•Says deposit-taking fintechs must be capitalised with N25 billion
•Curtail potential threats from financial technology companies, others, Ahmed charges regulators
• Banking crisis may have contagion effects, NDIC warns
•W’Bank: Nigeria’s economic growth continues to suffer from underperforming oil sector
•Hails country’s apex bank’s interventions, lowers GDP projection to 3.3%
•NNPCL: Oil theft, vandalism putting Nigeria in terrible situation, advocates capital punishment for offenders
•Justifies engagement of non-state actors in pipeline surveillance contract
Ndubuisi Francis, James Emejo, Sunday Aborisade in Abuja and Nume Ekeghe in Lagos
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele yesterday stressed that the rapid evolution of financial technology (fintech) companies has continued to alter the financial landscape globally.
He said developments have continued to disrupt traditional ways of offering financial services in the banking landscape, describing the disruptions as, “very disturbing.”
However, in an apparent response to the concern raised by Emefiele, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has challenged the financial sector regulators including the CBN and the Nigeria Deposit Insurance Corporation (NDIC) to sharpen their regulatory tool kits to enable them respond to any potential financial crisis arising from the activities of fintechs, among others.
Both the minister and the apex bank boss spoke at the opening of the International Association of Deposit Insurers (IADI) Africa Regional Committee (ARC) Technical Assistance Workshop with the theme: “Normality in Turbulent Periods: The Stabilising Role of Deposit Insurance’’, which was organised by the IADI-ARC and hosted by the NDIC in Abuja.
This was just as the World Bank yesterday stated that Nigeria’s growth prospect was being stifled by its underperforming oil sector which it noted was also creating fiscal imbalances for the country.
Nevertheless, the Washington-based multilateral institution also praised the direct interventions being carried out by the CBN in the agriculture and manufacturing sectors, stating that it provided some support to private investment which boosted economic activities.
But the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company Limited (NNPCL), Mr. Mele Kyari, yesterday said Nigeria is currently in a state of calamity over oil theft, pipeline vandalism and other criminal activities in the Niger Delta region.
Speaking further, Emefiele stressed the need for the banking industry regulator as well as supervisors to guard their loins to, “ensure that we are able to put in place strong regulatory framework and practices that should help nip in the bud, the unfortunate incident that may happen as we try to allow the growth of fintechs in Nigeria”.
Emefiele also said, several financial products were being provided by fintechs, including digital payments, international remittances, mobile money, peer-to-peer (P2P) lending platforms, among others.
He said the CBN had released a series of fintech-based policies and guidelines including the regulatory sandboxes, open banking and cybersecurity, among others, in its determination to ensure a robust regulatory landscape without stifling innovation.
The central bank governor, however, insisted that fintechs who want to be deposit-taking institutions, “should come forward and become a bank – bring N25 billion and be a bank.”
He said the CBN remained proud to be associated with the workshop because of its firm belief that it would provide a platform for brilliant ideas and experience-sharing, especially of the four-dimensional shocks shaping the current global economies and that of Nigeria with obvious linkages to the safety and soundness of the banking systems as well as the role of deposit insurance.
Emefiele maintained that early detection of problems in banks, timely intervention, contingency planning, crisis preparedness and management were not a particular country or agency’s affair, but requires strong and effective collaboration among the major stakeholders within a nation’s financial services industry and the government.
He added: “Our deposit insurance system (DIS), as a component of financial safety-net arrangement, is the risk-minimiser model and has been very effective in the discharge of its mandate. The CBN and NDIC represent key components of Nigeria’s financial safety-net arrangement.
“That partly explains why we have been able to successfully resolve the series of financial crises that confronted us with satisfying results.
“It is instructive to mention that the CBN and NDIC have been able to deal with the emerging crisis in the nation’s banking system. The 2009 banking crisis, 2004 banking consolidation exercise and their subsequent resolutions, provided a reference point of the benefit for effective collaboration between the central bank and deposit insurer.”
Emefiele, also challenged the IADI-ARC to increase its advocacy by reaching out to many countries in Africa to join the league of countries with DIS, adding that this would go a long way in strengthening the regional and continental financial systems for the benefit of all.
He said this became necessary as cross-border activities had resulted in the interconnectedness of financial systems and made it crucial for the systems to be on the same page, by putting in place mechanisms for safeguards against any contingencies.
In her presentation, Ahmed maintained that the challenges posed by disruptive technologies could not be swept under the carpet, urging regulators to install early warning signals that would help to take immediate measures in case of any crisis.
According to the minister, “We are living in very turbulent times; we are facing right now about three different types of crisis – the lingering effects of the COVID-19 pandemic, climate change, the Russia/Ukraine war, and also hyperinflation across the globe.
“And crisis is beginning to become normal; and what this means is that we should also be prepared to address the crisis. We also have disruptive technologies; This is a reality today and cannot be swept under the carpet.”
She added that, “fintech has come to stay and we have to deal with it.”
Ahmed said the theme of the workshop was particularly pertinent, in the light of recent socio-economic challenges that have continued to undermine the safety and stability of the financial system across the globe, accentuated by the lingering effects of COVID-19 pandemic, the Russian-Ukraine war, global supply disruptions and climate change challenges.
