It’s a very special pleasure and honour for me to have been invited to join you at this 12th Annual Conference. Very few professional gatherings can make the scale of impact on our collective prosperity and national development as the Chartered Institute of Bankers can.
Indeed, your professional association would have been number one among professional associations, but for the fact that it is second only to the Nigerian Bar Association. (General laughter).
But quite seriously, we are at a crucial point in our economic history as a nation. After emerging from a recession, we have attained a reasonable measure of macroeconomic stability; positive growth for almost two years.
We have also seen inflation falling sharply from close to 18% to about 11.02 today. But the challenges remain significant. Our population is growing at about 3% per annum and roughly 1.7 million young men and women are coming every year into the marketplace. We will have the third-largest population in the world in just under three decades from now. We all know what we need to do, no question at all. Every one of us knows what we need to do. We must create good jobs and opportunities. We must rapidly industrialize, we must provide the environment for local businesses, small and large to create wealth and value.
We must also address the concerns of young entrepreneurs and startups, and the small traders, the millions at the bottom of the economic value chain, the millions at the bottom of the pyramid, those who sell from their trays and tabletops all over the markets in our country. We must develop the housing sector both to provide much-needed shelter, but also to boost local opportunities in the local building and building materials sectors. We know that we must ramp up our agricultural production and provide a more efficient farm-to-market value chain, again creating millions of jobs in farming and agri-business generally. We cannot successfully do any of these things without a massive improvement in our infrastructure; in power, rail and roads.
But little can be done with industrialization without cheap credit to MSMEs in particular. Our retail and service sectors need consumer credit to scale up. If you have to pay cash for everything from TV sets to cars, consumer spending will remain stunted and so will the retail sector. The major housing reform which we are undertaking with the Family Homes Fund needs a robust mortgage finance market, the bottom of the pyramid traders need microcredit and financial inclusion.
With the signing by Mr President of the African Continental Free Trade Agreement, there are great opportunities and challenges. We have great opportunities to extend the reach of our banking and financial services across Africa where we are already making waves, and export more where we are already exporting, especially in fast-moving goods, cement and even FinTech now.
The Service sector accounts at the moment, for up to 50% of the GDP of most African countries and has accordingly been included as part of phase 1 of the AfCFTA, that’s the African Continental Free Trade Agreement. In phase 1 of the negotiations, 5 priority areas have been identified for liberalization, namely: transport, communications, tourism, financial services and business services.
The approach that is being taken is that countries will make offers to liberalise these sectors and also agree on regulatory changes that will make it easier for the African sector operators to do business in other African countries. That’s an interesting phase because it involves the financial sector, how that will be negotiated.
Phase 2 of the negotiations will focus on investment, competition policy and intellectual property. Although it’s a bit early now to know what the negotiations will yield, it’s clear that the objective must be to ensure national treatment for African service operators in the different African countries where they will operate. This holds potential for the Nigerian banking sector which is already present in several African countries and is poised to take full advantage of the level playing ground that the AfCFTA will offer them.
But we must improve the infrastructure to expand our manufacturing base and produce cheaper. This is crucial because we are also the target market for all of Africa. We are already dealing with the threat of smuggling. Practically all of the smuggling we are seeing come naturally from our next-door neighbours. But we will now have to contend with the threat of dumping with the AfCFTA.
This is why the negotiations going on at the moment are crucial. And I think it’s important for the banking sector to pay attention to what is going on, and to participate in this entire process. We already have fairly enormous participation from manufacturers association and several other trade and professional organisations, but I think the Chartered Institute of Bankers must pay close attention to the negotiations that are going on because a lot of it will affect the banking sector in Africa.
But the sum and substance of what I am saying is that our financial services sector now has to also redefine itself, challenge itself to partner with the public sector and players in the capital markets, to reap the immense benefits that await our economy and our people in these changing times. We must jointly think through how to really lend to MSMEs and the entire real sector. How to deepen capital markets and financial mediation, how to partner in developing our mortgage market? What do we need to do to deepen consumer credit, hire purchase schemes? How about lending to Agriculture? The CBN has already, in partnership with some banks, successfully given loans to almost a million farmers under the Anchor Borrowers Programme, but the need is far greater. There are a series of measures we have taken to unlock lending to critical, labour-intensive sectors of the economy.
In Agriculture in particular, we have seen how the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending, otherwise known as NIRSAL, has given the banking industry greater confidence to unlock new capital for Agro-business entrepreneurs, or those who are called Agro-preneurs today, by de-risking value chains across the nation.
The immediate dividend of the enhanced Agricultural productivity is, of course, the sharp increase in the population of employed and banked Nigerians while reducing our foreign exchange expenditure on food imports, which can now, of course, be expended on our extensive infrastructural needs and other investment programs for further job creation and enhanced financial inclusion.
We are leveraging on the success and the knowledge and experience of our work with NIRSAL to also fundamentally reform the Solid Minerals Development Fund (SMDF). This is to de-risk value chains in the Solid Minerals sector with a Risk-Sharing mechanism to secure lending from the banking sector for private capital in-flow and build new allied industries. We are also in discussions with PENCOM, and some of these discussions we’ve had with some banks already along with PENCOM is to de-risk pension funds in order to enable lending for infrastructure development.
