banking and payment service agents. Whereas this has been hailed as a progressive development, Nigeria remains far behind other countries like Kenya and South Africa, where a higher rate of financial inclusion has been recorded. Nigeria’s slow penetration rate in this regard was exposed by the COVID-19 lockdown and indeed in reality, Nigeria remains under-banked; its banking practices are still far behind.

For many subsistence workers whose survival depended on daily work, the banking situation was worse because these blue-collar workers live or suffer relative to their daily hustle. Whatever work that linked them to the banking value-added chain was cut off.  The extended family community that often helps to bridge the gap in Africa, was also adversely affected. Nigerians in Diaspora whose financial remittances constitute a major source of oxygen for local households and the economy also ran into troubled waters. In every sense, Nigeria’s financial sector faced a severe respiratory crisis with corresponding implications for economic growth and social stability. It didn’t take long before Nigerians especially the youth, became restive. A social crisis loomed large in the horizon. In Lagos and Ogun States, neighborhoods were attacked by those who called themselves “One Million Boys”. The rich became afraid of their own shadows. Nigerian banks had to take extra security measures. Organized Labour and the Organized Private Sector began to push the argument that the lockdown would not work in Africa, and that it was better government re-opened the business space.

On April 27, it may be said that the Federal Government succumbed to pressure when in a nationwide broadcast, President Muhammadu Buhari announced a “phased and gradual” easing of the lockdown in the Federal Capital Territory, Ogun and Lagos States, with the same advice for other parts of the Federation subject to their own peculiar circumstances with regard to COVID-19.  The responses were varied. Ogun State chose to defer its own relaxation of the lockdown by a week, having joined a week later than the FCT and Lagos State. On May 17, the state announced yet a further extension of the lockdown. Other states of the Federation again took their cue from the Federal Government in due course. Delta, Ebonyi, Katsina, and Borno states have since allowed mosques and churches to re-open. Kaduna state and others have also announced relaxed measures. Across the country, a curfew remains in place from 8 pm to 6am. Inter-state travel has been banned, even if there are concerns about the movement of the almajirai across state borders with many of them testing positive for COVID-19. In the face of new guidelines, banks also opened their doors.

But even then, bank customers are still unhappy, particularly in Lagos and the Federal Capital Territory. The banks remain an index of the people’s frustration. From May 4 to date, the premises of virtually every bank has been a war zone. Customers besiege the banks daily, without caring about either physical or social distancing rules. They sit outside or they queue up in a long, snaky, stretch. The people seem determined to die, if possible, just to gain access to their bank accounts. The queues are long. The desperation is palpable. A few banks have since provided tents and chairs in front of their branches. I won’t be surprised if in the third week of the easing of the lockdown, some Nigerian banks also begin to provide mattresses and mats!. Those queues may not disappear unless the banks open up more branches and pay better attention to customer care.

Just how serious this is, was brought to the fore in a now popular, and sensational video, showing the Chairman of Ikwerre Local Government in Rivers State, Samuel Nwanosike who led a mini-task force to a branch of the United Bank for Africa (UBA) to disperse a crowd of bank customers, who did not wear face masks, and did not observe physical or social distancing.  “Do you want to kill my people?”, Nwanosike asked the bank officials, angrily. “Who is the bank manager here?… Who is the second in command?” One bank official told him: “The people are not listening to us”. There may be a lot to learn from this as all businesses adjust to a “new normal” occasioned by a capricious virus.

The banks and their sympathizers insist however, that they do not deserve any blame, vulnerable as they are like every other business, without any measurable support from either government or their regulator, and yet they continue to play their part as responsible corporate citizens. There is probably a point here: it is on record that the banks and their CEOs enthusiastically joined the Private Sector Coalition Against COVID-19 known as CA-COVID which has so far raised over N27 billion. It is part of the burden that banks face that many of their customers think that the donations should have been given to them directly since the banks have their bank accounts and verification numbers. The banks were accused of seeking tax reliefs, and their CEOs, of promoting their own individual egos.

But perhaps the biggest challenge for Nigerian banks, and the extent of their vulnerability, emerged when a tele-conference video was leaked, showing the CEO of Access Bank, Herbert Wigwe, in which he announced that Access Bank was going to cut staff salaries and retrench staff as part of its business continuity and sustainability plans in the context of a public health crisis that has crippled business. The leakage of the Access Bank video was met with outrage. Wigwe was called names. The Bank was abused. A few days later, the Central Bank of Nigeria in response to this drama, announced that no bank is allowed to cut any job without its express approval, and that indeed job cuts in the banking sector are forbidden at this time. Access Bank denied the video that was in circulation. Stakeholders may accuse Nigerian banks of lapses in the face of COVID-19 but the truth is that the attack on Wigwe and Access Bank was totally unwarranted. In my view, Wigwe showed leadership and was honest.

The only “COVI-diot” in the Access Bank matter is the disloyal staff who leaked the content of an in-house conversation. No serious organization should condone that kind of treachery. Wigwe says salaries will be cut and branches will be rationalized. Last year, Access Bank acquired Diamond Bank in one of the biggest Merger and Acquisitions that the Nigerian banking sector has witnessed in the past decade. Since that merger, Access Bank has not rationalized staff or branch networks. It simply inherited all the branches and staff that belonged to the defunct Diamond Bank resulting in a situation where you could have up to three branches of the same bank on the same street. Access Bank may have chosen the wrong time to announce its business re-design plan, but it is confronted with a reality that every business would have to deal with. But the question should be asked: Is it part of the work of the regulator to dictate cost and business models?

Before COVID-19, one of the problems Nigerian banks faced was that of over-regulation by the Central Bank. Regulatory high-handedness hampered the capacity of the banks. Many of the banks also faced the threat of deteriorating credit quality due to over-exposure particularly to ailing sectors – oil and gas and the power companies. COVID-19, collapsing oil prices and naira devaluation turned the crisis in the banking sector into a triple whammy. Micro-finance Banks are losing over N45 billion uncollected loans. To all intents and purposes, it is part of the role of the Central bank to protect the banks and stave off the possibility of corrosive stress. Elsewhere we have seen Central Banks intervening to protect the banking sector. The Central Bank of Nigeria has made useful interventions in other areas– to protect SMEs, pharmaceuticals, loans, manufacturing sector, agriculture… but it has done little to strengthen the capacity of the banks to survive as business.

The plug on job cuts, or the furloughing of bank staff is at best the postponement of the evil day. Bank staff as well as other employees must prepare for the worst. Many businesses will end up as part of the COVID-19 death rate statistics. Jobs will die too. Previous pandemics posted a V-shaped recovery trajectory. There are no such guarantees this time around. A U-shaped recovery scenario may even be optimistic. Many economies will sink in an L-shaped format. And that is where leadership matters. What should leaders do in relation to economic risks and the structural legacy of COVID-19?  This is the kind of rigorous thinking we need to see instead of the same government that wants to implement the Oronsaye Report, cut cost and ensure economic sustainability telling banks and other businesses that they cannot cut costs. The mixed messaging that has characterized Nigeria’s management of the COVID-19 tragedy so far points to serious issues of governance.