After one year of his leadership at the Chartered Institute of Bankers of Nigeria (CIBN), Uche Olowu, president /chairman of Council, takes a review of the Institute’s activities and other issues in the banking industry, in this interview with Hope Moses-Ashike. Excerpts:
Can you in brief say some of the things you have so far achieved in the Institute?
Now, reviewing what we have done so far, on the first one which was roles and standards you are aware graciously the Bankers Committee has come out with the ethics and compliance certification which, as we speak today, about 15,000 people in the whole of the banking industry have written that examination; it is an annual pre-qualification like what avails in other climes that is renewed on a yearly basis.
We have started the pilot scheme from the managerial level where they have to take an online certification exam from the comfort of their offices.
The Bankers Committee approved it and it is running; every member of staff in the banking industry would have to pass through that training, so we have been able to start that but continuously we remind them about the high ethical standard of the banking profession.
We also reviewed our tribunal and investigative panel; some people are under investigation with a number found guilty. You would recall that we have delisted some members who have been found wanting and handed them over to the law enforcement agents to do their bit.
So these are areas of improving the ethical and moral conduct in our profession.
We are also on that initiative reviewing our extant law; the review of Act 5 of 2007 started last year when the Ninth National Assembly had not come in but now we are going to push for a review of that Act.
On up-skilling competences of the institute, like I said, it is very important we are not left behind in the fourth industrial revolution which is based on technology and the tech space is changing with speed.
We need to get involved because the whole design is to make sure user experience is simplified and that is also affecting every aspect of our lives because the way we behave, the way we transact and all that we do shape bank technology, making it very critical.
We have come up with some great initiatives to leverage technology in up-skilling the competencies of our members.
To that extent we have reviewed our syllabus and farmed it out to PWC to add content so that it is a globally accepted curriculum. The end being that if you are a holder of that flagship qualification you can go to any other place and it would be accepted.
If you look at the CBN governor ‘s five-year policy thrust, he has talked about banks recapitalizing in the next five years. What roles can CIBN play in ensuring banks are fully recapitalized?
The CIBN is a body, looking at its skilled workforce and regulating conduct but the regulator is CBN, not us. The best we can do is to support by advocacy to make sure our corporate members align with the regulators.
But as to compliance to the apex bank’s directive the banks don’t have any objection because they also know the need to recapitalize for the emerging businesses. They are going to the real estate sector and the MSMEs sector; if they have to fund these sectors then they have to recapitalise because one way or the other, if there are accidents along the way their share capital is the first buffer for the risk they are going to take. So for them to take additional risks in that space, they need to increase their capital and lucky enough the spectrum of 5 years is very optimistic that banks will comply and meet because it is for their own good that they do better businesses.
If your look at what has happened during Soludo’s era, it was N25 billion but now the naira has been devalued over time so the share capital vis-à-vis the kind of risk they need to take has to be increased.
So it’s perfectly aligned with that movement and change that is necessary and they have been given enough space and time to achieve this and I believe they would do so.
Are the banks not weary of the various contributions to different funds like the Agricultural Small and Medium Enterprises Investment Scheme (AGSMEIS) funds and others?
Banks are contributing in various interventions with the CBN spearheading it, but nobody has given credit to the banks for all they are doing.
I think they are playing in an economy that requires some dosage of intervention and it is not a short-term view but a long term view because the impact of these interventions would lead to greater economic activities.
I want to look at the perspective of investors’ feeling overly taxed, but capitalism is also changing and a lot of discussions are ongoing in that regard; is capitalism just about taking money out of the system? Or having a dosage of impact on the people?
The point is that those interventions are designed to jumpstart economic activities and this foundation would lead to growth and the money would come back to the banking system and the banks are having a long-term view on this.
This is similar to what US, China and other economies that are doing well/have done. There has been a lot of subsidy in China to their various manufacturing outfits and today the country is proud even though it took some time to reap the fruit of such efforts.
For me we should look from a positive view that this is going to lead to bigger returns for the Nigerian economy and the country’s financial system.
The LDR deadline is end of December which is very close, what are the strategies that banks putting in place to ensure compliance?
Fine, it’s clear that the banks have to review their portfolio. I don’t want to look at that directive as an over-regulation of the economy.
If you look at the regulation now it has some patriotic…designed to make sure that this economy gets jumpstarted.
The banks have been playing more in the fixed-income space, treasury bills and all that, borrowing the government and the government is exiting the domestic debt which means there is limited participation in that section of the market.
This is why they have to lend to the segment of activities that retain value for the economy like the real sector and the MSMEs.
It is matter of banks rearranging their portfolios and I am sure they are doing that and are going to comply.
If you look at ongoing campaigns, banks are trying to lend more to agriculture and if they do that their portfolio would go in the direction of CBN’s LDR requirement.
It was not just a fiat, the banks bought into it, I think they reached an agreement in the bankers’ committee, the banks are all ware and jointly agreed on it.
The impact would be felt to make sure this economy grows in the right direction.
There is an argument that the tier-one banks may not meet up with the directive, what is your take on this?
My point is this, there will be concerted effort. I agree with you because the big banks have lent out to the corporate sector, huge exposure to the corporate sector, and to rearrange the portfolio to suit the critical areas, the banks will have their 60 percent of deposits lent out. The big banks need it because they have huge liquidity so they are in a better position to meet the directive faster.
What that directive means is to lend, not particularly to the bottom of the pyramid, but to lend in other to create huge economic activities whether in corporate or retail ends.
I do not agree with those who say tier-one banks will not meet up; there is a misconception that 65 percent should go to MSMEs. It is 60 percent LDR.
The agric space is there and with that alone the banks can near the loan requirement benchmark. The mining activities is there also. So the question will be to review the credit architecture, to de-risk the preferred sector in such a manner that they will be motivated to lending out more.
And again trying to create a credit culture by saying that borrowing from one bank you must pay that bank before you can access loan in another, thereby ending an era where debtors hop from banks to banks without settling obligations. The banks will be talking to each other and the credit scoring system is there and then of course if one is a bad debtor, that person would be listed and would not get credit. So it is just a mechanism that has come to change how we view borrowing culture in Nigeria so I am expecting a very exciting time because now business entities know when they borrow money they should pay back because for me if you borrow money and do not pay back you deprive others that have very genuine cause to contribute their own quota to the economy.
What other activities do you see driving the banking sector going forward?
We have only struck the surface; if we increase our ability to bring the unbanked to the mainstream of financial services, with the help of BVN and all the various things we have done it is a lot easier for us to intermediate properly.
The real estate sector which gauges the heart of every economy has not been any good framework and we are now coming out with a framework for lending there. House ownership scheme is very critical because the multiplier effect of lending to the real estate sector is very huge.
We have the agric value chain, where we believe monetary policy and the fiscal policy will encourage domesticating value in Nigeria, so, that will have a lot of impact in the financial intermediation space.
We have the creative industry where the banks are looking to lend on account of our film industry being the third best performing globally. How do we export this? How do we ensure we give them the right funding to bring value to this economy?
Right now any economy depending on commodity will fail. I went to Singapore which virtually imports everything but with the right economic policies, services is ruling the world, the technological space is there.
So we have to broadly diversify the economy as this government is trying its best to and this would result in increasing activities in the financial landscape.
I believe we have to be sincere and motivated in making sure we tackle the huge unemployment problem we have; the economy need stop grow above population growth rate and there is no way this can be done without good financial system.
And then the advice is also that this greedy approach to issues should be done away with.
This economy is huge. If we get it right this is the next frontier for investors.