There’s a lot that’s going on. There’s a lot of engagement that’s going on now, but we really need to move this forward. We really need to start doing and implementing a lot of what has been happening. Of course, there is a great deal of shyness because this is new territory for everybody. But I think that we really need to move quickly and we really need to move efficiently.
Financial inclusion, of course, is the key to realizing so much of what we expect as an economy and the President promised in his June 12 speech, to lift 100 million people out of poverty in ten years. That is the commitment of the government of Nigeria. We started that journey with our collaboration with the Bank of Industry to deliver the GEEP programme, better known as TraderMoni and MarketMoni, by providing microcredit to almost 2 million petty traders. The Bank of Industry has now brought this huge bottom of the pyramid into the formal financial system and that has been recognized worldwide. Recently, GEEP won the AfDB prize for financial inclusion because of the work that they did with TraderMoni. This is a huge task.
Going forward, we now need to embark on financial training for all of those who have been brought into the net. As you know, when they’re given N10,000, just N10,000, when they payback, they are given N15,000, N20,000 and it goes all the way. But at that point they’re given their BVNs, they’re formally included in the financial system, they’re formally included as formal traders, and so we are able to give them financial training and all that.
Now, the important thing, and I have seen that sometimes we do not recognize the real needs that there are, and for very long, that bottom of the pyramid has been completely excluded and yet informal trade is significant. Of course, the most significant part of trading that is going on in our country. But what we found is that these individuals who are given the money, are traders who have small inventories, very small inventories.
As I was saying the other day, I was in Kebbi State to launch the TraderMoni scheme there and I was speaking to a lady who was selling small vegetables. I asked her, “how much her entire inventory was?” Everything she had on her tray was N500. All that she was going to sell from morning to evening that day was N500. It was very evident that this is someone who obviously wants to work, but there’s no way you’re going to ever make any significant impact on your own life or the lives of your family if your inventory is only N500. That’s the story of petty trading, of informal trading across the country.
If you heard in Abuja, I met a lady who was selling Ponmo in a bucket and I keep telling this story everywhere I go. In her little bucket, she had Ponmo (I hope everyone knows what Ponmo is by the way? Because people are looking at me rather strangely.) Anyway, for those of us who know what Ponmo is, she was selling this in her little bucket and I asked her how much her entire inventory was; N3500. So, I said to her, “how do you make profit from N3500?” She didn’t even answer the question. She just pointed to another lady standing beside her who had her own Ponmo in a little bowl. So, she was just telling me look, “I’m a big player here. If you have any problems, you can ask this lady how she’s coping!”
So, there’s a real need out there and we must devise the methods by which those at the bottom of the pyramid can be uplifted and we must look at how we can even resource the entire value chains.
What we find is that the petty trader, who just has a trade, is usually selling little bits and pieces from many of the manufacturers or fast-moving products and we found that just by giving them credit, we can resource the whole value chain all the way up. And we’re working with the Bank of Industry, with several players in the market, especially the marketing services people to identify how to work through those value chains so that more and more of these people can move from petty trading, higher up in the value chain as they’re resourced. All of that will depend on what the banking industry is prepared to do, how adaptable the banking industry will be to giving loans, especially microcredit.
Everything is changing very quickly. There is no question that the world we are living in is disrupted daily by technology. But Nigeria is in a very fortunate place. We are today the second largest users of the internet on our mobile telephones. We are the second largest. We also, possibly have the largest mobile banking business already. In other words, because we have such a large number of telephone users – I think it’s about 117 million at the last count – there’s a huge market out there, the FinTech business and all of that, that appears to be somewhat outside the formal banking system.
I’ve been speaking to a lot of the TelCos and banks and there’s a fair amount of tension going on because obviously the TelCos appear to want to take the lunch of the banks and everyone is saying you can’t go that far, you can’t do this, you have to become a licensed bank and all that. And a lot of the FinTech companies are doing incredible things across borders and we are at a point where you cannot stop the progress that is going on. There’s no way. So, we must sit down and develop policy that will enable the FinTech companies to grow, policies that will find space, proper space, for the TelCos also to grow.
The banking industry is being disrupted, and it simply must change. And this is happening everywhere in the world. The response of many banks is a very progressive one and the Central Bank also.
We established something called the Creativity and Technology Group as part of the Industrial Council. What has happened is that a lot of the young men and women, especially in the FinTech and Entertainment who are part of that group, are showing how we can modify policy, especially policy that will help them to be able to not only access credit but also change some of the rules for banking licenses and other financial services licenses. That way, FinTech companies can play a better role, so that all these companies that are involved in the financial sector can play a more active role and we think that is the way of the future.
So, we are living in exciting times. These times are the best times for business and for the Nigerian economy.
I am extremely pleased to see that the theme of this conference seeks to address the changes that we should expect, not just from the banking sector, but from the entire economy. I want to congratulate again and commend the Chartered Institute of Bankers and the leadership of the Institute for forward-thinking and for thinking so clearly about what the future will be.
So, in the next few days, I hope that we will see and hear a lot of very interesting and exciting deliberations and conclusions that will enable this country to solve the problems that face it and to take up all of the opportunities that await it.
It is my very special privilege to formally declare open, this 12th annual conference of the Chartered Institute of Bankers.