President, Bank Directors Association of Nigeria (BDAN) and Chairman of Fidelity Bank Plc, Mustapha Chike-Obi, in this interview aired on ARISE NEWS Channel, decried the indefinite payment of levies by banks to the Asset Management Corporation of Nigeria (AMCON). The pioneer managing director of AMCON also spoke on the state of the Nigerian economy, among other issues. Nume Ekeghe presents the excepts!
Nigeria’s GDP, according to stats by NBS, grew by 5.01 per cent in Q2 2021. What’s your take on this, especially as this is the biggest GDP growth in six years? Is it an indication of improved business activities and what are the measures needed to sustain this growth?
Well, this is unalloyed good news. No matter where you are, you need to start progressing from someplace, and people are going to tell you that you started from a low base or you didn’t start from a low base. But the fact that we can grow five per cent from any base is very encouraging. So, I think this is very good news.
There is a silver lining, congratulations to all those involved, and congratulations to the Nigerian government for the enabling policies, including incentives given by government, that helped to achieve the growth.
This is good news if you situate it with the fact that inflation has been moderating at the same time, which is still quite high even though it didn’t rise in the last report. So, from the economic standpoint, this is very good news, and I compliment all those involved, including the Nigerian people who have taken their lives back after the devastation of COVID-19.
Do you see the feat as an inflation-led growth?
Well, it’s a real GDP growth, that is after it’s been adjusted for inflation. The nominal GDP was much higher, so it’s adjusted for inflation, which makes it a real growth, and it’s impressive.
Can this be sustained and can we have double-digit growth anytime soon?
It is unlikely that we would sustain the five per cent growth without significant expansionary policies. I think there’s work to be done with the expansionary side of the economy. I think that the fiscal authorities are focusing too much on raising revenue, and that would impact the economy down the road.
As for double digit, it is not going to happen except all hands are on deck and committed to double digit expansion. I expect that next quarter, we would probably get a three per cent growth and then we will level up around two and half to three, given the current policies.
We are not aggressive enough in terms of expansionary policies to see the five per cent sustained. One of the issues we raised earlier was that the inflation rate is still high, although you may say something has been achieved in that regard based on the statistics of the National Bureau of Statistics (NBS). With the way the GDP is measured, you have nominal GDP and real GDP.
Real GDP is nominal GDP minus inflationary impact. So, anytime real GDP is positive, it’s a number that has been adjusted, and the inflationary impacts have been taken off. You can have high inflation-driven growth, but it shows up in GDP. Real GDP doesn’t grow if inflation is very high.
Congratulations on your appointment as President of the Board of BDAN. What is your take on the EFCC instruction which stated that come September 1, banks would be held liable for any institutional fraud within the banks, not just depositors alone?
Let me talk about BDAN. I am honored to be appointed president, that’s usually a role that’s reserved in the past for the so-called tier-one banks. So, the fact that a Fidelity Bank Chairman is the President of BDAN is very encouraging for Fidelity Bank.
It’s an institution that I don’t think many people know much about but I believe it’s one of the most important corporate platforms in Nigeria.
My mission is to really expand on what people have built on BDAN and make sure people know what BDAN is, and that BDAN represents the interests and policies of the banks, not just the bank directors. We need to create a better image of banking in Nigeria and I think BDAN is the platform to do that.
So I have a lot of plans for BDAN going forward. I am much honored and I think that Nigerians will hear and feel more of the impact of BDAN in the years going ahead.
I think that the current Chairman of the Economic and Financial Crimes Commission (EFCC) is doing his best to make sure people know where he stands on certain issues and I think it was a useful statement, which he told the banks.
According to him, “Whatever you have done in the past, we will look at it but what you will do in the future, especially going into an election, is very important to me. And let nobody sin anymore.” I think the first word in his institution is economic in nature and I think that he is also a partner in growing the economy by making sure bad practices are eliminated.
So, I encourage the proactive dialogue he has initiated with the banks and I think that bank MDs and banks should take note that those are the things that are important to a partner in their economic growth.
Can you speak more on your plans as BDAN President?
For BDAN, nobody should take a job like the President of BDAN without having a clear idea of where they want to do. And one of the things that are problematic for banks today is the Asset Management Corporation of Nigeria (AMCON) levy. And it’s strange that I am talking about AMCON levy since I was the initiator of the AMCON levy.
But when we initiated the levy, we had a 10-year plan for banks to contribute to the AMCON. It is now open-ended and I think it will be useful for the banks, banks shareholders, AMCON and CBN to come up with a definitive plan on how much longer these levies will last. Is it another five years or another 10 years? Because an open-ended commitment that becomes the second or third largest expense item for banks is not helpful, and many banks today that are paying the levy were not around at the time of AMCON.
So, there must be some equity about making people pay these large sums of money that’s open-ended. I will like to engage the CBN and AMCON particularly to come up with a plan that shows definitely when this AMCON levy will cease so that the banks can plan. As this open-ended thing is uncomfortable for banks and they won’t say it because of fear of the regulators, but I think that as BDAN, we can discuss that.
The one that concerns me the most is that every government agency is trying to raise revenue without considering the impact it has on the overall economy. I think that while we are arguing about Value Added Tax (VAT), government is raising taxes. However, if you overtax an economy without growth, what happens is that the economy will not grow because government is a very useless spender of money. Private sector spends money effectively more than the government. So, taking money from the private sector to the government is not the way to grow the economy. We need to have a discussion where the private sector and the public sector can do things together to grow the economy.
