From Uche Usim, Abuja
Over a decade ago, the Federal Government set a vision for the country encapsulated as “Vision 2020”, which is to become one of the 20 biggest world economies by the year 2020.
Naturally, the Central Bank of Nigeria (CBN) has a major role to play in the achievement of this vision based on the intricate linkage between financial sector development and economic growth and development.
Consequently, the CBN launched the Financial System Strategy (FSS) 2020 in 2007 in order to strategically position the financial sector for the attainment of Nigeria’s Vision 2020.
Since the launch, CBN officials have been appointed as coordinators of this project and the incumbent Head of FSS 2020 is Alhaji Suleiman Barau.
Achievements
In measuring the milestones of FSS2020 so far achieved, we have to look at them from the existing sectors’ perspectives. For the mortgage sector, a robust secondary mortgage has been created with CBN and the mortgage operators are clearly streamlined, which has led to the establishment of the Nigeria Mortgage Refinancing Company (NMRC). Again, the Uniform Underwriting Standard, which was nonexistent has now been codified and introduced in the mortgage industry to regulate their practice.
In addition, the framework for the Mortgage Asset Registry has been developed to capture mortgage transactions on a common IT platform. The CBN has also introduced the categorisation of Primary Mortgage Banks into national, state and local government. The pension asset has grown from about N3 trillion in 2013 to N6.02 trillion in 2017. The Nigerian Sovereign Investment Authority (NSIA) has been appointed advisers to manage the deployment of pension funds into long term infrastructure programmes. Through sensitisation and mass advocacy, PenCom has stepped up prompt settlement of pension claims for retirees and is embarking on massive technical trainings using the IT platform to ensure prompt service delivery and implementation of the micro pension scheme.
For the insurance sector, the micro insurance programme (Takaful) and other compulsory insurance schemes are being implemented. Also, improvement in the settlement of insurance claims of policy holders is being pursued as confidence and trust of the holders, which were at the lowest ebb, have now been restored. There is also capacity building for insurance stakeholders and inclusion of insurance in the school curriculum for prompt service delivery. For the MSME sector, several intervention programmes to improve funding and access to finance for small businesses have been developed. Also, the creation of the National Collateral Registry for lendings and access to finance by SMEs is a huge milestone, especially with the passage of the Secured Lending Using Movable Assets Bill by the National Assembly.
Notwithstanding this milestone, there are some challenges militating against the achievements of FSS2020 objectives including but not limited to the following – funding and logistics, technical challenges, human capital development (especially the inability to attract talents from abroad to Nigeria), delays in the passage of the Identified Financial Sector Bills by the National Assembly is a drawback, policy inconsistency and lack of continuity.
International Financial Centre
It is envisaged that the Nigeria International Financial Center (IFC) will be a country within a country with its municipal laws to be dictated by it by its necessity. The following incentives are likely to be derived from any investor within the center, namely, competitive corporate and tax rates, competitive Value Added Tax (VAT) on products and services, currency convertibility, flexible expatriate quota limit, one stop shop approach to business registrations and other permits, 100 per cent repatriation of funds, access to Nigeria’s double taxation treaties, 100 per cent foreign ownership permitted, low cost quality information services and internationally accepted investment regulations.
Stakeholders’ contributions
The FSS2020 is just a platform that brings together all the key implementing institutions to achieve a common objective in the financial system. Since actual implementations are being done by these agencies, our attempt is to identify where there are challenges or issues or duplication of efforts. In that circumstance, the FSS2020 calls the attention of the affected institution to address it in the overall interest of the financial system. The FSS2020 initiatives were carefully tailored to align with the mandate of these institutions that have the responsibility to implement the identified initiatives, which is within the realm of the FSS2020 objectives.
For instance, CBN has achieved a lot in the areas of Payment System Vision 2020, which is an initiative of the FSS2020 along with the cashless policy. In the same vein, Securities and Exchange Commission (SEC) has been successful in the implementation of the e-dividend policy, which has always been one of the initiatives FSS2020 had been advocating, and so many others. Also, the funding of FSS2020 programme had been solely born by the CBN, until recently when some of the implementing institutions like PenCom started making contributions to the funding of FSS2020 activities; with others showing interest to do same. Most of the implementing institutions have been providing technical assistance to the running of the programme in the areas they are more specialised.
implementation
Initiate policies that will ease the doing of business in Nigeria and encourage investment within the country; ensure that there is an enabling infrastructure and guarantee maximum peace and security in the country. Also, the development plan of the government must have bearing with the needs and realities of the citizenry, especially issues of unemployment, microeconomic stability and capacity building in all sectors of the economy.
