Alhaji Suleiman Barau, Deputy Governor, Corporate Services Directorate, Central Bank of Nigeria (CBN) is the Coordinator of the Financial System Strategy 2020 (FSS2020), effectively harmonising the inputs of all stakeholders and collaborators in the nation’s most ambitious financial sector project.
As the name suggests, Nigeria’s economy is envisioned to grow into one of the world’s top 20 economies by the year 2020, as long as macroeconomic stability and recent reforms are maintained. Simply put, the FSS2020 initiative is the financing arm of Nigeria’s quest to be one of the 20 world’s top economies by the year 2020.
The veteran banker-cum-economist tells TheEconomy that the FSS2020 is largely on track in spite of the obvious challenges facing the nation’s economy. Barau, however, admits that as a strategy, the implementers may need to tweak aspects of the blueprint to achieve acceptable results within the expectations of Nigerians.
Excerpts of the interview, reproduced hereunder provide a succinct but adequate summary of the intent and achievements of the corps of the strategy’s implementation agencies working together to achieve the common vision.
The strategy has barely three years to its destination and Alhaji Barau already can name a slew of impressive achievements the FSS2020 has had and the impact on the nation’s economy.
This interview presents the workings of a home-grown blueprint designed to accomplish a crucial national assignment: the making of a financial system capable of launching Nigeria into a world-beating economy by the turn of the decade. It is quite worth the while of any serious enquirer into the prospects of the Nigerian economy, even in these trying times.
WHAT is the FSS 2020 about?
The Financial System Strategy (FSS) 2020 is a national economic reform programme conceptualized in 2006 to fast-track and enhance the economic growth and development of Nigeria’s financial system by the year 2020. This is sequel to the Goldman Sachs’ prediction that Nigeria would emerge as one of the next 11 big economies and probably one of the top 20 economies by the year 2025, if it is able to grow her economy at not less than 12.5% annually. It also predicted that the GDP could also grow to an estimated US$900 billion and per capita income of $4000. To attain this status, the Central Bank of Nigeria in collaboration with other key regulators engaged local and international consultants to craft the initial overarching strategy. Its vision is that by 2020, Nigeria’s financial system would be the safest and most diversified financial system among emerging markets, supporting the real economy while its mission is to drive rapid and sustainable economic growth primarily in Nigeria and Africa.
Based on the vision and mission statement, a report was produced that would help Nigeria to meet the predictions as earlier stated with three strategic objectives; namely, strengthen and deepen the domestic market; enhance integration with external financial markets; and promote sustainable economic development. The major stakeholders at take-off include the Federal Ministry of Finance, the National Assembly, the Securities and Exchange Commission (SEC), Nigeria Deposit Insurance Corporation (NDIC), National Insurance Commission (NAICOM),National Pension Commission (PenCom), Federal Inland Revenue Service (FIRS), Debt Management Office (DMO), Nigerian Stock Exchange (NSE), Deposit Money Banks (DMBs), Federal Mortgage Bank of Nigeria (FMBN), Bank of Industry (BOI), Nigerian Export-Import Bank (NEXIM), Bank of Agriculture (BOA) and leading development partners, while the key implementing institutions are the CBN, NDIC, SEC, NAICOM, PENCOM, DMO, the Small and Medium Enterprises Development Agency (SMEDAN), NSE, FMBN, FIRS and Financial Reporting Council of Nigeria (FRCN) formerly known as Nigerian Accounting Standard Board (NASB).
What has been the impact of the FSS 2020 so far?
The initiative has so far made the desired impact in the areas of mortgage, pension, financial markets (credit, capital and money markets), insurance, and MSMEs development as well as human capital development. Other areas of impact are information and communication technology (ICT) and regulatory reform. To be specific, some of the successes recorded are in terms of the introduction of Electronic Payment System in the financial system, E-dividend warrants in the stock exchange, the creation of the Mortgage Asset Registry linkage, Nigeria Mortgage Refinancing Company housing policy initiatives, introduction of market-making and creation of capital market data bank, development of risk- based capital adequacy framework for the market, and the deepening of domestic bond market through foreign and Naira-denominated bonds.
