Nigerian Banks under the umbrella of the Bankers’ Committee have resolved to provide funding to critical sectors of the economy in a bid to ensure sustained economic development in the country by floating development bonds.
This resolution was made at the Bankers’ Committee national retreat focused on “The Role of the Nigerian Financial System in Economic Development” held in Enugu recently. The Committee, chaired by Mallam Sanusi Lamido Sanusi, the Governor of the Central Bank of Nigeria, comprises the Deputy Governors of the Central Bank and Chief Executive Officers of Deposit Money Banks.
By this resolution, banks plan to float development bonds to finance infrastructure in critical areas such as power, agriculture, transportation and small and medium scale enterprises in the country.
On the significance of the initiative, Mallam Sanusi Lamido, the Governor of the Central Bank of Nigeria and Chief Executives of banks collectively emphasized the critical role financial institutions play in national development; noting that unfortunately, the current structure of lending to the Nigerian economy was such that the bulk of aggregate credit is channelled mainly to financial market operators and oil traders to the neglect of key aspects of the real economy such as power, agriculture, transportation, Small and Medium Enterprises (SMEs) among others.
The Enugu Bankers Committee national retreat is further to the decision of the apex bank and the banks at the 296th Bankers’ Committee meeting on the need for the financial services sector to hold a retreat to explore collaborative approaches to support the transformation of the critical sectors of the Nigerian economy.
The retreat was attended by international and local experts on project finance and infrastructure development, senior government officials, the CBN Governor, his deputies and all the Chief Executives of Money Deposit Banks, Development Bank and Discount Houses.
Besides floating bonds, the CBN and the Chief Executives of banks in a communiqué issued after the retreat also resolved to revitalize the investment function of banks with focus on packaging structured infrastructure finance deals as well as invest in targeted capacity building for investment bankers. Also, it agreed to develop guidelines on asset allocation and investment of pension funds, propose a reduction in charges for establishing companies to the Corporate Affairs Commission to encourage local entrepreneurship and improve public and private sector capacity for infrastructure concessions.
The Committee also requested the CBN Governor to seek Federal Government approval for the required legislation and regulatory changes concerning its economic revitalization activities, present recommendations on the financial sector intervention to the National Executive Council (NEC) and present a report on the financial sector intervention to the Federal Executive Council (FEC) for effective collaboration among the major parties.
As a demonstration of its commitment to the outlined developmental programmes, the Bankers’ Committee bestowed on the Central Bank of Nigeria the responsibility of monitoring activities of financial institutions and other operators to ensure adherence to the action plan and prepare and provide monthly implementation progress reports to the Bankers’ Committee.
Dr. Shamsudeen Usman, Minister of National Planning & Vice Chairman, National Planning Commission presented a paper on Vision 20:2020 / Expectation of the Banking System. The minister, in his presentation, specified that there are various opportunities for the banks to participate in the development of the economy. He noted that there was an existing information gap as people were not adequately informed on definite steps being taken by the government to address the current situation.
The objective of his presentation was to define the government’s expectations of the banking system with respect to Agriculture, Food, Security, Infrastructure Concession Regulatory Commission (ICRC); Oil and Gas, Power; Works: Roads, Housing, Transport; the Niger Delta and regional development, land reform and mortgage market development; legal framework and reforms and leveraging on support of development partners.
Dr. Usman discussed the Vision 20: 2020 programme and stated that it is an ambitious but reasonable agenda of action emphasizing discipline, consistency and harmony of policies, priorities and programmes over the long_term, to achieve high levels of investment and growth that is people_centered, pro_poor and all_inclusive. Vision 20: 2020 provides an avenue to define the action that is required to achieve aspirations of growth and development.
Public sector funding is insufficient to achieve the desired transformation and complimentary private sector funding is critical for success. It is, therefore, the role of the financial sector to mobilize funds for investments in the real sector of the economy.
The minister emphasized the need for collaboration to drive future efforts by banks and the need to bring back creativity into banking in Nigeria. He stated that there were various pieces of new laws and amendments to existing legislations under consideration. He said the banking industry should act as a lobby group and come up with suggestions for any legislative changes required by the industry.
Addressing participants at the retreat, Mallam Sanusi Lamido Sanusi, the Governor of the Central Bank of Nigeria reviewed the rapid credit growth rate in the banking sector post_consolidation which reached a peak in 2007/2008. He noted that credit was not channelled to the real sector but concentrated on the stock market and Oil and Gas sector.
He stated that the Banking sector was affected by a number of factors since consolidation, which include lack of focus on economic and macro_prudential management, major failures in corporate governance, lack of investor and consumer sophistication, inadequate disclosure and transparency, uneven supervision and enforcement, structural and institutional weaknesses in the business environment.
The Governor tasked participants on the need to identify specific initiatives and define action plans that will facilitate their actualization. He also harped on the need for participants to assign roles and define the process for implementation and monitoring of the identified initiatives as well as determine required involvement in the programme, including partners/sectors, resource requirements, limiting factors, industry gaps _ skills, regulation, etc and process for rectifying and encouraging collaborative competition in the interest of long_term survival of industry and country.
In a separate presentation, Mr. Aigboje Aig_Imoukhuede, Managing Director and Chief Executive of Access Bank Plc who chairs, the Sub_Committee on Economic Development, reviewed the context and background of the retreat, including the initialization of the process by the CBN Governor at the 296th Bankers’ Committee meeting.
Aig_Imoukhuede highlighted the objectives of the retreat as follows: define a clear strategy for a more deliberate role for the financial sector in the nation’s economic development with emphasis on power, transportation and agricultural sectors, identify specific initiatives and programmes to address impediments on our way to achieving the strategy and identify actionable items for the financial system that can be with or without the intervention of government.
Given the concrete achievements made, the retreat will now be an annual affair to ensure long_term sustainability of the initiative.