Ajibola: Nigeria Must Guard against Economic Depression

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The President/Chairman of Council, Chartered Institute of Bankers of Nigeria, Prof. Segun Ajibola has advised the federal government to implement policies that would resuscitate the economy. He counselled businesses to redefine their strategies in view of the challenges in the foreign exchange market. He spoke with Obinna Chima. Excerpts:

How do you think banks can navigate through the present challenge business environment?

Well, the beauty about banking is that whether an economy is booming or an economy is in recession, you need the banking industry. You need the banking industry to manage the boom, just as you need the banking industry to bring an economy out of the doom. Recession is a temporary setback. It is a temporary economic dislocation.

It is when you have disequilibrium caused by sudden loss of income. As we know, the global oil industry is in some sort of problems today and we rely on oil as the major source of our revenue. That would definitely dovetail into recession. When you have loss of income, your fiscal responsibility suffers. Whatever you intend doing in the short-run, you will not be able to meet up because of that state of disequilibrium. But it is an opportunity for you to look inward immediately. And that is what we have been canvassing at the institute through our various learning sessions.

As a country, we need to more than ever, start taking seriously our export promotion strategies and diversify our earnings base. The reliance on oil as major source of revenue is too heavy. We need to reduce the significance of oil on our economy. So, if we can start diversifying into agriculture, solid minerals, manufacturing, and expand our export potential, we would be able to earn more foreign exchange from other sources other than oil. Then we also need to look inward more than ever before. The challenge, the message is coming to us that we don’t need to rely too much on other countries to feed our population.

The various varieties we have in the agriculture sector can feed this population today, if properly organised and well harnessed. We can rely on ourselves for the provision of basic necessities of life- food, clothing and shelter. And we can de-emphasis a lot of things we import because of our mentality to consume imported items. So, the high propensity to import, fuelled by cultural disorientation can be corrected through import substitution strategies. So if we can embrace these two, we would be able to reverse the recessionary economy that we are facing at the moment.

It is when an economy fails to learn from this temporary setback, that recession moves to depression. And depression is a permanent problem that may remain with an economy for decades. Nobody prays for that and the federal government must ensure we don’t get to that. We know what is happening in some other economies of the world today that rely too heavily on oil. So, it is an opportunity for us to learn and tame our appetite for imported items and to look at our economy in totality to find out how to diversify immediately to reduce over-reliance on oil as source of revenue. If we can do just these two things, then we would have been able to change our orientation. There would have been some paradigm shift. The structure of our economy would have undergone significant change.

And by the end of the day, we would be out of recession. First, the role of bank when an economy is facing the kind of situation the Nigeria economy is facing now. Banks can continue to provide the basic financial services to the economy as a whole. If you look at the structure of the Nigerian economy, if we leave oil and gas out and look at other sectors of the economy, you would discover that the contribution of the small scale sector of the economy, the micro sector of the economy is insignificant. In situation like this for example, microfinance banks can help by empowering the masses in various sectors of the economy.

It can support those that have micro businesses to pursue. If the empowerment could come from the bottom, then it would gravitate towards the small scale enterprises. But because we have been monolithic as an economy for so long, we have ignored these sectors. Banks can play this role by coming out to more than before, faithfully support these various businesses at the lowest end of the ladder. If these people are empowered, they can be more economically active.

You spoke recently about banks taking advantage of opportunities in other African countries by expanding their businesses, considering the weak macroeconomic environment, not just in Nigeria, but also in most other African countries, won’t it be wrong for banks to embark on such project?

By talking about Africanising the Nigerian banking system, what we are saying is that although the United Bank for Africa (UBA) has done it and is still doing it, there are other banks in Nigeria that are also operating in other countries in the continent. They are also doing their bit. So, through this, trade between and among African countries would be promoted and complementary roles can now be played by a body like the African Union (AU), to promote the economy of Africa. The AU can now take more interest in African trade and if the support is coming from banks operating in Africa as a whole, not just within an enclave, then it would be easier so intra and inter African trade to grow and to help contribute to the economy of individual members of the AU and the African economy as a whole.

But the discussion about growing trade among countries in the continent cannot be complete if we don’t address the single currency issue. Do you think having a single currency can help grow trade among countries in the continent?

