The President, Chartered Institute of Bankers of Nigeria, Dr. Uche Olowu, in this interview, says notwithstanding the challenges the economy faced last year, 2020 will be a better year as the impact of investments in infrastructure begins to materialise, with an anticipated improvement in power supply as well sustained coordination between the fiscal and monetary policy authorities. Obinna Chima and Nume Ekeghe bring the excerpts:
How will you say the Nigerian economy performed in 2019?
The year 2019 was turbulent. But if you look at the antecedent of what happened in the previous years, the ship has been steadied. That is the best way to describe 2019. Unemployment is still very high. The exchange rate has been stable and that is because the central bank has done yeoman’s job by defending the naira and in keeping it steady; and monetary policy has been very stable. In terms of interest rate, we are almost talking about single-digit interest rate and we are getting there. And then of course, the oil price has done Nigeria good because volatility has not been there, so we could plan.
Also, in terms of infrastructure, we are still getting more investment in that space but the impact has not really shown. So, on the economy, depending on where you are looking at it from, I believe it is an economy that has now steadied. But, the impact has not really been felt on the people and citizens because there are still complaints and there is poverty in the land. And we have not been able to create enough jobs. But, the basic building blocks are there and we hope that 2020 would hold a brighter prospect.
And the expected bright prospect can be attributed to the fact that we have changed the budgetary calendar which is now from January to December. So, we expect that execution would be faster. On corruption, the fight has been there, but that fight is humungous. People are always looking at government, but even in the smaller facets of life where there is transaction between people, there is still corruption all over the whole place. So, we need do a lot of value re-orientation if we have to, because corruption has eaten so deep into the society.
And whatever policies you come up with, that cancer would always try to limit the good. Yes ‘big fish’ have been jailed like past governors and that is sending the right signal to the people in government and for those who are to come. This is because, if you have been made a steward in charge of people’s resources, you have to be very faithful and not divert the resources. In terms of attracting investment, because no government whether it is America or China, which are success stories develop with foreign investment inflow.
So, foreign direct investment (FDI) is very important and that we did not see much last year. And that is also because we need to tweak our policies to be more attractive to foreign investors. And my advice to the government would be to create that confidence for FDIs to come. Portfolio investors are hot money and that cannot develop this country. We must try as much as possible to ensure that we create that confidence in the mind of investors. There had been one or two policy summersaults here and there, but thank God we are beginning to see some semblance of focus in terms of tackling the problem. So, overall, 2019, I would say the ship has been steadied; we are not yet there because the common man is still suffering quite a lot. But we expect that 2020 would be better because we have to keep hope alive.
And for the banking sector?
For the banking sector that I represent, I can say the regulator, the Central Bank of Nigeria (CBN), has come out with policies that tried to ensure financial stability. Basically, in terms of the monetary policy, I would like to commend the regulator for maintaining price stability which is very critical. We have also seen exchange rate stability. Yes, it may come at a cost, but the most important thing is that businesses can now plan which has created certainty in the economy.
And then, you have seen that the non-performing loans (NPLs) have significantly come down, and that is because we the players, regulators and even our institute have come together to say we need to change credit behavior in this country and that is very critical. Banks have cleaned their books and accretion on NPLs have come down; and of course, we are trying to deepen the financial market. In the area of financial inclusion which is very critical to the economy, the CBN, deposit money banks and the Chartered Institute of Bankers of Nigeria (CIBN) introduced a special purpose vehicle called the Shared Agent Network Expansion Facility (SANEF).
SANEF is a vehicle that was introduced to deepen financial inclusion. I believe we have crossed 60 per cent and we need to do more in that area. Overall, the banking sector has supported the economy very well. In fact, I am almost tempted to say that if the fiscal policy had done as much as the monetary policy side of the economy, we would have been a lot better. But we believe that in 2020, there would be improvement. Our financial system is now very stable and we have also tried to train the skilled workforce that would intermediate on the economy.
In the banking space, 2019 wasn’t a bad year for us because of the earlier stability I have alluded to as a result of the activities of the regulators. The regulator has increased the loan-to-deposit (LDR). That was designed to give the desired oxygen in the real sector and down the line, you would see various small and medium scale enterprises (SMEs) accessing credit without much difficulties and that is the way to go if we want to grow the economy.
So, the banking sector on its own is trying to drive the economy and has done very well.
However, as we having fintechs, we need to beef up some investment in cyber security, which is a major one we are pushing to address.
