Central Bank of Nigeria, Governor, Mallam Sanusi Lamido Sanusi, who spoke with journalists at the end of the 5th annual retreat of the Bankers’ Committee in Calabar recently, appealed for moderation on speculation around his likely successor. Obinna Chima presents the excerpts
What level of progress has been achieved on the cashless policy?
The whole cashless programme was rolled out with a number of things. First of all, these are products that were designed for customers and to make things easy for them and easy for the banks. So it is about financial literacy and financial education. What we have found in places like Lagos is that people have bought into it. Everybody understands it is now easier to receive payment on a card than to have a pile of cash in your shop or move cash around in the market.
The risks are too high. It is easier for the banks and reduces the cost of handling cash. We have multiplied in million times, the volume and value of transactions that are done on point of sale (PoS) terminals since we started cashless Lagos and we don’t think that, that will be a problem in Nigeria. We have PoS that are biometric-compliant and don’t need to have someone with a strong level of education. We also have mobile payment. So, there are alternatives that are designed to include those that we want to get into these channels.
Recently, we discovered that there are so many mutilated naira notes in circulation and it looks like the central bank has stopped the production of mint?
You know there was a process that had commenced when we had redesigned notes that were going to be printed and as a result of the approval we received, we had actually stopped the production of the notes and gotten our printers to prepare to print the new notes. As a result of all the noise around the N5, 000 and coins, that process was stopped. We did not print the new notes. I know some people think we have already printed, but we did not print the new notes and we did not award the contracts for the new notes. But then, our printers now have to go back to the production of old notes. I think that would soon be a matter of the past. We have re-ordered for banknotes and I think they have started arriving and probably you would have seen some improvements on that by now.
You said the bankers' committee will sustain the real sector growth. What strategies have been designed to support the real sector?
Well, if you take agriculture for instance, we started in 2009 with lending at less than one per cent and now it is about 3.6 per cent. We did have a target of getting to five per cent of banks’ loan books by 2015 and seven per cent by 2017. So there are clear targets and we are moving towards those targets. As for small and medium scale enterprises (SMEs), the amount lent to SMEs, when you discount the loans provided through the central bank and Development Finance Institutions (DFI) is negligible. So frankly, any progress in that area is welcome. There are some banks that have established a strong capacity to lend, many have not. We recognise that for SMEs, just like agriculture, the issues go beyond providing finance.
You have to deal with things like electricity, infrastructure, the tariff regime, security, fiscal incentives and one of the ways we would like to do this is to engage with the Ministry of Industry, Trade and Investment and the Ministry of Finance, to see how we can move together in developing SMEs. So, if you have an industrial cluster with 1,000, 2,000 or 3,000 factories, which has electricity, infrastructure and incentives, it is easier for the banks to go and lend in a safe manner.
What is the level of compliance by banks on the sustainable banking principle and are there sanctions for banks that fail to implement this initiative?
Sustainable banking is a journey and not a destination. Every single day, you are improving. If you look at our nine principles, we have environmental principles, social principles and governance. So you have principles for example around risk management and disclosure and accounting practices; around women and gender issue; around environmental footprints; around taking environment into consideration in banks’ lending; around stakeholders’ engagement. So, it is an ongoing process. At the moment, what I can say is that the Nigerian banking industry is actually used as role model and benchmark for sustainability.
Now, does this mean that we are where we want to be? No, we still have a long way to go. It just means that other regulators have not taking this with the same urgency that we have taken it. We have rolled out guidelines for example on lending to power, lending to agriculture and lending to oil and gas. Banks will not lend to you if, for example, your business involves bush burning because it destroys the environment, or anything that will lead to environment degradation. So, we have made a lot of progress, but we still have a long way to go.
But despite your efforts in the agric sector, there are still complaints by farmers that they are not getting enough loans to support their business. What is the central bank doing in that area?
Well, I am happy we are in Calabar. I will request if you can, that before you leave Calabar, you interview the Commissioner for Agriculture of Cross River State. There is a 5,000 hectare plantation being developed by a Nigerian businessman in Calabar that is financed by Nigerian banks. It is an integrated farm that would produce pineapple. Now, the reality is that we are moving from a situation where there was actually no lending to one in which we have gotten to 3.6 per cent of a hugely increased portfolio. On Commercial Agricultural Credit Scheme (CACS) alone, banks have given out, using the central bank money, N200 billion. You’ve got NIRSAL and the number of companies that have benefitted from the guarantee that have been issued by NIRSAL.
The entire growth enhancement support that financed the fertilisers for the farmers, based on the subsidies of the government, all the agro-dealers got their loans from banks and I think the banking industry this year gave about N6 billion to N7 billion, just for the agro-dealers to promote fertilisers. I know the banking industry is financing the tomato paste and tomato manufacturing factory that Dangote is putting up near Kano. So, there are so many things that are happening. I do know that it looks like it is not enough because agriculture is 42 per cent of GDP and four per cent lending is frankly still a long way to go. We need to increase it. But when you look at where we are coming from, you have to accept that there has been a lot of progress.
Your tenure will soon come to an end, and also that of one of the deputy governors and some bank chief executive officers. What has the Bankers’ Committee put in place to sustain some of the progress made since the inception of this retreat?
I think one of the greatest tests of leadership is to always plan institutionalisation and while the individual remains important for having a vision, for defining a strategy, for driving everyone and bringing everybody together for implementation. I think a very important aspect of leadership is to make sure that those that are part of this process buy into the process and believe in it and are convinced that, that is the way to go. Both at the level of the central bank and the bankers’ committee, everything we have been doing have been a result of a process of debate and understanding of what is in the best interest of the Nigerian economy. It is not the view of one man or the idea of one man.
The deputy governors that you see and the chief executive officers of banks have been part of everything we have done in the last five years. The departure of Aigboje Aig-Imoukhuede from Access Bank has been planned with the transition to a successor and his departure from the committee has also been planned. There will be a new chairman of this committee and the committee will continue and next year the strategy is defined and what we are going to do is clearly articulated. We do think that the transition at the central bank, the banks and bankers’ committee would not be destructive.
However, I would like to urge the press to be a bit moderate in some of the speculations and write-ups. I know sensational news sell newspapers, but you must remember that where the central bank is concerned, too much sensation around these things can have an impact on the economy and stability far beyond what you intended. For example, unnecessary speculation or rumour can affect the exchange rate, it can affect the flow of capital and whoever the next governor is, you would have placed him in a difficult situation ab initio by creating instability. So my advice is to moderate some of sensation around that and I am sure we will have a smooth transition.