She added that these had posed myriads of challenges and risks to the safety and stability of the global financial system, pointing out that the banking sector remained pivotal in supporting the real economy through the provision of innovative products and services to all relevant stakeholders.
The minister, however, noted that the fiduciary nature of banking business, coupled with increased social-economic challenges across the globe, had increased the risk of banks’ failure, with significant implications for depositors’ losses and erosion of public confidence in the banking system.
She said the negative impact of the challenges on economic growth and financial sector stability in most economies of the world, raised a number of questions concerning the role of DIS in contributing to financial system stability.
According to her, this equally demonstrated the important role played by the deposit insurance system, as a component of financial safety-net arrangements in most jurisdictions across the globe, given that, depositor protection is a critical element necessary for maintaining and restoring financial stability.
She also pointed out that the Nigerian economy, like others, felt the brunt of the global economic distortion, having to go into recession twice in the space of five years.
Ahmed, however, noted that given the resilience of the nation’s financial system, Nigeria came out of the recession within months.
She said, “We also make bold to say that despite these economic challenges, no depositors’ fund was lost given the effectiveness of our agencies, most especially the CBN and the NDIC.”
On his part, the Managing Director/chief Executive, NDIC, Mr. Bello Hassan, said presently, economies globally are stressed, and some still recovering from the impact of COVID-19 pandemic and the spill-over effects of the Russia-Ukraine war.
He said, “As we are all aware, the fabric of global financial stability is constantly being threatened by one form of crisis or the other. The potential threats at present, include the Russia-Ukraine war, cyber threats posing increasing risks to financial institutions, slow growth, increasing inflation and tighter global financial conditions which may all exacerbate pre-existing vulnerabilities.”
He said growing financial inter-connectedness had also shown that banking crises can have contagion effects, adding that a system-wide approach to crisis management, involving collaborative efforts of the financial safety-net participants and regional deposit insurance systems remained highly imperative.
Hassan, noted that both the 2007 –2009 global financial crisis and the COVID19 pandemic had exposed the increasing relevance of deposit insurance in stabilising turbulent banking systems and as a buffer for financial system stability.
He said the crises further led to the review of some of the design features of explicit deposit insurance systems in many countries to accommodate emerging developments in the domestic and global financial system.
Also, in her remarks, the Chairman of NDIC, Mrs. Ronke Sokefun, noted that in a world where financial systems were inextricably linked, robust cooperation was required to ensure financial system stability, and by extension growth and stability of the global economy.
She said it was against the backdrop that the NDIC needed to keep working through forums like the IADI and other collaborating agencies to share experiences, strengthen our supervisory tools, monitor the effectiveness of insured institutions’ Contingency Planning and Crisis Management Framework as well as ensure our readiness for timely, and prompt intervention to engender financial system stability.
She added that it was noteworthy that the NDIC has for a long time since its establishment in 1988, collaborated with other international standard-setters and deposit insurers.
Sokefun said, “For instance, the NDIC has collaborated in capacity development with the IADI itself, the ARC members, the Financial Stability Institute, the US FDIC, the Islamic Financial Services Board and several other international agencies. Also, the Corporation has Memorandum of Understanding (MoU) to share information on capacity development with deposit insurance agencies of Ghana, Poland, South Korea, Taiwan and Uganda.
“It is in the spirit of such collaboration that this workshop was organised so as to serve as a forum to dissect pertinent issues, share experiences, compare notes and elevate our understanding of the role of deposit insurers in early detection and timely intervention; contingency planning and crisis management; crisis simulation to strengthen operational resilience; and contingency planning framework for a safer, and more resilient financial system, that is supportive of sustainable economic growth in each jurisdiction.”
W’Bank: Nigeria’s Economic Growth Continues to Suffer from Underperforming Oil Sector
Meanwhile, the World Bank has stressed that Nigeria’s growth prospect was being stifled by its underperforming oil sector.
The bank also praised the direct interventions being carried out by the CBN in the agriculture and manufacturing sectors.
But the Brentwood institution in its latest Africa’s Pulse released yesterday, downgraded Nigeria’s growth prospects to 3.3 per cent a decline from 0.5 percentage points lower than the April 2022 Africa pulse forecast.
On Nigeria’s growth predictions, it stated: “Economic growth in Nigeria continues to suffer from an underperforming oil sector. Oil output was down by 11.8 per cent year-on-year in the second quarter of 2022 against 26 per cent in the first quarter.
“After dropping for the fifth consecutive quarter (from 1.4 million barrels per day in the first quarter to 1.2 million in the second quarter), oil production slowed further in August to a 50-year low of 1.13 million barrels per day, behind Angola (1.17 million).
“It continues to lag the production levels of last year at 1.6 million barrels per day. Despite elevated oil prices, the country’s net official oil earnings have not increased. Several headwinds, such as increasing petroleum product subsidies deducted directly from the gross oil earnings, limited investment in oil infrastructure, and theft on the pipelines, prevent the economy from realising gains from rising oil prices,” it added.
