Lagos — Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi in this interview unfolds the areas Nigerian banks will focus on this year. Excerpts
What is the focus of the Bankers' Committee in 2013?
Our focus in 2013 remains the implementation of the financial inclusion strategy, continuation of the agricultural lending programme, moving towards the gas to power plan, privatisation of power sector and issues around policies and principles.
We still have a long way to go, but we are proud of the work we have done in the last four years. I do hope that this industry will produce the generation of central bank and bank chief executive officers that played a catalyst role in the development of the economy.
The Bankers' Committee has said that our focus would be on financial inclusion across the country. But there will be a special focus on Borno State on financial inclusion.
The Bankers' Committee will partner with the government of Borno towards financial inclusion in that state. Now, with the conclusion of the power privatisation there are a number of issues. The first is advising the government on funding of power transmission.
One thing that is clear to us and what we are going to advocate is that all the proceeds from the sale of power assets should actually be dedicated to improve power transmission system. Because there is a huge financial requirement for power transmission development and if $2.3 billion is dedicated to that, it covers a significant part of that cost.
Such decision should be taken by the Presidency and the National Assembly and not the Bankers' Committee and this would create the confidence that private investors require to invest in the integrated plant because they know that the big risk in the power value chain now is transmission.
A lot of funding is required. So fixing transmission is one, ensuring that we have funding for capital expenditure for generating plants that have just been set up is also key. The committee is working on financing and advising the sector.
On the agricultural sector, we will continue with our engagements with the state governments and continue to address the value chain process. There are outstanding issues and they need to be addressed. We need to improve the engagement with the federal Ministry of Agriculture and our resolve was to integrate our silos so that all stakeholders can get more value chains to operate. We shall continue with the work which we have started on the modernisation of the payment system, governance, competency, training and financing.
How does your intervention in the agric sector affect the rural farmers?
The whole idea of the intervention in the agric sector through NIRSAL is to address some of those things that have affected the growth of the sector.
One of those things that we have tried to do is to work with state governments and put those farmers into co-operatives so that they are able to raise silos as a cooperative. As a cooperative, they are able to get training, extension services, buy seeds and negotiate for fertilizers. Go to Kagawa, which is 40 kilometres from Kano, you will see how the state government has put together tomato farmers to get improved varieties and seeds. Now, we are looking at setting up a processing plant which will produce tomato and process it on-site. They are producing twice a year now, instead of once with irrigation. We give them seeds, fertilizers and they are able to access financing. But we must remember that agriculture and lending to the real sector is a journey and not a destination.
Two years ago, we set a target of getting bank lending to 10 per cent of the loan book of banks by 2017. As at that time, we were at 1.5 per cent. But today, we are at 3.58 per cent. So, as we continue to implement these reforms, we should get to our target by 2017.
What is the Bankers' Committee doing to ensure that lending rate is reduced to support the growth of SMEs and what would be the contribution of the committee to assist flood victims?
As far as the committee is concerned, Small and Medium Enterprises (SMEs) only survive or thrive in an environment that is conducive. If you want vibrant SMEs that can borrow from banks, we must fix the power problem, we must fix the agricultural value chain problem. Banks cannot continue to lend to SMEs that are not profitable because they have to continue to run on the generators and buy diesel, with bad roads and insecurity. So the environment has to be fixed and that would encourage banks to lend to SMEs. That is why we said there should be focus on power and we should get the reforms ongoing. A lot of work has been done on the power reform and the funds from the banks. The reform would not have happened if the central bank did not provide the funding.
The central bank paid for all the work that was done to privatise power by the Bureau of Public Enterprises. The objective is to get the power reforms completed and if that is done, then power supply would improve, cost of production would come down, industrial capacity would increase and SMEs would be able to borrow and service their debt.
On the interest rate, it is not a Bankers' Committee issue. Rates of interest are reflective of rates of inflation, therefore there is need to have stability in the system. As we begin to move to a low inflation environment, rates of interest would continue to drop and make it easier for banks to provide financing for the real sector.
On the flood, the Bankers' Committee has agreed that we would support. The CBN would put money into that pool, all the banks would put money into that pool and we would give the funds to the Flood Relief Committee that was set up by the President.
What is the Bankers' Committee's level of commitment to the stability of the financial system?
We affirm our commitment to a stable financial system that contributes to economic development and growth of the country. We commend His Excellency, President Goodluck Ebele Jonathan's economic reform agenda and associate with the objective of growing the Nigerian economy and creating jobs. The central bank has taken proactive actions to ensure that the financial system remains focused and committed to the goals of economic development and sustainability.
Effective collaboration and partnership across government, banks, private sector and key stakeholders is critical to achieve economic goals and objectives. We reaffirm our aspirations for transformation of the power, agriculture and the oil and gas sectors of the economy, increasing access to finance for Nigeria's under-banked and unbanked and to the principles of sustainable banking.
To consolidate our progress and achievement to date and address issues that remain, the Bankers' Committee will continue with a deliberate advocacy and partnering with the economic team to implement the economic reform agenda to grow the economy and create jobs. We have defined clear objectives and targets for 2013 and agree on the results and outcomes we expect to achieve and assigned responsibilities for implementation. We will continuously monitor our progress on implementation as well as the impact of our actions on Nigeria's economic development goals and objectives.