Bankers’ Committee Provides Recipe for Economic Development

12 Dec 2012

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Mallam Sanusi Lamido Sanusi

Obinna Chima highlights various initiatives by the Bankers’ Committee to stimulate the development of the Nigerian economy as well as the focus of the Committee for next year
Generally, the banking system plays an important role of promoting economic growth and development through its process of financial intermediation.

The relationship between the banking system and economic development remains very critical for any economy to realise its potentials. These relationships always bring about an improvement in the productive capacity of the economy.

Furthermore, the banking system is expected to provide linkages for different sectors of the economy and also encourage high level of specialisation, economies of scale and a conducive environment for the implementation of various economic policies of government
To this end, the Central Bank of Nigeria (CBN) and Bankers’ Committee have vowed to continue to initiate policies that would drive the country’s growth. This was the submission of top officials of the CBN, Chief Executive Officers of Banks, Discount Houses and the Nigeria Deposit Insurance Corporation (NDIC) that gathered in Calabar last week for the fourth annual Bankers’ Committee Retreat tagged: “Towards Economic Development and Sustainable Transformation.”

CBN Governor and Chairman of the Bankers’ Committee, Mallam Sanusi Lamido Sanusi, said banks would continue to play central role in the nation’s development by mobilising resources for productive investments.

The various initiatives of the bankers’ committee, he said, had led to a drop in the number of the financial excluded population from 46 per cent adults in 2010 to 38.7 per cent in 2012.

The Bankers’ Committee and CBN had few years ago, designed the Nigerian Incentive-based Risk Sharing Agricultural Lending (NIRSAL) - an initiative conceived to drive agricultural revolution in the country. NIRSAL is an innovative mechanism targeted at de-risking lending to the agricultural sector.

The programme is aimed at repositioning the agricultural production in the country. The committee had said that in the long-run, NIRSAL would bring about agricultural value chains and agriculture financing by commercial banks.

Presenting the scorecard of NIRSAL and agric sector lending by banks, Sanusi said: “On the agricultural sector, we will continue with our engagements with the State governments and continue to address the value chain process. We need to improve the engagement with the federal ministry of agriculture and our resolve was to integrate our silos so that all stakeholders can get more value chains to operate.

“The whole idea of the intervention in the agriculture sector through NIRSAL is to address some of those things that have affected the growth of the sector. One of those things we have tried to do is to work with State governments and farmers, so that the farmers can raise silos as cooperatives. Now, they are able to buy seeds and negotiate for fertilisers as a cooperative and are able to get training.

“Go to Kagawa, which is 40 kilometres from Kano, you will see how by working with the State government, we have put together, tomato farmers to get improved varieties and seeds. Now, we are looking at setting up a processing plant there which will produce tomato and process it on-site. With irrigation, today, they are producing twice a year now, instead of once.

“But we must remember that agriculture and lending to the real sector is a journey and not a destination.”
He also stated that the establishment of NIRSAL has encouraged the growth of formal credit for the agriculture value chain.
Sanusi also revealed that banking sector lending to the agriculture sector has increased remarkably from 1.5 per cent of total industry portfolio to 3.5 per cent in 2012.

According to Sanusi, banks had outlined strategy to attain seven per cent agric sector lending by next year and 10 per cent by 2017.
Head of NIRSAL Project Implementation Office under the Development Finance Department, CBN, Mr. Jude Uzonwanne, explained that NIRSAL mobilised financing for Nigerian agro-business by using credit guarantees to address the risk of default. NIRSAL, according to him, was a flexible financing tool designed to change the behaviour of financial institutions.

According to him, the programme was designed to create access to finance by integrating end-to-end agriculture value chains such as input producers, farmers, agro dealers, agro processors and industrial manufacturers with agricultural financing value chains – loan product development, credit distribution, loan origination, managing and pricing for risk, and loan disbursement.
Power Sector Reform
With the shortlisting of 14 companies selected as preferred bidders for the power generation and distribution companies by the National Council on Privatisation (NCP), the bankers’ committee said it would advise the federal government of funding of the power assets.

Sanusi said: “The first is to advise the government on funding of power transmission. One thing that is clear to us and what we are going to advocate is for is that all the proceeds from the sale of power assets should be dedicated to improvement in infrastructural system. Because there is a huge financial requirement for infrastructural development and if $2.3 billion is dedicated to that, it covers a significant part of that cost.

“The announcement of that kind of decision to be taken by the Presidency and the National Assembly would create the confidence that private investors require to invest in the integrated plants because they know that the big risk in the power value chain now is transmission. A lot of funding is required. So that is one, ensuring that we have funding for capital expenditure for generating plants that have just been set up is also key.”

The NCP had shortlisted Amperion Power Distribution Company Limited, Transnational Corporation of Nigeria Plc Consortium, CMEC/Eurafic JV Consortium, Mainstream Energy Solutions Limited and North-South Power Limited as the preferred bidders for the power stations.

For the distribution assets, NCP had shortlisted Integrated Energy Distribution and Marketing Company Limited, Vigeo Power Consortium, Interstate Electrics Limited, KANN Consortium Utility Company Limited, Aura Energy Limited, West Power & Gas, 4Power Consortium, Sahelian Power SPV Limited and New Electricity Distribution Company (NEDC) as preferred bidders.
Sanusi declared that in 2012, over N100 billion was committed to power projects from the Power and Aviation Intervention Fund (PAIF).
Target for 2013
On the outlook for next year, the CBN governor said the committee’s focus for next year would be the implementation of the financial inclusion strategy, continuation of the agriculture lending programme, ensuring that the cashless policy is taken to other states, among others
“We still have a long way to go, but we are proud of the work we have done in the last four years. We affirm our commitment to a stable financial system for Nigeria that contributes to economic development and growth. We commend His Excellency, President Goodluck Ebele Jonathan’s economic reform agenda and associate with the objective of growing the Nigerian economy and creating jobs.

“The CBN has taken proactive actions to ensure that the financial system remains focused and committed to the goals of economic development and sustainability. Effective collaboration and partnership across government, banks, private sector and key stakeholders is critical to achieve economic goals and objectives.

On his part, Group Managing Director/Chief Executive Officer, Access Bank Plc/Chairman of the Sub-Committee, Economic Development and Sustainability, Bankers’ Committee, Mr. Aigboje Aig-Imoukhuede, assured that the banking industry would continue to focus on agriculture, power, transport and infrastructure sectors development.

“This process started in 2009 and the emphasis is ensuring that the banking system supports the development of the Nigerian economy. We see our intervention largely in three ways: the primary one of course, is in lending, that is channeling of savings to the real sector. The second thing is how we go about these activities, because it is one thing to lend, and another thing to do so in a constructive manner that makes the desired impact.

“We also look at things like financial and issues of sustainability, which is how we treat our environment and other stakeholders in the economy and how we conduct ourselves as business entities,” Aig-Imoukhuede explained.

The Access Bank boss however pointed out that the banking system did not exist in a vacuum, saying that banks were part of the macro-economy which involved stakeholders such as government, borrowers and others.

“One key issue that affects the macro-economy is policy and the enabling environment. So, we have done a lot of advocacy and support, towards ensuring that the appropriate environment that will allow stakeholders in the economy is created,” he added.

Tags: Business, Featured, Nigeria, Bankers’ Committee, Economic Development

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