The Central Bank of Nigeria (CBN) has advised operators of Finance Houses to ensure that they implement risk management principles in their firms.
Deputy Governor, Financial Sector Surveillance, CBN, Mrs Aishah Ahmad, gave this advice in a keynote addressing at the biannual conference of Finance Houses Association of Nigeria (FHAN) held in Lagos recently.
According to her, a robust enterprise risk management framework would help identify and proactively prevent and mitigate inherent risks (interest rate, currency risks, et al) in debt capital financing.
“This cannot be over-emphasised. We urge operators as they navigate the landmines of the debt market to, in local parlance, ‘shine your eye,’ she said.
Ahmad noted that despite apparent odds that hinder finance companies’ operations, notably access to finance, there are lead players in the sub-sector who can, not only tap the local market, but also attract funding from foreign development agencies committed to the MSME sector as a potential engine of economic growth and development. “Therefore, the challenge for finance companies lies, not only in expanding own ability to access funding but, more significantly, in translating same into enhanced access for their MSME customers.
“Only then is the purpose of intermediation truly fulfilled.
“Referring to the issue of the finance company licences that were recently revoked, the breaches of regulations by these companies ranged from poor corporate governance, negative capital to relocating business addresses without prior approval by the CBN as required by the guidelines.
“Thus, in order not to fritter away any finance raised and deliver sustainable returns to investors and the economy, there is no substitute for strong corporate governance practices,” she added.
According to her, while the subsector has made progress as evident in increased shareholders’ funds and risk assets, “operators are barely scratching the surface in terms of large untapped market available to them.” Represented by the Director, Other Financial Institution Supervision Department, Mrs Tokunbo Phillips, Ahmad added: “This is a sub-sector that has great potentials and by extension responsibility to stimulate growth of the Nigerian economy.
“The theme of the conference, which is, Access to Finance: Exploring opportunities and navigating the landmines for local and foreign institutional debt, couldn’t have come at a better time.
“This is because the sector is yet to realise its full potential because it is leaving out so much of the various things it could have done in terms of permissible activities documented in the revised guidelines for finance companies.”