CBN Suffers Budget Cut, Funding for Financial Initiatives Hampered

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James Emejo in Abuja

The Director, Financial System Stability (FSS 2020), Central Bank of Nigeria (CBN), Mr. Mohammed Suleiman, on Tuesday said a 50 per cent slash of the bank’s 2016 budget by the federal government has affected funding of some important initiative in the financial system.

Speaking in Abuja when he led the FSS 2020 team on a courtesy call to the Nigeria Deposit Insurance Corporation (NDIC), he said funding had been a major constraint to FSS 2020 strategy implementation.

He said: “Funding has been a major issue, the FSS 2020 programme since its inception has always been bankrolled single handedly by the CBN. The CBN is beginning to weary a little bit because the current budget this year was reduced by 50 per cent and that is majorly affecting some of our capabilities to implement some of these strategic objectives.”

According to him:”50 per cent of our budget cut is no small measure at all. We need to agree on the funding approach, we need to have a rethink and get the support of all implementing institutions. The FSS2020 is not a CBN project it is a financial system project, all financial system players have to take ownership of the project and be willing to support it.”

During the exchange of views on the way to move the Fs2020 project forward, an official of the NDIC revealed that it costs around N198 billion to fund the FSS2020 project.

The Director of FSS2020 who is also a staff of the CBN, noted: “We will structure the FSS2020 to include dedicated team for monitoring, tracking and reporting and ensure regular quarterly or biannual meeting of stakeholders for the progress and implementation of the strategy.”

Suleiman identified some of the challenges the FSS2020 team have had to grapple with to include: inadequate financial skills development particularly in the capital market; unavailability of investable funds for long term financial products; non existence of listing rules for special purpose vehicles; increasing cost of transactions and operations; weak risk management.

Other challenges include: low level of card usage on POS and high ATM usage for cash transactions; physical insecurities and prevalence of financial fraud; low levels of financial literacy and inclusion; low acceptability of Mobil payment and merchant locations; non existence of sound collateral management; inadequate legal and regulatory framework for commodities market and unwillingness of private companies to go public; inadequate foreign direct investment and non existence of integrated credit scoring system.

To ensure that the FSS2020 project does not fail because of lack of funds, Suleiman stated that “the intervention is to advocate that agencies making budgetary provisions provide funds for development because these products need the support of budget to implement them.”

He also expressed concern that Nigeria does not “have the required skills for these products, we need to build the capacity of the industry, we have started capacity building at Woodpecker for heads of strategy of implementing institutions who were in attendance at Golden Tulip in Lagos recently.

The FSS2020 director then revealed that that capacity building programme “cost the CBN £144,000 because facilitators were brought in from the UK. We will also build capacities in the bonds markets and derivatives.

“Already, they have identified agencies that will take ownership of these strategies, they are CBN, SEC, NSE, NDIC, PenCom, National Assembly, Nigeria Commodities Exchange, Budget and National Planning, Federal Ministry of Trade and Investment, SMEDAN and SON (they will be in charge of setting standards for the commodities to make them fit for purpose).”

Suleiman decried what he called inadequate legal framework and to address this inadequacy, the secretariat of the FSS2020 has come up with some planned interventions to address the inadequate legal framework.
He said they have been able to come together with other stakeholders to create some legislative interventions through bill for the consideration of the National Assembly.

“Some of the interventions behind the bills that we have crafted about three weeks back are the warehouse receipt bills, the securitisation bill, the mortgage and allied matters bill, and the SMEDAN amendment bill these are bills that we have so far reviewed and are ready for transmission to the Federal Executive Council (FEC).”