Since the idea of the FSS 2020 was first mooted in 2007, the expectation was high that the country, in the 10 years, would be closing to the transformation of its entire financial system.
But 10 years down the line, that was not to be. Although the nation still retains the potential to arise and shine in the rest three years of FSS 2020. To get the full gist of the initiative, a dissection of the strategy would provide such insight.
FSS 2020 is a comprehensive strategy aimed at repositioning the Nigerian financial system for domestic and external recognition to enable it compete globally and attract foreign investment for growth and development.
Its objectives, basically, are to transform Nigeria into a financial hub for Africa by 2020; to position Nigerian banks among the best 100 in the world by 2015, and to make Nigerian financial institutions competitive in all aspects of investments and credit granting services by year 2020. In other words, the financial system is expected to be the driver and catalyst that will lead to full diversification of the economy and gear the system for world class efficiency and relative safety by that magic year.
The key drivers of the proposal are credit market; SME financing; pension; mortgage market; capital market; insurance as well as money and foreign exchange market
“If we want to move to where the world is, we must do things that the world wants, says Oluwatoyin Jokosenumi, the Deputy Director/Head of Strategy, FSS 2020 Desk of the Central Bank of Nigeria (CBN), to drive home the point.
A cursory look at some aspects of FSS 2020, and how the strategy is expected to achieve its objectives, shows that, if the nation is committed to its implementation, the value chain is expected to stimulate business and create jobs. “In short, FSS 2020 is one of the catalysts to take us out of recession and depression,” added Jokosenumi.
He singled out a key component of the idea, Ombudsman: “This is a service within the financial sector. It covers all the financial system. It is to fast track resolution between customers and customers without going to court. If foreign investors know that dispute resolution in the financial system or e-payment can be settled without going to court, they will be willing to come to the country.”
To corroborate this, Mohammed Suleiman, the Director of FSS 2020, stated: “The credit registry has over N60 billion assets base. If the law (on FSS 2020) is passed, people can register their assets and the asset base may run into trillions. “Take Pension contribution, for instance, It is about N6.12 trillion. We want to start deploying the fund into infrastructure development with strong partners like the Nigeria Sovereign Investment Authority (NSIA) investing in infrastructure bond.This would make it secure. Out of the 36 states, only 14, and lately Kaduna, has keyed into the mandatory pension scheme. We are going to get states, Association of Local Governments of Nigeria(ALGON) and Governors’ Forum, among others, to make them key into the Pension Scheme. Afterwards, we can start to create Construction Bond for the pension fund.”
However, as lofty as the FSS 2020 seems, it is bogged down by the some challenges such as inadequate skills for financial products development (Capital Market); inadequate collaboration of regulators and stakeholders; inavailability of investible fund for long term financial products and increasing cost of transactions and operations. Weak risk management; low level of card usage on PoS and high ATM usage for cash transactions, physical insecurity and prevalence of financial fraud .The rest are low level of financial literacy and inclusion of low acceptability of mobile money at merchant locations; non existence of sound collateral management, inadequate legal and regulatory framework for the commodities market.
The biggest constraint, according to Jokosenumi, is non- signing of the Electronic Transaction Bill. Hear him:
“Things that would change the fortunes of the nation took eight years before they (the National Assembly) could even listen. After passing the bill at the tail end of the 7th Assembly, The president withholds his assent .If we donít have the law, we cant harvest all the benefits of the e-payment system.”
But despite the challenges, FSS 2020 is currently collaborating with CBN, Nigeria Deposit Insurance Corporation (NDIC), the Securities and Exchange Commission(SEC), the Nigerian Stock Exchange (NSE), Federal Inland Revenue Service (FIRS), Debt Management Office (DMO),Nigerian Commodity Exchange (NCX) and Financial Reporting Council (FRC) to increase the tempo in transforming the financial markets in the country.