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CBN moves to address high IT spend in financial institutions

By on March 27, 2015

The Central Bank of Nigeria (CBN) has expressed worry about the high cost of application and utilisation of Information Technology (IT), in driving activities in the financial services industry in Nigeria.

The apex bank is of the view that IT utilisation lags global leading practices and is limiting banking operating efficiency, cost effectiveness, regulatory information and risk management practices.

CBN’s Head, Shared Services, Mr. Chidi Umeano, stated this while addressing a cross section of senior IT, Audit and Control executives, predominantly from the banking and IT sectors, at the 60th edition of the Digital Jewels’ Information Value Chain Forum held in Lagos recently.

In a presentation titled: “Demystifying the CBN IT Standards Blueprint”,

Umeano disclosed that IT spend in the Nigerian financial services industry, as a proportion of overall operating expenses, was quite high and on the increase.

He stated that commensurate value had not been realised from the INVESTMENTS as a result of several challenges. According to him, these included complex, duplicate, non-standard and costly processes; non-standard systems and infrastructure; inefficiency of electronic information exchange and data integrity issues.

In order to address the identified gaps and provide guidelines for application and utilisation of IT, the CBN defined some industry IT standards that will articulate and provide a point of reference for the utilisation of IT among financial institutions.

Umeano said prior to the drive by CBN on IT standards, there were no defined IT standards driving interoperability, information exchange, enterprise architecture, and system integration, among others in the industry. The implications were high cost of integration as banks’ IT infrastructure could not interact with each other or other relevant third parties without the implementation of dedicated interfaces.

“Thus banks are forced to maintain different interfaces to different service providers thereby increasing cost of service, while interoperability and automation to drive straight through processing cannot be achieved leading to islands of automation but no integration,” he noted.

He further stated that the quality and maturity of IT could not be ascertained having no reference point to benchmark, while there is poor customer experience in the use of bank’s IT infrastructure due to absence of a minimum IT standards driving governance, service management, and infrastructure and ad-hoc implementation of CBN regulatory policies and plans around IT.

Umeano however pointed out the benefits of IT standards to the industry which included increased up-time/availability of banks leading to increased cost savings, establishment of a reference point for objective assessment of the IT function leading to improved IT performance measurement; improved data integrity and electronic information exchange; increased efficiency and productivity of staff due to interoperability of IT systems; business continuity/recovery and reduced risk of prolonged downtimes and improved data security assurance to customers leading to increased customer confidence
He explained that Nigeria was not the only country where the Central Bank had to enforce or drive certain IT standards within its local industry. He listed other countries involved, such as Australia,

Bahamas, Brazil, China, Croatia, Malaysia and the United Kingdom.
Managing Director and Chief Executive Officer of Digital Jewels Limited, Mrs. Adedoyin Odunfa, who presented ‘An Industry Status Report’, provided a categorisation of the CBN standards blue print.

She also provided a cross-referencing of standards to indicate those closely associated and provided guidance on preferred routes to attain certification to multiple standards. For organisations who have more than two management systems in place, she recommended an integrated approach though the PAS 99, which is the world’s first specification for integrated management systems. According to her, it streamlined operational activities, aligned all common standard requirements and cut the cost of separate audits and administration. Its benefits include less duplication, lower operating costs, simplification and easy to update.