We cannot achieve everything at the same time. We can look at economic cooperation, even within the West African sub-region and then move gradually. If we can first of all integrate the economy, common currency would help to strengthen that integration. But if we have not integrated our economy as Africa, we can’t be talking about common currency. You know the challenges we have been facing, even within the West African sub-region in having a common currency.

So, it is the same thing in Africa, just like in other parts of the world. But, if we can achieve economic integration up to a level where the man in Ghana can freely go to Kenya and sell his trade, and there are no obstacles and trade barriers are demolished, then we would be able to move to the next level of financial integration. That would bring about the issue of common currency. The stage we are now, we have not gotten to that level. The challenge we have now is to integrate the African economy and by the time we do that, we start thinking about ways to further deepen that level of integration.

If you are to proffer solution to Nigeria’s perennial foreign exchange crisis, what would be your recommendation?

Like I have said, we should recognise that foreign exchange is a commodity, just like any other commodity. The forces of demand and supply would continue to play a role. So, if we allow the forces of demand and supply to play its role in the foreign exchange market today, you and I can imagine what the exchange rate would be. But the reality, however painful it may sound, is that when we continue to tamper with the market system, we would have two authorities managing the market- the official segment and the unofficial segment. So, whenever you try to suppress the forces of demand and supply, black marketing would emerge.

And that is the beauty of what the Central Bank of Nigeria has done by deregulating the market and introducing a flexible exchange regime. The central bank is also conscious of the immediate implication of having a freely floating exchange rate on the masses that live on less than two dollars a day. But the summary of the problem is that we have supply rigidity. Supply is limited while demand is more or less unlimited. So, the solution to it is what I have said earlier and as difficult as what I have said: reduce your exposure to foreign exchange demand by eliminating unnecessary items. Another challenge is when you say some items are not eligible for foreign exchange for official allocation, but that they can go to the unofficial market, you put unnecessary pressure on the unofficial market. That is why we are seeing the gap between the official and unofficial rates widening on a daily basis.

It may look so radical, but I don’t see anything extraordinary in banning the importation of rice into Nigeria today and let’s see how sufficient Abakaliki rice in Ebonyi state would be, Igbemo rice in Ekiti state would be to feed Nigerians. The same thing goes for other sources of staple food that we have in abundance but nobody cares about them and our children would be looking for imported biscuits, we would be looking for imported toothpicks, and everything imported. Let’s take the bull by the horn. Other economies in the world did it and their people didn’t die. We have potential for self-sufficiency in certain things in this country. But because of our untamed appetite for imported raw materials and goods and because of that culture and disorientation, we always prefer foreign goods and services.

So, we have to start gradually by ensuring that we are self-sufficient in certain areas. We must ensure that we are faithful and adherent to such policy dimensions. Like is said, it might sound too radical and shocking for us Nigerians that have been so over pampered with imported goods, let some of these imported items be priced out of the reach of some us. Then, we would know the importance of our locally produced goods. So, some of these policies may be so radical, but we need them to sanitise the environment and let some form of orderliness reign in our foreign exchange market.

What is your take on ethics in the banking profession?

More than before, ethics and professionalism is one of the core mandates of the CIBN. You will agree with me that compared with what used to be the case about 10 years ago, we are far better as an industry today. That is because today we have corporate governance rules, we have code of conducts and we have bodies that are policing these specific aspects of our lives as financial services industry. So, it has improved. But you see, in an assemblage of human beings, you still come across people of different orientation, vested interests and diverse background. You will continue to see those who challenge the morals of their profession and cannot uphold the ethical standards of their profession and banking cannot be left out of that.

The important thing is that we have the rules and regulations and when there are infractions, there are procedures for dealing with such so that whoever wants to go into infraction knows ahead, the likely consequences. Armed robbers know the likely consequence of their action, but some still take the risk. So, it is the same thing in every profession. We have it in legal profession, medical, and every other profession. There would be some few black sheep that would want to take the risk of misconduct. But as long as the rules are clear and when you do it, you cannot go unpunished, then the system would gradually sanitise itself.

As the leader of the CIBN, what is your value proposition for the institute?