Overall, I would score the banking sector 75 per cent, even though there is room for improvement and we are beginning to see a banking sector that is passionate and is focused on driving this economy.
Still on the banking sector, the CBN recently reduced most of the charges. How do you think this would affect their performance going forward?
I must commend the CBN because as you know, as journalists you would have been hearing about series of complaints on excess charges, which was against the cashless policy, and other policies of the central bank. So, what the central bank did showed that they have listening ears and that they are also aware of those who bear the burden, especially those at the lower rank of ladder and that you don’t need to over burden them with charges. The reduction in bank charges was designed to encourage financial inclusion.
So, very clearly, if you ask me, banking should be without charges for those in the rural area because what that means is that it would give them that impetus to be included in the system. But for bank, this might affect them in them in terms of their non-interest income. But on the flip side, it would also increase velocity of banking. Now, the charges are lower, we should begin to see a lot more activities. So, what they would lose in absolute numbers, they would gain by the increased velocity. So, for me, I doubt if it would affect their profitability.
This market is still underbanked and we still have a lot of financial intermediation that needs to be done. It is a welcomed development and the CBN has consulted and met with the banks and it is a very good one and I must commend them.
There have been this raging argument about whether the federal government should take additional debt or not. For you, what is the best way out of the situation the country is faced with presently?
This is a very complex thing and I feel for both the government and the citizen. There are two ways to it: Yes, it is true that Debt-to-GDP is low but the economic activity is very low. So, you begin to tax people that are not producing enough. I believe that what we should have done would be to review in a way to increase the tax bracket. Government funds their revenue from the tax base which is not even enough and so the alternative would be to borrow.
The question to ask is, what are they borrowing for? Is it infrastructure that would jumpstart economic activities? Why people are opposing it is because the resources are not adequately used and we don’t get value for the projects being executed. We are accruing more debt and where would you get the money to repay back those debts. And if the federal government says they are borrowing to improve the infrastructure, and if they are going to execute projects that would improve the lives of the citizens and make enterprise to thrive, then I support that. If I were to advice, borrowing should be channeled to infrastructure that would motivate entrepreneurs. I understand and appreciate what is being done in the rail sector because that area would have a massive impact on the economy if we get it right.
I support the idea that government should be more transparent and tell us how these monies are being used, so that we can be assured of what is being done with the monies borrowed today. So, in answering your question, borrowing is good, but it should be channeled towards those sectors that would grow the economy. One more thing we have not done very well is on government’s reputation. We have not been able to instill and inspire confidence. Why would other climes attract investment and we are not able to attracting investment? We really need to stop having a socialist bent and have a free market that would encourage people to come to this economy. Also, vocational schools are very critical. What made China what the country is today, was their massive investment in vocational schools. And so, we have to look at this in a holistic manner. We shouldn’t borrow for consumption and government should also curb leakages. And we can all try as much as possible to support the government from our various spheres.
Have you seen the Finance Bill, and do you think it would address some of these challenges?
The Finance Bill is a very good one if signed into law and if effectively implemented. It is designed tackle the problems we are looking at, but it is not enough. We still need to find a way in making sure people are patriotic in this country so that as the bill is coming out, some whiz kids shouldn’t be looking at the loopholes.
Earlier you talked about capacity in the banking sector, some of the bankers in the 80s and 90s would always talk about a drop in the quality of manpower in the industry today, compared with the period when they were in service. Do you agree with this and if yes, what can be done to address it?
The difference between those old bankers and the new ones is that the system wasn’t sophisticated then. Then, they kept it in the very simplest form and they were brilliant. And in terms of ethical conducts, I agree, they were far better. For most of them, what mattered so much then was the name. but today, banking has evolved and is becoming more complex. And so, you cannot compare this era with that era. It is just like what is happening in the society, the banking sector is also a mirror of the society and values and things have changed.
And you begin to see those in the habit of get-rich-quick wanting to play funny games. I agree with you to some extent in terms of training the people. It is not necessarily your degree, and banking is as an apprenticeship thing. You learn so much on the job and you train people. We lost it when we didn’t train people and that was why we had the kind of problems that we had like the issue of failed banks and all. But today, I can tell you that it is now consigned to history. We know that today if you don’t have the required capacity you cannot play in the market of today. All banks now have banking academies and the academies were designed to enable us train bankers and people who graduated from the universities. So banks have realised the need to train and are making a lot of investment in capacity building.
