The Nigerian banking sector, a critical component of the nation’s economy, is operating within a complex and dynamic business environment.
This environment is shaped by a confluence of global economic shifts, domestic regulatory frameworks, technological advancements, and evolving customer expectations.
Understanding these challenges and opportunities is paramount for sustainable growth and development within the sector.
While the sector has shown resilience and adaptability, several systemic issues continue to impede its full potential, particularly when compared to more developed banking systems in Western countries.
These challenges are not merely operational; they are deeply intertwined with the broader socio-economic context of Nigeria.
The need for a fundamental transformation in operational efficiency, customer service, and strategic direction is more pressing than ever.
One of the most significant operational challenges facing Nigerian banks is the issue of Turn Around Time (TAT). This refers to the time it takes to complete a banking transaction or service, from initiation to completion.
In many instances, TAT in Nigerian banks is excessively long, leading to customer frustration and inefficiency.
This is particularly evident in areas such as loan processing, account opening, and even routine transactions.
The reasons for this are multifaceted, including manual processes, bureaucratic bottlenecks, inadequate staffing in certain areas, and a lack of seamless integration between different departments or systems.
This protracted TAT directly impacts customer satisfaction and can lead to lost business opportunities.
In Western countries, significant investments in technology and streamlined processes have drastically reduced TAT, offering customers faster and more efficient services.
The disparity highlights a critical area for improvement in the Nigerian banking sector.
Another pervasive issue is the perception and reality of excessive charges on customer accounts.
While banks are commercial entities that need to generate revenue, the multitude and often opaque nature of charges can erode customer trust.
These charges range from account maintenance fees and ATM withdrawal fees to SMS alerts and transfer charges.
The lack of clarity regarding these charges and their impact on customer balances can lead to dissatisfaction and a feeling of being unfairly exploited.
In many Western countries, there is greater transparency regarding banking fees, with clear fee structures and often lower charges for basic services, particularly for individuals.
The Nigerian banking sector needs to re-evaluate its fee structure, ensuring transparency and fairness, and exploring alternative revenue streams that are less burdensome on customers.
Customer Relationship and satisfaction , a cornerstone of any successful service industry, remains a significant challenge for Nigerian banks.
While some progress has been made in recent years with the introduction of digital channels, the overall customer experience often falls short of expectations.
This is linked to the issues of high TAT, excessive charges, and also extends to the quality of customer service provided.
Long queues in banking halls, unhelpful or poorly trained staff, and difficulties in resolving customer complaints are common occurrences.
The lack of a truly customer-centric culture within some institutions contributes to this problem.
In Western banking systems, there is a strong emphasis on personalized service, proactive problem-solving, and leveraging technology to provide seamless and convenient customer experiences.
Nigerian banks need to invest in training their staff, empowering them to resolve issues effectively, and implementing robust customer feedback mechanisms to continuously improve service quality.
The pursuit of “humongous targets and profitability figures” without sufficient consideration for environmental benefits is another critical issue.
While profitability is essential for the sustainability of any business, the relentless focus on short-term financial gains can sometimes come at the expense of ethical considerations, sustainable practices, and a holistic understanding of the bank’s role in society.
This can manifest in aggressive sales tactics, pushing products that may not be in the best interest of the customer, and a lack of investment in environmentally friendly initiatives.
In Western countries, there is a growing emphasis on Environmental, Social, and Governance (ESG) factors in the banking sector, with banks increasingly integrating sustainability into their core operations and investment decisions.
Nigerian banks need to adopt a more balanced approach, recognizing that long-term profitability is intertwined with responsible and sustainable practices.
Network challenges and the non-automation of services further exacerbate the operational inefficiencies and hinder customer experience.
Unreliable internet connectivity in some areas, coupled with a lack of full automation of many banking processes, leads to system downtimes, slow transaction speeds, and the need for manual intervention in many instances.
This contrasts sharply with the highly automated and interconnected banking systems in Western countries, where transactions are often processed instantaneously and services are available 24/7 through various digital channels.
Nigerian banks need to invest heavily in upgrading their IT infrastructure, ensuring reliable network connectivity, and automating as many processes as possible to improve efficiency and provide seamless digital services to their customers.
To address these challenges and capitalise on the opportunities presented by the evolving business environment, the Nigerian banking sector needs a multi-pronged approach focused on systemic improvements.
A key recommendation is a significant investment in technology and automation. Banks must move away from manual processes and embrace digital transformation across all aspects of their operations.
This includes implementing robust core banking systems, automating back-office processes, developing user-friendly mobile banking applications, full digitalization and leveraging artificial intelligence and machine learning for tasks such as risk assessment, fraud detection, and personalized customer service.
This will not only improve efficiency and reduce TAT but also provide a more seamless and convenient experience for customers.
Furthermore, exploring the potential of blockchain technology for secure and transparent transactions could offer significant advantages.
The focus should be on creating a truly digital-first banking experience that is accessible and reliable for all customers.
Another crucial recommendation is a fundamental shift towards a truly customer-centric culture.
This requires more than just offering digital channels; it demands a deep understanding of customer needs and expectations.
Banks should invest in comprehensive customer relationship management (CRM) systems to track customer interactions and personalize services.
Furthermore, there is a need for extensive training of bank staff, focusing on empathy, problem-solving skills, and a proactive approach to customer service.
Implementing effective feedback mechanisms, such as customer surveys and complaint resolution systems, is also essential for continuous improvement.
Banks should also simplify their fee structures, making them transparent and easily understandable for customers.
Exploring tiered fee structures based on customer segments and transaction volumes could be a way to ensure fairness and affordability.
The goal should be to build long-term relationships with customers based on trust, transparency, and exceptional service.
This will require a cultural transformation within the banking institutions, moving from a transactional focus to a relationship-driven approach.
Dr. Adeyemi Kayode Samuel is an accomplished professional with a Ph.D. in Business Administration and Management from Obafemi Awolowo University, with a research focus in Strategic Management, Corporate Governance, SMEs, Business Development, and Retail Growth and Expansion. With over 18 years of progressive experience in the banking sector, he has developed a strong reputation for driving growth, optimizing operations, and supporting businesses through innovative financial and strategic solutions. He is an Associate Member of Nigeria Institute Of Management, Nigeria Institute of Risk and Credit Management.