Others include the roll-out of the Takaful and micro-insurance, adoption of risk-based supervision by banks, initiation of the legal and regulatory framework through drafting of Quick Win Bills that were passed by the 7th National Assembly. The Bills are: the Nigerian International Financial Centre Bill, The Office of the Nigerian Financial Ombudsman Bill, the Electronic Transaction Bill. Other Bills are in the works as they are currently before the National Assembly like the Payment Systems Management Bill, The National Collateral Registry Bill for Secured Lending using Movables, The Nigeria Warehouse Regulatory Agency Bill, Securitization and Asset Backed Securities Bill, SMEDAN Amendment Bill and Factoring Bill. In addition, the FSS2020 Secretariat has organized various Human capital development programmes for heads of strategy on Strategy Execution and Project Management to develop capacity in the financial sector.
What are the on-going projects in the FSS 2020 initiative?
FSS2020 will continue to work towards the passage of the critical financial sector bills in order to have a proper legal framework for the industry. In addition, it intends to strengthen its collaboration with all stakeholders and key implementing institutions. For the insurance industry, it will collaborate with NAICOM to strengthen investors’ confidence in the industry. For the Pension Industry, we will collaborate with PenCom to promote the Micro Pension Scheme and deepen the Pension Assets and set out criteria for the use of part of Pension fund for long-term infrastructure development. For the Mortgage sector, support in the area of Mortgage Refinancing, provision of affordable houses and creation of a country-wide web for Mortgage Asset Registry (MARS) linkage. For the MSME, to grow small and medium enterprises, enhance their business standard and codes, support their funding and create wealth and employment opportunities. Also, we are developing a project called the Business Community- Based Credit Model. In addition, the financial market is collaborating with key regulatory financial institutions to ensure that both the money and capital markets enjoy minimum stability and new products developments and promote financial derivatives.
How far has Nigeria gone in its implementation? Specifically, at inception in 2006, 750 projects were proposed as part of the FSS2020 initiative. What percentage of these has been completed?
In general, less than half of the 750 initiatives as at 2010 had been implemented and /or initiated by the implementing institutions due to numerous execution challenges. But that is not to say that gains were not made, especially in the payment system, the pension system and a lot of things within the Banking industry and the legal and regulatory framework for the financial sector.
The year 2020 is three years away. Looking at what has been achieved so far, would you say FSS 2020 is still feasible within stipulated time?
Again, we must remember that, this is only as good as a strategy; nothing stops us from reviewing the programme if we are not getting the critical results that we aspire to achieve by 2020. But three years are still a long way from here. The important thing is that a solid foundation is being laid. Please, we must realize that the year 2020 is for the measurement of milestone around the financial industry which is a continuous exercise if we must join the comity of nations as one of the top 20 economies of the world.
What are the financial infrastructures already in place towards the establishment of an international financial centre in Nigeria?
The Nigerian International Financial Centre (NIFC) Bill which is the focus of the NIFC operation was passed by the 7th National Assembly. A lot of efforts in terms of the nature of the structure and operation as well as the management of the centre have been developed including the request for proposal. But these were all stalled by the non-assent of the Bill which ought to have given life to the take-off of the NIFC. To explain further, Africa has been largely excluded from the global financial system despite its massive size, population, abundant natural resources and returns potential. Thus, the desire to establish a Nigerian International Financial Centre to fill this gap and act as a catalyst for economic growth in Africa, especially sub-Saharan Africa. The envisaged NIFC will be an integrated, functional and full-service financial centre leveraging technology, superior legal framework and people to deepen banking, insurance and capital markets, just to mention a few. It is meant to be a huge physical and infrastructural development supported with the existing Banking, Capital Markets, Pension, Insurance and E-commerce successes.
What incentives are there for financial institutions wishing to come to set up shop in Nigeria in line with the FSS2020?