In CIBN, we have done quite a lot. We accredit all the learning academies of banks. Today, banking has changed and it is very complex now and it is driven by technology. I can boast that today, our bankers can compete anywhere and in any clime. We are now in a global village and we train quite a lot of them, both internally and externally. Efforts are designed to making sure that people learn on the job and people are properly trained because if you don’t train them, don’t hold them accountable for any lapses.
The area we need to pay more attention to is on ethics. I can agree with you that ethics in the industry today and that of the 80s are not the same. That is why the institute is playing a yeoman’s job in trying to make sure that everybody complies with the Code of Conduct all bankers signed. If you have any infraction, the institute is open to prosecution because we have a tribunal and once judgement is passed, you would only appeal to the appeal court because we have a retired Supreme Court Judge as our Assessor. So, disciplinary mechanism is very strong in the institute today. So, you cannot but, comply with current rules.
Can you take us through some of your achievement you became CIBN President?
When I came on board in May 2018, I reviewed the state of institute and I had five cardinal focus – Rules and standards; building capacity; leveraging on technology; changing the narrative of our institute, and then how we address our people. Have we done them? Largely we have done all that I decided to do. On rules and standard, we know that ethics is very important and today every banker in this country writes the Ethics and Compliance certification which is renewed every year.
Does the exam apply to only commercial banks?
All of the banks, including microfinance banks. A pilot study started with the commercial banks, so that alone puts the bankers in a better position, just like what happens in the UK where the authority certifies you. We have also prepared to change our Act to further strengthen us in terms of making sure we have the necessary allegiance to achieve our mandate. And our mandate clearly is built on ethics, capacity building, advocacy as it concerns the industry.
And on capacity building, you would see more graduates today writing our exams because we have reviewed our syllabus. Today, we are getting accolades from the International Monetary Fund (IMF), international institutions in Hong Kong, Singapore; and that is because when we reviewed our syllabus, we did a thorough survey to know what people wanted and we wanted to make sure that holders of our certifications are highly sort after in the market today. We have received a lot of accolades for that because what we have today is comparable to CFA. Also, in pursuant of capacity building, we are talking with National Universities Commission (NUC) to change the curriculum of the universities especially those doing banking and finance. NUC is enthusiastic about it.
When do you think that would happen?
We already in talks and we have forwarded the proposed courses to be added to the curriculum to them and we have agreed. The Nigerian Economic Summit Group (NESG) and NUC had a conference in our secretariat where they saw what we were doing and they were pleased with it and they are going to change the curriculum. When I came in, we had an average of 300-400 people qualifying yearly, but today, we are talking about 2,000 people which is a massive jump because of the various initiatives we introduce. On technology, we have digitalised our operations.
Although we are not yet there, but we would continue to review that so that members can interact with the website and through that platform you can interact with the institute without coming to the secretariat. In terms of changing the narrative, today we have so many collaborations. I was invited to the IMF, the United nations and the Economic Commission for Africa. So, we have been in all areas. We have a collaboration with IFC on ethics and we have so many collaborations with international bodies.
Nigeria is the chairman of African Alliance of Institute of Bankers. Prior to this it, the secretariat used to be rotated all over Africa, but we have gotten the secretariat to be domiciled in Nigeria. We did that to interface with the various multinational agencies. We are well received by the government and we have changed the narrative of who is an associate of the CIBN. Our exams are written all over Africa – Ghana, Gambia, Sierra Leone, Rwanda and we are in so many countries and we want to dominate the African continent.
In the international community we are well recognised. And we have intervened in so many policies of government and we have continued to support the legislative agenda because as of today, any bill, whether it is the Finance Bill or any potent discussion, the CIBN would be invited by the National Assembly. However, I would need posterity to judge me on whether we have done well but I can say that the institute is going higher and higher and we would remain there.
What is your outlook for the economy for 2020?
We expect a better 2020 because the impact of the investment in the infrastructural sector would begin to materialise. We are beginning to see some improvement in power and we expect it to show in output. The fiscal and monetary policy will become better. The budget was passed on time and we expect that releases would happen as revenue come in to make sure those areas are covered.
But it is still tough and I cannot say it would be all rosy but we would begin to see positive direction. Inflation is down although it went up as a result of the border closure, which the institute supports; but that is a short-term measure and we expect that inflation should come down later in the year. Overall, we expect an exciting 2020 if the policies are carefully executed with the relevant laws that have been put in place. I am not overly excited but we would see positive growth this year.