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First-Class Central Bank Impossible In A Rotten Environment —Sanusi

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The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, was the guest lecturer at the Udo Udoma & Belo-Osagie's 30th anniversary lecture in Lagos. He spoke on the problems with the economy and his vision for the financial system.

On Nigeria's payment system
Looking at the payment system, we want to be a model to Africa and the rest of the world. You get on a plane (aircraft), you want to go to Kenya or Tanzania or South Africa. You don't bother to look for the Kenyan shilling or the local currency of that country to put into your pocket. No! You simply go with your card. And before now, if you are going out of Nigeria, you must have N10,000 in your pocket because when you come back to the airport and your driver is not there, God help you if you don't have cash. We keep going to the rest of the world with our cards and we never asked our own country is not like that? If you open an account with First Bank, you have a First Bank ATM, then you open with Zenith, you get a Zenith ATM. When you go to the ATM, you have to check your wallet and see if you have Fidelity card. Again, these are totally unnecessary structures. We had to break down the barriers. We had to force the banks to bring down the cost of using the ATMs. Of course there would be complaints. We want the banks to make money because I know more than anyone else that if banks don't make profit, they cannot be under the capital that will give them strong balance sheets. But that profit has to be made in the context of the overall economy prosperity of the country. If the economy itself is not on a sustainable key, those profits are not sustainable. You will have a boost and after two or three years, the banks will go down. So, the challenge is the one per cent or two per cent profit, which is the price to pay for the sustainability. When more people use mobile phones, ATMs, PoS, it means less money is spent on having big branches and air conditioners. It means less money is spent on counting money. And we see results.

The example CBN is showing with the cash-less drive

If you look at the CBN's balance sheet in 2009 when I took over, the cost of currency management was N49bn. In 2013, it was N35bn. In 2014, it would be N30bn. We are spending less money printing, transporting cash, managing and centralising cash. We have got more money now being transferred through electronic channels. Our concern now is how to put in checks and balances to minimise fraud because as you move huge money via electronic channels efficiently, you run the risk of fraud itself being more efficient.

The new biometric registration of bank customers
On Friday (today), I will launch a nationwide biometric project. In 18 months, we would have cracked a problem we have had for three decades-UNIQUE ID. We don't have a unique national identity card system in this country. Within 18 months, all of you registering with banks will have only one registration with the company and that is it -Your biometric data, your biodata and your photograph. And the data is available to every bank in Nigeria and every microfinance institution. You don't need to register again. Your grandmother in the village does not need a passport. She goes to an agent and the agents are not monopolised. It does not matter which bank you go to. If there is an agent in the village, she goes to him; with her finger, her name and her face, she is registered. If you send money to her, she puts her finger, her picture comes up and she collects her money.

But then, for this to work, we need bandwidth. So, we are about to conclude the commercial terms. The CBN will pay. And within six months, we are going to get NIGCOMSAT to drop Internet on each of the 774 local governments in Nigeria. We will buy Internet. Every PoS and ATM terminal will be on dedicated lines; so, we will have bandwidth and we will allow primary and secondary schools in the villages to have free Internet access. In every village, you can have PoS, ATM and a primary school pupil in a remote village or local government can have access to the Internet. It is for the governors to buy the computers but we will provide the Internet.

Making Nigerians know how to use these facilities
The solution is financial literacy, financial education. We have financial literacy day coming up. I have started a few things. You see me going to secondary schools to teach financial literacy. The financial literacy day is coming up on March 13. Every bank CEO, the CBN governor, deputy governors etc, we will all be in one school where we will teach financial literacy. As we have the financial literacy day, we will also have a financial literacy committee.

Low interest funds for businesses
This economy needs low interest money. We need it for infrastructure, we need it for manufacturing, SMEs, agriculture etc. In the last five years, the CBN has put on the table, at least N800bn of single-digit long term funding for these areas. Many SMEs have survived because of that. Large industries have been able to make a bold move. For example, a company wanted to take advantage of the new guidelines on sugar. It will take four years to see the first crop, and another three years to see the first cash flow. Now, which bank will give you a loan with a seven-year moratorium? They needed money and we put that money on the table of their bankers. They will get that money at an interest rate of seven per cent, 15 years and seven years moratorium. Another company wants to build a refinery, a petrochemical complex, a fertiliser plant; we put N50bn on the table for their bankers, you take the credit risk. We provide the liquidity; give them money for 15 years at seven per cent.

We put up a N220bn MSMEs fund because we thought microfinance had become too commercialised. You know there is this miff around microfinance; that somehow, if you don't give poor people education, health care; if you don't invest in agriculture, if you allow the microfinance banks to lend money at 40 per cent, they will get out of poverty. Microfinance only works within a broader, developed environment. So, we will provide the funding to MFBs at a low interest rate but tied to development projects – entrepreneurship training, community support, agriculture, etc. And 60 per cent of this money has to go to rural women.

Engaging commercial banks in this area
I said to the bankers that we have been talking about SMEs and the rest. And I told them I wanted us to challenge ourselves. Let the banks to come up with programmes that are targeted at women. I asked them out of the loans we have provided, how many of them are tied to businesses that have to do with women? I am talking of the women lawyers. Every weekend in Lagos, there are parties. They buy aso ebi. How many of us have looked into how aso ebi is sourced, financed etc and how we can plug these into business opportunities? How about catering? How many of us have looked at studying catering chains and lock into their cash flows? How many of us have studied them and targeted them and said between now and 2016, we will get eight per cent of it?

Concern about women empowerment
The issue of women is very important because we talk about financial and economic inclusion. We talk of the poor people as being the bottom of the pyramid. But if the poor man is at the bottom of the pyramid, under his feet, there is a hole; he is even below the bottom. We can't talk about financial inclusion without looking at the women. So, there are a number of things and a lot of work in progress in these areas. But I am pleased because in most of the things we have done, we have brought in the Bankers Committee, we are getting them to believe and buy intellectually into this vision; and within the CBN, we have got people to also understand that these are our primary roles. More importantly, the communication around the MPC, the communication around policies have got people to have certain expectations of the bank; people now expect the CBN to protect depositors' funds, people now expect the CBN to keep inflation down, people expect the CBN to continue to modernise the payment system. There is a point now that when you get to the cattle market, people pay with cards. And I think in the next few weeks, we are going to roll out cash-less in 30 states. And the phone will be the centrepiece of the payment system. 100 million Nigerians are on the mobile phones. We are still negotiating with the telecommunication companies on what role they can play and we can manage. My dream is that we get to a point where you go to a village, you enter a taxi, he drops you, and you transfer the fare to his phone and he lets you off because he knows he can go with that phone. But what is important or the message is that you can't have a first-class law firm, or a first-class CBN or a first-class business in a rotten environment. So, we have to start sweeping our little corners in any part we are in Nigeria. You sweep your corner, and if anybody has not swept his corner, you look at him and say, 'You, go and clean up the mess you have created.'