The Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, said on Wednesday that Nigerian banks were still not in the league of ?jumbo? profit-making banks in spite of the fantastic figures they churned out annually as profits.
He said that the profits declared might appear ?big? but when compared with the amount that went into investment, they were discouraging.
Soludo spoke at a public hearing on ?Unethical practices in the banking sector,? conducted in Abuja by the House of Representatives Committee on Banking and Currency.
The committee, headed by Mr. Ogbuefi Ozomgbachi, had listed many alleged unethical practices such as high interest rates, refusal of banks to fund the real sector of the economy and high commission on turnover charges.
The committee also noted that the number of dormant accounts was rising without measures being taken to address it; that banks failed to remit withholding tax; and also frowned on the ?policy of setting ridiculous deposit targets for staff, especially the females.?
The Association of Senior Staff of Banks, Insurance and Financial Institutions, in a memorandum to the committee, also complained that corporate pimping, exploitative charges, violation of labour rights and out-sourcing of staff were on the increase as banks searched for profits.
The CBN governor, however, said that while banks were in business to make profit, the profit being made by Nigerian banks was not impressive.
He compared the situation in Nigeria with an investor who invested N200bn in a business and ended up with about N20bn profit.
Soludo added, ?Benchmarked against other sectors of the Nigerian economy, or against banks in other countries of the world, Nigerian banks cannot be said to be earning jumbo profits.
?The profits of individual banks may appear big in absolute terms but scaled by the size of their shareholders? funds, we still have a long way to go.
?In my view, the profits are yet to come, compared with the sheer size of the actual capital investment.?
The CBN governor stated for instance that, between 2006 and 2007, the profit before tax of some banks ranged from N1.119bn to N23.228bn, while the return on capital was between 4.50 per cent and 33.61 per cent.
Soludo also reacted to complaints that interest rates in Nigeria ranked among the highest in the world, saying that it was a matter to be determined by the competitive nature of an economy and the structure of the banking system.
He claimed that though the cost of doing business in Nigeria was high amidst high government spending that put pressure on inflation, ?interest rates in Nigeria are not the highest in the world.?
According to him, in Nigeria, inflation rate was about nine per cent, but prime lending rate was about 16 per cent.