By Babajide Komolafe
IT is two years to the end of the time frame for achieving the vision to make Nigeria’s financial system to be the safest and most diversified financial system among emerging markets supporting the real economy.
This time frame was set in 2006 when regulators and government agencies in the financial system, led by the Central Bank of Nigeria (CBN), developed the Financial System Strategy 2020 (FSS 2020).
The FSS 2020 vision was prompted by the prediction of Goldman Sachs that Nigeria is among 11 emerging countries that have the potential to be among the 20 largest economies by year 2020. The overriding objective was to develop and transform Nigeria’s financial sector into a growth catalyst and engineer Nigeria’s evolution into an international financial centre. In addition to this, FSS 2020 was designed to strengthen and deepen the domestic markets, enhance integration with the external financial markets; and promote sustainable economic development.
The task of implementing the vision was vested in the participating institutions including Nigeria Deposit Insurance Corporation, Securities and Exchange Commission, Nigeria Stock Exchange, National Insurance Commission (NAICOM), Pension Commission of Nigeria (PENCOM), Debt Management Office, Financial Reporting Council, Federal Inland Revenue (FIRS) and the Ministry of Finance.
To ensure effective coordination of activities under FSS 2020, an FSS 2020 Office was created domiciled in the CBN, led by the Deputy Governor, Corporate Services, and the Coordinator, Financial System Strategy (FSS) 2020, Alhaji Suleiman Barau.
What has been achieved?
The Nigerian financial system is still far from what was envisioned in FSS 2020 document. However, the commitment of the various participating institutions to delivering on its objectives has led to policy initiatives which have produced profound impact on the financial industry and the economy at large.
In the Mortgage Sector, a robust secondary mortgage has been created with the Central Bank of Nigeria and the Mortgage operators clearly streamlined which has led to the establishment of the Nigeria Mortgage Refinancing Company (NMRC). Also, the Uniform Underwriting Standard which was nonexistent has now been codified and introduced in the Mortgage Industry to regulate their practice. In addition, the framework for the Mortgage Asset Registry has been developed to capture Mortgage transactions on a common IT platform. The CBN has also introduced the categorization of Primary Mortgage Banks into National, State and Local.
Furthermore, implementation of the FSS 2020 has led to radical improvement in the nation’s payment system. This is reflected in the increasing deployment and adoption of electronic payment channels, propelled by the cashless policy of the CBN.
Interbank funds transfer
There is also the Central Bank of Nigeria Immediate Transfer Service (CBSITS) and an interbank platform for effecting payment transactions.
In addition is the Electronic Cheque Clearing (ECC) system, which allow for a same day cheques-clearing process, the Nigeria Electronic Funds Transfer (NEFT) as an alternative means for interbank funds transfer among others including the Real Time Gross Settlement System, as well as the introduction of the Biometric Verification Number (BVN).
Also, Nigeria’s pension asset has grown from about N3 trillion in 2013 to N6.02 trillion in 2017. The Nigerian Sovereign Investment Authority (NSIA) has been appointed advisers to manage the deployment of Pension funds into long term infrastructure deployment.
For the insurance sector, the Micro insurance (Takaful) and compulsory insurance schemes are being implemented. Also, improvement in the settlement of insurance claims of policy holders is being pursued as confidence and trust of the holders which was at lowest ebb has now being restored.
The CBN has also introduced several interventions to improve funding and access to finance for Small and Medium Enterprises (SMEs). These include the creation of the National Collateral Registry for lending and access to finance by SMEs and the passage of the Secured lending using movable assets Bill by the national Assembly.
Challenges to FSS 2020
More than the above could have achieved but for some challenges which have militated against implementation of the FSS 2020. Highlighting some of these challenges, Coordinator of the “There are some challenges militating against the achievements of FSS2020 objectives including but not limited to the following- Funding and logistics, technical challenges, human capital development, especially the inability to attract talent from abroad to Nigeria, delays in the passage of the identified financial sector bills by the national assembly is a drawback, policy inconsistency and lack of continuity.”
Roadmap for the future
In a bid to strategise on how to overcome these challenges, the participating institutions led by the CBN Governor, Mr. Godwin Emefiele held a strategic review meeting in Lagos last week. While addressing the meeting Emefiele commended participating institutions and the FSS 2020 for their commitment to the vision. He specifically commended Barau, who will retire from the apex bank this month, for his leadership of the FSS 2020 office since inception.
The way forward
Emefiele however called for increased support and collaboration among the institutions.
He said: “without doubt, services provided by the financial System Strategy 2020, have impacted on economic growth of Nigeria in the last 10 years. We expect them to do more by collaborating with the implementing institutions to promote sustainable economic growth.
“If today, only five out of 10 people have access to financial services, how do we ensure that by the next three years, eight out of 10 are able to have access to financial services. This session that closes today will provide a roadmap that will help us achieve that.”
Speaking on the sidelines of the meeting, Barau also made for increased collaboration, stressing that whatever have been achieved so far was made possible by collaboration. He said: “One of the things we must continue to do is to continue to work together so that the huge challenge we have on inclusiveness is achieved as quickly as possible because we do not have time to wait.”