By NKIRUKA NNOROM

Central Bank of Nigeria, CBN, has approved the adoption of sustainable banking principles by banks, discount houses and Development Finance Institutions (DFI) in the country.

The CBN in a circular with reference number, FPR/DIR/GEN/01/030 to all banks, discount houses and DFIs, the apex bank said the agreement to adopt the principles was reached at the bankers’ committee retreat held two months ago, while directing all financial institutions to ensure full implementation of the principles and guidelines.

Mr. Chris Chukwu, Director, Financial Policy and Regulation Department, CBN, who signed the document, said that approval to adopt the principles was in furtherance of the bankers committee’s commitment to deliver positive development impacts to the society while protecting the communities and environments in which financial institutions and their clients operate.

In order to enable effective implementation of the principles, Chukwu explained that the apex bank would issue five different documents to the financial institutions.

The five documents, according to CBN, include the Nigeria Sustainable Banking Principles, the Nigeria Sustainable Banking Principles Guideline Notes, Nigeria Sustainable Banking Principle Power Sector Guidelines, Nigeria Sustainable Banking Principle Agriculture Sector Guidelines and the Nigeria Sustainable Banking Principles Oil and Gas Sector Guidelines.

He said, “Successful implementation of these principles and guidelines will require banks, discount houses and development finance institutions to develop a management approach that balances the environmental and social (E&S) risk identified with the opportunities to be exploited through their business activities. E&S risk management would ensure stronger overall risk management for the concerned institutions.

“The adoption of the principles will no doubt enhance the adopting institutions’ financial success over the longer term while ensuring that they remain environmentally and socially responsible.”

He noted that incentives would be provided to those institutions that take concrete measures to embed the provisions of the principles and guidelines into their operational, enterprise risk management and other governance framework.

He, however, stressed that banks, discount houses and DFIs are expected to submit regular report to the CBN in line with reporting requirement that would be made available to the industry. The report, according to the CBN, would enable it track the progress of the implementation and adherence to the principles and guidelines.