The current administration does not have an economic adviser. Instead, there’s an economic advisory body. Do you think that at the policy level, enough attention is being paid to the economy in terms of its importance? Secondly, as the President of BDAN, how much challenge does security pose to your operations?
Well, let me say that I have always been surprised that the President of Nigeria had never appointed a Chief Economic Adviser. It may be cosmetic or not, but it’s important when you’re dealing with something that you show people that you care about it. That has always surprised me but I am sure they have their reasons.
I think Nigeria’s primary issue is not security, it’s not corruption, it’s the economy. There’s no country in the world with a robust economy that has security issues. There’s no country in the world with a robust economy that has corruption issues. If your economy is growing and people have the hope for a brighter future, they tend not to engage in criminal activity, they tend not to engaging in corrupt activity, they tend not to engage in issues that will compromise the security architecture of the country.
So, I think that corruption and security challenges are a function of lack of economic direction, and I think more efforts should be directed towards fixing the economy.
If we have the double-digit economy we spoke about so glowingly, I promise all Nigerians that the security challenges will be minimised, corruption will be minimised and all this agitation will be minimised. My issue has always been let’s focus on growing the economy at double-digit, let us get together to do it, let’s get the next president in 2023 who has an economic vision. Let us get the best economic mind irrespective of the party to run this country so that we can address serious issues and this partisan stuff that everybody is talking about has not helped us and will not help us.
What role do you envision that BDAN will play in what you just described, and how can the existing vacuum be filled?
Well, first of all we need to project the image of banks better. We also need to make sure that banks are playing their roles in the economy. We need to partner with government agencies as a banking group to make sure that it’s difficult to steal money; it’s difficult to hide and launder stolen money. We need to do many things as banks to show that we are true partners in the economic growth of Nigeria, and not just profit-making enterprises.
It is a step at a time. I just started this and one of the first things I want to do is to review the constitution of BDAN. We need to have a policy arm, a research arm, a legislative arm, so we can engage more proactively in those issues to enable the banks properly play their roles in the society.
We have been seeing the proliferation of FinTech in the country. Are the banks threatened with this development, and why are they not investing in FinTechs?
There’s a difference between FinTech and FinTech companies, which you just said. FinTech is just financial technology and every bank uses it and every time you do internet banking, it’s financial technology you’re using.
Fintech companies, in my opinion, are companies that are devoted solely to doing things that involve financial technology and they don’t do other traditional things that banks do, like traditional finance.
My feeling is that eventually all banks will be using financial technology and will be doing everything that the FinTech are doing today.
There are one or two successful FinTech companies but they are not many. For every two or three you mention, I can name a 100 that have failed.
As banks, we are not afraid of financial technologies as people think. I am not and Fidelity Bank is not afraid of financial technologies that are emerging. The truth is that we will adopt the ones that make sense to us. The key for us though is that the Central Bank of Nigeria has to allow us to close some branches across the country because now the idea of branch banking is not as effective because people can bank without going to the branches. You go to many branches now and they are empty. So, one of the things we have to look at is the cost of maintaining branches as opposed to the cost of using financial technologies and I can assure Nigerians that we are a FinTech and we are going to be FinTech users going forward, but we are not threatened.
Do you think the economic advisory group of the presidency has been effective. What should be the appropriate role of the state governments in achieving inclusive economic growth?
Let me address the issue of the Economic Advisory Council, which is composed of very high-minded intelligent people.
I always felt that Presidents are not good consumers of policy documents of the kind that emerge from that kind of body. Those work outputs from them should have been going to a Chief Economic Adviser who will sit there every day and condense their output, so the president can act on it.
Giving a president a briefing every three months is not actionable. I was always worried that although the council was well-constituted, the channels for their output to convert into action are not there. Unfortunately, my fear has proven to be true because they don’t seem to have had the impact that we all hoped they would have when they were constituted. So, I wish they would have a Chief Economic Adviser who they will submit their output to and then that Chief Economic Adviser will condense it for the president’s action.
The problem is that federal regulators are too powerful in this country. And so, in the end and beyond the power that the regulators wield at the federal level, we don’t have the ability for states or even companies to do much without running to federal government for this approval or that approval.
Look at the Value Added Tax issue, which the court has said clearly that states should collect and the Federal Inland Revenue Service (FIRS) is objecting to it and insisting it should be paid to FIRS. So until the federal regulators realise that they are partners in business and that they are not dictators in business, I think we are going to have to keep running to the federal government to help with the growth of the economy and that is unfortunate. The states and private sector are practically helpless in the face of rampaging federal regulators.
As President of BDAN, what are your primary concerns about the image of banks in Nigeria today?
Well, banks are seen as predatory, they make money and pass the cost on to customers, they break the rules and make profit. I think that image may well have been partially justified in the past. But as BDAN, we will always make sure that banks are doing the right thing and once we start doing the right thing, and that image of doing the right thing is projected, then the banks will get it right.
So, it’s a two-way process. There is need for internal review of our practices and how we treat our customers and how we treat the economy. There is also need for awareness creation on the things we are doing right and the things we intend to continue to do right. So, the first step is an internal review process, which we will undertake with all the banks as soon as possible.