The proposed incentives for the NIFC include Competitive corporate and personal tax rates, competitive value added tax (VAT) on products and services, flexible expatriate quota limit, one-stop shop approach to business registrations and other permits, 100% repatriation of profits. The NIFC will also take advantage of the existing treatise and seek to create new ones, adopt internationally accepted investments regulations, provide information services department to offer low-cost, quality market research and information support, referencing, library etc. In addition, 100% foreign ownership and industry-specific incentives are available.
What natural and socio-political comparative advantage(s) does Nigeria have that makes it a suitable choice for an international financial centre?
The NIFC will be situated in a quarantined location within an existing city. It will be a joint venture project between the federal and the state governments. Our strength lies in our position as an economic power house in Africa. Nigeria is West Africa’s largest economy. Our in-depth understanding of sub-Saharan Africa is that no one knows Africa like Nigeria and our businesses and business men and women are quite active in establishing operations in several African countries. With over 180 million population, one in every four Africans is a Nigerian. This means that the population and demography of Nigeria would drive strong demand for products and services. There are also huge investment potential and opportunities across sectors. And not to forget the relative strength of the Nigerian financial system with several Nigerian banks across Africa.
What message do you have for investors on Nigeria’s readiness to kick-off an international financial centre in Africa?
Nigeria is said to be populated with skilled workforce, flexible labour market and high quality of business education. The business environment is conducive especially with government’s efforts at improving the ease of doing business, tax incentives and economic freedom. There is general competitiveness, market access with availability of varied financial products and currency convertibility.
How would you describe the relationship between the apex bank and other stakeholders towards achieving this goal?
The relationship between the apex bank (Central Bank of Nigeria) and the other implementing institutions has been most cordial and encouraging. And that is why we still believe there is a lot to achieve in the implementation of the programme. It is important to emphasize that it is not solely a CBN programme as all implementing institutions as I listed earlier are part of the process. On a daily basis, we interact at the level of FSRCC to see how we can improve the way things are done in the financial system especially as it relates to the activities of the FSS2020. It is critical for all stakeholders to be part of the FSS2020; we shouldn’t expect the CBN to drive it alone.
What level of collaboration, if any, are you having with multilateral finance institutions towards the actualization of this programme?
We have been collaborating with the World Bank, the International Monetary Fund (IMF), the Japan International Cooperation Agency (JICA), the Department for International Development (DFID), the German Society for International Cooperation (GIZ) and other development partners to midwife and engineer the international Financial Centre like that of Dubai, Qatar, Singapore and Frankfurt. It is important to emphasise the support we have so far received from some of the development partners, particularly, World Bank, IMF, JICA and GIZ in the areas of technical assistance and so on.
The Nigerian economy has had a rough patch in recent times. To what extent would you say the recession may affect the implementation of the FSS 2020 initiative?
The current recession is a temporary challenge which, hopefully, would be surmounted with strong fiscal and monetary measures in place. The FSS2020 does not exist in isolation of this challenge. Our budgetary allocation has been seriously reduced and some initiatives set to be achieved this year were prioritized and drastically reduced in view of paucity of fund. Also, the FSS2020 initiative in other implementing institutions is not spared by the current recession and every institution is compelled to prioritize its initiatives. However, with the current giant stride in the diversification of the economy, we are optimistic that the country would be pulled out of the recession and bounce back. Indeed, the FSS2020 Strategy is also currently addressing issues around promoting the development of products and channels that will create access to finance and remove the challenges affecting the growth of small businesses.
Hosting a conference of the magnitude of the World Banking Institutes puts the Nigerian financial sector on the global stage. How best can the gains of this event be appropriated towards achieving some of the objectives of FSS 2020?
This conference will give the FSS2020 programme the visibility it needs to reach out to the world on its activities. It is a platform to advocate and communicate to everyone the initiatives that are ongoing and existing transformational programmes sieved from the over 750 initiatives at conception. It would afford FSS2020 the opportunity to secure the buy-in of investors, regulators and operators, policy makers, development partners and government functionaries and even those who have been lukewarm towards the entire programme.