CIBN has grown with time from a very small membership of 200 individual members to over 100,000 now. We have all banks in Nigeria- regulators, commercial banks, microfinance banks, mortgage and other financial institutions. It is a body that has made impact in policy dimension, development of members, instilling ethics in members and certification of professional bankers at various levels. So, it is an institution that has become entrenched in the system, but also one that needs to move to the next level. Under my leadership, we will lift the institution from where I met it. My agenda, codenamed “The Cs” will address every facet of our professional life.

The first ‘C’ is capacity building. We need to build more capacity in the industry to address some skills gap, as well as upgrade our members’ knowledge to ensure continuous professional development. We also need to build capacity in specialised areas in banking and certifying deserving ones fit and proper to practice banking. We already have agreement with some universities through what we call linkage agreement to develop students studying banking and finance and those in the Polytechnics. We also have agreement with local and international institutions to develop manpower in specific areas with the like of the Nigeria Deposit Insurance Corporation.

These institutions we are talking about cover trainings on specific areas of need like risk management certification. While we also train and qualify individuals as chartered bankers, which is the second ‘C.’ The third ‘C’ is communication. We know that we need to communicate the ideals of the institute to the larger society, even among our members and stakeholders. So, we will upscale our communications as a strategy, with a view to bridging gaps among banks’ clients and users, to know what banking and its practices are. This will also help to reduce the dearth of knowledge outside there.

The fourth is ‘Codification.’ There are some aspects of banking that must be codified- our code of conduct is an example. As a member of the organisation, our law compels banks’ workers to register with us. One of the reasons for that is for us to be able to have oversight and be able to call practitioners to order and enforce ethical standards on our members, as well as ensure sanity in the way and manner banking is practiced in this part of the world. Already, we have a code of conduct signed into by members. We also have to extend this to other banking practitioners, not just commercial banks.

We have our Act, which also strengthens our legal capacity and where the need arises, we will also bring to bear some amendments to carry-out our core mandates. We also talk about constructive engagements for stakeholders. We talk about innovative ideas that can be added in Nigeria’s banking. In this regard, yearly, we have the Judges’ seminar where we bring all the levels of judicial officers with top banking officers to discuss the industry. This is to educate them on the technicalities of banking practice, so that when they face issues on banking matters, they will be knowledgeable and sufficiently empowered to handle such matters.

We have a very virile structure through the Bankers Committee sub-committee on Ethics and Professionalism to ensure that banking is practiced with ethical standards in mind. When there are issues among banks and customers, they are reported to the sub-committee for amicable resolution.
Creativity as a goal is another ‘C’ agenda of my leadership. There could be a goal, but there could be many ways of reaching it. What is the best in terms of creativity and efficiency in reaching it? Also, consolidation talks about getting the best of the institute and membership as a 53-year old body. Having done a lot already, we still need to do more.

We need to consolidate on some of the things we have done in the past like getting our members closer to the body to fulfill their obligations, add value to their lives, whether corporate or individual. How do we improve on our physical infrastructures like our library facilities- e-learning platform, bookshops and making our subsidiaries like the printing press, more virile? How do we get more from our newly established thought leadership centre in terms of research and intellectual issues on banking and economy? These are some of the things my tenure will pursue.

Already, the institute will host the 22nd edition of the world conference of banking institutes next year and this will project Nigeria further in terms of investment opportunities inherent here. By bringing those who have stake in the movement of funds and harnessing of investments across the globe to Nigeria, we believe it is another opportunity for us an institute to sell the country.

As an institute, as at today, we are expanding our foray into other African countries. We are already in The Gambia, Sierra Leone, Senegal, Kenya, and we have just left the position of the chairman of African Institute of Bankers. Through that forum, we were able to synergise with other sister institutes in Africa, to see what we can do to encourage banking and banking practices in Africa; to promote ethical standards, to uphold the code of conduct known for banking the world over. By the time we are able to do all these, banking and finance would be very relevant to emerging economies coming out of Africa at the moment, and we would be able to deepen financial inclusion.

It would also enable us to provide even the basic financial services to the generality of the African people and promote trade among Africa. As an institute, we also try to encourage our sister institutes to play their key roles to ensure they pursue their mandates and to cooperate with both the regulatory and political authorities in their countries as we try to do in Nigeria. That is to make sure that policies and programmes that would promote economic empowerment of the people are pursued from time to time.