The Central Bank of Nigeria [CBN], in its determination to reform the Nigerian financial system came out with a blue print built around four pillars. The pillars are geared towards enhancing the quality of banks, establishing financial stability enabling, healthy financial sector evolution and ensuring the financial sector contributes to the real economy.
CBN governor, Sanusi Lamido Sanusi disclosed that in enhancing the quality of banks, the apex bank would initiate a five part programme which consist of industry remedial programme to enhance the operations and quality of banks in Nigeria The programme , he said would consist of industry remedial programmes to fix the key causes of the crisis. It will also include implementation of risk based supervision, reforms to regulations and regulatory framework, enhanced provisions for consumer protection, and internal transformation of the CBN.
Establishing financial stability is the second and very crucial pillar. the key features of this pillar centre around strengthening the financial stability committee within the CBN, establishment of a hybrid monetary policy and macro-prudential rules, development of directional economic policy and counter-cyclical fiscal policies by the government and further development of capital markets as alternative to bank funding.
The third pillar, enabling healthy financial sector evolution according to the apex bank fall under the banking industry structure, banking infrastructure such as credit bureaus and registrars, cost structure of banks, and role of the informal economy.
Sanusi said the CBN would continue to ensure that the banks are well capitalised and also bear in mind that required capitalisation is always relative to risk profile..
In choosing ‘ensuring the financial sector contributes to the real economy’ as the last pillar, the CBN said rapid financialisation in Nigeria did not benefit the real economy as much as had been anticipated.
He said development financial institutions set up for specific purposes such as housing finance, trade finance, urban development has not fulfilled their mandates.
The four pillars as it were is capable of giving the financial system the leeway it desires to perform the engine of growth within the Nigerian economy.
As an engine of growth, it presupposes that the banking industry must contribute to the financing of critical areas like infrastructural development, agriculture and the Small and Medium scale enterprises
It is in the light of this that one can situate the N500 billion loan to the power sector, the N200 billion set aside for the development of the agricultural sector and the N200billion to the manufacturing sector
Beyond this, since the banks are nearer to the people, they should be put in a better position to be able to perform the crucial role of economic development
The unfortunate thing is that the banks cannot possibly play these role now because of their aversion to risk taking, but with time and the reform going on in the sector there will be synergies in the banks and all the sectors for the corporate good of the Nigerian economy.
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