In my second term in office, part of my pledge is to work to the best of my abilities in fulfilling these objectives.
On Macro-Economic Stability, over the next 5 years, with a key emphasis on supporting improved GDP growth and greater private sector investment, we intend to leverage monetary policy tools in supporting a low inflation environment, while seeking to maintain stability in our exchange rate. As a result;
- Decisions by the Monetary policy committee on inflation and interest rates will be dependent on insights generated from data on key economic variables.
- We would also strive to continue to sustain a positive interest rate regime to the delight of our important stakeholders.
- Monetary policy measures embarked upon by the CBN will be geared towards containing inflationary pressures and supporting improved productivity in the agricultural and manufacturing sectors.
- Working with other stakeholders, we intend to bring down the cost of food items, which have considerable weight in the Consumer Price Index basket.
- Our ultimate objective is to anchor the public’s inflation expectation at single digits in the medium to long run. We believe a low and stable inflationary environment is essential to the growth of our economy because it will help support long term planning by individuals and businesses.
- It will also help to lower interest rates charged by banks to businesses thereby facilitating improved access to credit, and a corresponding growth in output and employment.
Exchange Rate Stability
We will continue to operate a managed float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on our economy.
- We will support measures that will increase and diversify Nigeria’s exports base and ultimately help in shoring up our reserves. While the dynamics of global trade continues to evolve in advanced economies, Nigeria remains committed to a free trade regime that is mutually beneficial; but, particularly aimed at supporting our domestic industries and creating jobs on a mass scale for Nigerians.
- We intend to aggressively implement our N500bn facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings.
- We will launch a Trade Monitoring System(TRMS) in October 2019, which is an automated system that will reduce the length of time required to process export documents from 1 week to 1 day. This measure will help support our efforts at improving our non-oil exports of goods and services
- We will also work with our counterparts in the fiscal arm in supporting improved FDI flows to various sectors such as agriculture, manufacturing, insurance and infrastructure. These measures while supporting improved inflows into the country, will help to stabilize our exchange rate and build our external reserves.
Financial System Stability
A resilient and stable financial system is imperative for the continued growth of our economy given the intermediation role that financial institutions play in supporting the needs of individuals and businesses.
As a result,
- We will continue to improve our onsite and off-site supervision of all financial institutions, while leveraging on data analytics and our in-house experts across different sectors, to improve our ability to identify potential risks to the financial system as well as risks to individual banks.
- In the next five years, we intend to pursue a program of recapitalizing the Banking Industry so as to position Nigerian banks among the top 500 in the world. Banks will therefore be required to maintain higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system.
- With the rise in digital payments and cyber security threats, we will develop a robust mechanism that will help ensure that the necessary safeguards are put in place by banks and financial institutions to protect against loss of data, fraud and cyber incursions in their respective systems.
Robust Payment System Infrastructure
An efficient payment system is vital to the effectiveness of monetary policy interventions.
It also helps in reducing the cost involved in payment for goods and services.
The Payment Services Management Department in the CBN will work to enable the buildup of a robust and secure payments infrastructure in Nigeria that is reliable and easy to access.
- We will reinvigorate our efforts at driving the cashless initiative across the country, due to the immense efficiency gains that will be derived from it, and the impact it could have on our financial inclusion drive.
- Given Nigeria’s large size, and the cost involved in building bank branches across the country, the payment system department would support the spread and utilization of digital modes of transactions so that every Nigerian will have access to financial services.
- A strong emphasis will also be placed on improving speed and efficiency of payments channels while working to ensure that digital channels are safe and secure. This will help to build confidence in our nation’s payment system.
- In order to improve the utilization rate, we will continue to ensure that payment channels are interoperable, which will enable individuals with digital devices to transact across different banks or payment modes.
- Through measures such as the cashless initiative, USSD, Mobile Banking, agent networks and Payments Service Banks, Nigerians can expect to see significant improvements in the payment systems infrastructure over the next 5 years.
- We will also work with NIBSS, Banks and Fintechs in developing a regulatory sandbox. This sandbox will enable us to test financial innovations by Fintechs and Banks in a controlled environment, in order to assess its impact on the growth and safety of our financial system.
We will continue to work to safeguard the stability of our financial system, while supporting the development of a payment system infrastructure that will improve access to credit for all eligible Nigerians.
Targeted Development Finance
Building on the success of our Anchor Borrowers Program and other intervention programs geared towards supporting the growth of our agriculture and manufacturing sectors, and in keeping with the recent Presidential Directives, we intend to:
- Boost productivity growth through the provision of improved seedlings, as well as access to finance for rural farmers in the agricultural sector, across 10 different commodities namely: Rice, Maize, Cassava, Cocoa, Tomato, Cotton, Oil-palm, Poultry, Fish, and Livestock/Dairy.
- Our choice of these 10 crops is driven by the amount spent on the importation of these items into the country, and the over 10 million jobs that could be created over the next 5 years if efforts are made to expand cultivation and processing of these items in Nigeria. So far, we have held series of engagements with importers and producers of these products. Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2bn in 2018 to $12bn by 2023.
- Our intervention programs will strengthen the linkage between farmers and agro-processors/manufacturers by ensuring that the output of farmers is purchased by agro-processors/manufacturers.
- This linkage with agro-processors is necessary in order to prove that farmers are creditworthy individuals with bankable contracts. It will also help to unlock private capital flows from financial institutions to farmers, in order to enable farmers meet orders from agro-processors.