It projected that real Gross Domestic Product (GDP) growth in Nigeria was expected to slow from 3.6 per cent in 2021, to 3.3 per cent in 2022.
On the stance of Nigeria’s monetary authority, it noted that the interventions by the central bank supported economic growth and boosted the value-chain of the agriculture sector.
It added: “Direct central bank lending to the agriculture and manufacturing sectors provided some support to private investment.”
On Nigeria’s debt, the World Bank noted that the assistance extended by multilateral institutions to International Development Association’s eligible countries in the form of the Debt Service Suspension Initiative was dwarfed and as result, the number of countries in or at high risk of distress continues to rise as the risk of a financial crisis mounts.
It stated: “Across the sub-regions, debt edged up in Western and Central Africa (AFW), while it contracted slightly in Africa Eastern and Southern. Excluding Nigeria, oil-exporting countries are expected to reduce government debt significantly.
“Due to its heavy reliance on imported petroleum products and constrained oil production, Nigeria did not benefit from favorable terms of trade induced by the Russia-Ukraine conflict. The downward revision partly reflects headwinds from rising food and fuel prices and a contractionary monetary policy.
It further added: “Nigeria, the largest African oil producer, is set to emerge from the current account deficit of – 0.4 per cent of GDP in 2021 to a surplus of 1.1 per cent in 2022, and edge up to 1.2 per cent in 2023.
“The current account balance is expected to improve in 2022 and 2023 relative to 2021 due to higher oil prices, which offset lower oil output. Higher import prices of food and refined petroleum products weigh on the current account surplus.
“A mega-refinery project that is expected to be completed in 2023 will boost external earnings by drastically reducing imports of fuel and at the same time contribute to the regional supply of petroleum products.”
The report noted that the fiscal deficit for the region was projected to decline slightly from five per cent of GDP in 2021, to 4.8 per cent in 2022 and was set to shrink next year to 4.5 per cent and further to 3.2 per cent in 2024.
It noted that the surplus in oil-rich countries at 1.2 per cent of GDP, excluding Nigeria at -5.9 per cent and South Sudan at -3 per cent, the countries were projected to register fiscal surpluses this year.
“Although revenue from the oil sector constitutes half of the government revenue in Nigeria, the government deficit will stay elevated throughout the forecasting horizon mainly due to persistent problems in the oil industry, since the non-oil sector has not been able to make up for the loss.
“The deficit is predicted to remain stable in non-resource-rich countries, at 5.5 per cent in 2022. It will widen in mineral and metal resource-rich countries by 0.8 percentage point this year and narrow to 3.9 per cent of GDP in 2024 as the consolidation process becomes effective,” it added
NNPCL: Oil Theft, Vandalism Putting Nigeria in Terrible Situation
In the meantime, Kyari has said Nigeria was in a state of calamity over oil theft, pipeline vandalism and other criminal activities in the Niger Delta region.
He explained that the situation had led to serious low production in the oil and gas industry.
Kyari stated this when he appeared before the Senate’s joint committees on Petroleum (Downstream), Petroleum (Upstream) and Gas.
He concurred with the recommendation made by Senator Albert Bassey Akpan (PDP Akwa Ibom North East), that capital punishment should be put in place for offenders.
He said the crime on oil theft in Nigeria had been on for many years and specifically about 22 years ago, but the dimension and rate it assumed in recent time was unprecedented.
Kyari said, “As earlier stated as a result of the oil theft, Nigeria losses about 600, 000 barrels per day which is not healthy for the nation’s economy and in particular, the legal operators in the field which had led to close down of some of their operational facilities.
“But in rising up to the highly disturbing challenge, NNPCL, has in recent time in collaboration with relevant security agencies clamped down on the economic saboteurs.
“In the course of the clamp down within the last six weeks, 395 illegal refineries have been deactivated, 274 reservoirs destroyed, 1,561 metal tanks destroyed, 49 trucks seized and the most striking of all, is the four kilometeres illegal oil connection line from Forcados Terminal into the sea which had been in operation undetected for 9 solid years,” he said.
He explained further to the committee that in addressing the menace, the NNPCL carried out aerial surveillance of the affected areas and saw the economic saboteurs carrying out their activities unchallenged and unperturbed.
“The problem at hand is not only security but social as locals in most areas where the illegal refiners operate, unknowingly serve as their employees by mistaking them for operatives of licensed companies for oil exploration and production in the area,” he stated.
He further added that being a problem requiring urgent solution, the Cambodia and Mexico models of involvement of non-state actors was being adopted by NNPCL with involvement of three private security companies.
He said, “It is not abnormal to involve non – state actors for protection of oil pipelines and other critical infrastructure as done in Cambodia and Mexico which produced desired results.”
On non – remittances from NNPCL into the federation account since January, Kyari told the committee members that the company was not owing Nigeria, but rather the country owed it N1.3 trillion
In his closing remarks, the Chairman of the joint committee, Senator Mohammed Sabo Nakudu (APC Jigawa South West), told the NNPCL boss to get prepared for oversight functions on Port Harcourt and Warri Refineries claimed to have been rehabilitated.
Virtually all members of the three committees attended the interactive session which lasted for about four hours.