By Nume Ekeghe
The Deputy Governor, Financial System Stability Directorate, Central Bank of Nigeria, Mrs. Aishah Ahmad, has advised Nigerian banks to continue to design their business models to enable them manage disruptions and make positive environmental and social impact in their quest to deliver value to their stakeholders.
She made the call while delivering her remarks at a Webinar, organised by the Centre for Financial Studies (CFS) of the Chartered Institute of Bankers of Nigeria (CIBN).
Ahmad maintained that banks and other financial institutions can only survive disruptive events if they fully embrace sustainability principles, stressing that this had become even more critical during periods of significant disruptions such as the current COVID-19 pandemic ravaging the world.
According to her, though primarily a health crisis, the negative spill-over effects on business and the economy are complex and pervasive, considerably slowing economic activities in most countries.
The Webinar tagged CIBN Advocacy Dialogue Series 2.0 focused on “Enhanced Sustainable Banking (ESB) Model in the Event of Major Economic and Business Disruptions’.
Ahmad, told over 800 participants who connected to the programme through Zoom and YouTube that prior to the disruption caused by COVID-19 pandemic, financial services was undergoing significant evolution.
The Deputy Governor of Central Bank of Nigeria was of the view that banks have had to modify their business models to address changes caused by innovation, digitalisation, new entrants by fintechs, increasing regulation and changing needs and behavioral patterns of customers.
These developments have triggered very aggressive changes in the financial services industry, introducing significant dynamism into the industry’s value chain – changing mode the production, delivery and consumption of financial products and services, she asserted.
She also stated that the CBN has been at the forefront of entrenching sustainable banking principles in the Nigerian banking industry through the implementation of the Nigerian Sustainable Banking Principles (NSBP), which has formally been adopted by the CBN and 33 banks, discount houses and Development Finance Institutions.
In his intervention, the Vice Chairman, FMDQ Group, Mr. Jibril Aku, who noted that the Nigerian economy was at the risk of a second recession foresaw a new financial order post COVID-19.
To stimulate economic growth and opportunities, Aku spelt out the critical steps policy makers, the banking sector and capital market should undertake as a matter of urgency.
For policy makers, the Vice Chairman FMDQ called for the recalibration of national economic strategy to reduce dependence on oil/gas sector and boost non-oil sector growth and enjoined strategic investments in health sector with a focus on domestic production.
He also stressed the need for investment in digitalisation of education in public schools to prevent the collapse of educational system as well as unified and market determined exchange rate regime.
He admonished the banking sector to ensure effective implementation of sustainable banking principles with a focus on economic, social and environmental and governance issues to boost reputation and investor confidence.
While he saw the current situation as an opportunity for digital transformation and growth in e-banking offerings, Aku also emphasised the need to increase investments in cyber security to reduce fraud risk.
Furthermore, Aku who is also the Chairman of SunTrust Bank Limited listed the imperatives for the capital market to include the need to support the creation of new funding mechanisms to support economic recovery; work with regulatory and market shareholders to create incentives that support the growth of a green economy; ensure that listed companies report on compliance with environmental, social and corporate governance criteria, and enhance capacity building and knowledge enhancement in sustainable finance.
The CBN had at the last Monetary Policy Committee (MPC) meeting said the anticipated economic damage due to the COVID-19 pandemic requires vigilance to mitigate emerging risks in the banking system.
Ahmad, had in her personal statement at the meeting, said the effects of the pandemic, which has continued to spread, “requires heightened vigilance by the bank to mitigate emerging risks and other complementary measures such as the restructuring of credit lines for existing obligors and provision of liquidity backstops as and when required to safeguard the financial system.”
The deputy governor had said stress tests conducted by CBN staff under low to moderate scenarios had revealed that the financial system remained resilient in the face of tightened financial conditions. However, she stated that under severe stress scenarios, certain vulnerabilities in the system were evident.
These, according to her, included reduction in earnings, deterioration in asset quality and decline in capital adequacy.