The Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi has warned other central banks’ governors not to lower their guard in view of the lingering European debt crisis and the continuing threats of global financial crisis.
Mallam Sanusi while speaking at the First Ordinary Meeting of the Association of African Central Bank (AACB) in Abuja said that sound economic policies as well as tailored and collaborative measures were needed to shield the economies of African countries from the downturn and return them to the path of sustainable growth.
Sanusi explained that the facilities granted to the African Central Bank Study Group group/steering committee should be viewed in the context of the determination of the Central Bank of Nigeria to ensure the creation of a single bank for the African continent and achieve monetary integration.
In his speech, the Commissioner for Economic Affairs of the African Union Commission (AUC), Dr. Maxwell Nkwezalamba, while commending the CBN for its continued support to the joint AUC/AACB committee, emphasised the need for the study group to complete its work on time.
Dr. Nkwezalamba expressed the hope that the Study Group/Steering Committee would continue to have the necessary human and financial resources to complete its work, assuring that the AUC was on its part ready to discharge its responsibility in that regard.
He disclosed that the protocol and statute for the establishment of the African Investment Bank, already adopted by African Heads of State and Governments, was awaiting ratification. He added that the statute for the establishment African Monetary Fund was being worked out and would be finalized by the meeting of the African Ministers of Finance and Economic Planning coming up in Addis Ababa, Ethiopia, in the next few weeks.
In his remarks, the Governor of the Reserve Bank of Malawi, who is also the Chairman of the AACB, Dr. Perks Ligoya, said that the AACB meeting was being held in Abuja, instead of Dakar, Senegal, because of the favourable environment provided by Nigeria, and extolled Sanusi for the hospitality. In his words: “We want to thank you very much for the hospitality given to us all. The choice of Nigeria (for this meeting) was not by mistake but because of the good work that Nigeria, in collaboration with the AUC in providing facilities for the Study Group that is working towards the joint strategy for the establishment of the African Central Bank.”
He enjoined Governors of Central Banks of Africa to take interest not only in economic affairs but also in the unfolding political developments on the continent. He frowned at the removal of the Governors of Central Banks of Zambia, Madagascar and South Sudan against the subsisting legislations governing their appointments. Dr Ligoya said this is a threat to the autonomy of the central banks and could have negative impact on the financial stability and economic development of those countries.
Meanwhile the Central Bank of Nigeria (CBN) banking sector reform has received some positive commendations from Standard & Poor’s Rating Services. In a recent report by the UK-based credit rating agency stated that after more than two years of CBN support, the Nigerian commercial banks are once more engaging with the economy.
It pointed out that through the CBN’s culture of proactive regulatory oversight Nigerian banks are increasingly being encouraged to lend to the agricultural and industrial sectors that further benefit the economy, pointing out that domestic lenders now have access to dedicated lines of funding at discounted rates to support energy, power and agriculture-related projects.
It noted that owing to the CBN’s efforts, the banking industry and its regulation have improved significantly, adding that additional measures were taken to strengthen the banking sector. The report commended the proactive effort of the CBN Governor, Sanusi Lamido Sanusi, in instituting longer-term reforms that has improved regulatory oversight, encouraged consolidation through merger of failed banks with stronger, more-viable entities, and changed provisional guidelines. For example, banks are to transit to International Financial Reporting Standards (IFRS) by year-end 2012, according to report, is seen as a step towards uniformity of reporting standards, thus engendering increased transparency and better comparisons.
The rating agency said that rated banks’ bottom-line profitability has improved because cost of risk has fallen significantly over the past two years, thus, reflecting better balance sheet clean up and better loan underwriting standards.
The report noted that although oil and gas account for more than 35% of the GDP, Nigeria is still considered as a low –income country. It however pointed out the salutary effects of government reform initiatives, including cutting fuel subsidy substantially, overhauling the electricity sector, continuing work on the petroleum industry bill and establishing a new sovereign wealth fund. This is in addition to tightening its fiscal and monetary policies.
Also, improved infrastructure spending by the government, according to the report, has enabled the services and construction sectors to support fairly stable GDP growth rates, with GDP per capita envisaged to grow to over 4% in 2012, owing to stronger export demand.
Furthermore, the report noted the faster growing non-oil sector, particularly services, over the past few years, thus improving economic diversity, with agriculture and fishing, which employs a large proportion of the population, representing 34% of Nigeria’s economy, and trade activities about 15%.
The report however, stressed that the long-term success for Nigerian bank will chiefly depend on them enhancing their risk management, improving their governance, diversifying their loan portfolio, and securing their funding profile. According to the report, “if the authorities want the financial system, particularly banks, to play a central role in developing the real economy, we expect them to promote the spread of global best practices in the industry.”