- To complement the progress made so far as well as the lesson learned from the conduct of previous programs, we intend to strengthen the capacity building arm of the Anchor Borrowers Program, which will help support better farming practices and higher outputs for farmers.
- Through the credit bureaus, we will also leverage technological tools such as analytics in identifying and supporting farmers that have exhibited good credit behavior, in repayment of their loan obligations. This measure will improve their ability to source for financing from commercial banks.
- We will introduce a non-oil export aspect to the anchor borrowers’ program, which will be focused on linking smallholder farmers to international buyers.
- To discourage the activities of smugglers, who bring in restricted goods into the country, perpetrators and their affiliated companies will be blacklisted and denied access to banking services in the entire country.
- This renewed focus of our intervention program, coupled with increased support for research and development on improved seedlings and enhanced farming practices, will help drive exponential growth of our agricultural and manufacturing sectors.
Over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the payment service banks, we intend to broaden access to financial services to individuals in underserved parts of the country.
- Our ultimate objective is to ensure that 95 percent of eligible Nigerians have access to financial services by 2024.
- We will also intensify our financial literacy and consumer protection programs such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilizing these services, which will enable them to make well-informed choices.
- Besides providing valuable information to banking customers, we are committed to developing and enforcing strong rules to protect consumers.
- Our banking supervisory and consumer protection department at the CBN will ensure that dispute resolution mechanism in financial institutions are not only efficient but also timely, in order to maintain the confidence of the Nigerian populace in the utilization of banking services.
Access to Credit
Beyond our intervention programs, we are also working to encourage banks and financial institutions to lend from their balance sheet in order to support the growth of critical sectors of the economy, such as Agriculture, MSMEs and the Real Estate Sector. Greater emphasis on improving consumer spending and business investment by MSMEs is critical to sustainable double-digit growth of the Nigerian economy.
- MSMEs today constitute over 90 percent of businesses in the country. Through the national collateral registry, over N400 billion worth of movable assets have been registered by MSMEs in the registry. We intend to triple this number over the next 3 years.
- Our ultimate objective is to broaden the range of collaterals that MSMEs can provide to banks in order to obtain credit.
This will help improve access to credit for farmers and MSMEs, and it will also support the growth of their respective businesses.
- In order to ease the constraint poor identification has on the availability of credit to prospective banking customers, the CBN will support an aggressive enrollment of prospective banking customers in the informal sector onto the BVN system.
- The current enrollment of 38 million unique banking customers will be expanded to 100 million over the next 5 years. The ongoing partnership with NIMC will also enable integration between the two databases.
- This effort will improve the comfort level on banks in providing services to an expanded customer base. It will also aid in the development of a credit profile for banking customers,
- which will assist in improving access to credit for creditworthy borrowers by banks.
Lending to MSMEs
- The recently established NIRSAL microfinance bank will also work to improve access to credit for MSMEs in rural communities, which will help stimulate improved economic activities.
- In order to reduce the constraints which high account receivables, have on the growth and operations of MSMEs, we will support the development of a Trade Receivables Portal, which will enable MSMEs trade their invoices with financial institutions in order to improve their cash flow and support ongoing operations of their respective businesses.
- Today, less than 10 percent of adult Nigerians who have a bank account, utilize financial products offered by banks, such as credit cards, personal loans, mortgage loans, auto loans and consumer durable loans.
- Consumer credit is critical to the growth of our economy as it will help boost consumer spending
- accelerate improved investments by businesses, who seek to meet the demand of consumers. Improved consumer spending and investments by businesses will ultimately help to spur the growth of our economy and support our job creation efforts.
- In order to spur lending to consumers, a lending framework will be announced by the CBN, under which large departmental stores, automobile companies, equipment leasing companies, in partnership with financial institutions, and the credit bureaus, will be able to provide credit facilities at reasonable interest rates to consumers. This will help to spur consumer spending and aid our efforts at driving the growth of our economy.
- The framework being developed will support the emergence of a digital, less burdensome process for consumers who seek to access such facilities.
- Credit patterns of consumers will be shared with credit bureaus to assess repayment patterns and credit histories of customers. This will also enable financial institutions to provide additional credit to creditworthy borrowers.
- Financial institutions will also be mandated to disclose to consumers the upfront charges involved in accessing such credit facilities, in order to prevent consumers from being abused by money lenders.
- Fellow Nigerians, you will agree with me that a lot of equity is currently tied down in mortgage assets which are today entirely cash backed. In our effort to support the growth of Nigeria’s real estate industry , the CBN will work in developing a framework that will enable banks to securitize mortgage loans, which can then be sold in the capital markets.
- Adequate safeguards will be put in place to reduce the risk of delinquency in the mortgage backed assets that will be sold in the capital markets.
- These measures will reduce the credit and liquidity risk to banks of holding these assets on their balance sheets and improve the amount of funds available to support mortgage loans. It will also reduce the high cost of obtaining mortgages for banking customers.
I will like to conclude my remarks by stating that although these goals are onerous and tasking, the CBN will remain committed to fulfilling its mandated objectives of price and exchange rate stability. We will continue to work to safeguard the stability of our financial system, while supporting the development of a payment system infrastructure that will improve access to credit for all eligible Nigerians. Nevertheless, additional emphasis will be placed on supporting greater growth of our economy and in reducing unemployment, through targeted interventions in the agricultural and manufacturing sectors.
Over the next five years, this will be the task for the Central Bank of Nigeria under my leadership, and we intend to do our very best to achieve these objectives.
I thank you for your attention.
Godwin I. Emefiele
Central Bank of Nigeria