Central Bank governor Sanusi Lamido Sanusi has said that Nigeria cannot achieve the much desired sustainable economic development unless it puts in place a sound, efficient and stable financial system. He added that the country needed a macroeconomic and financial stability to achieve development.
Sanusi who spoke as a guest speaker at the 2011 international education conference organized by the chartered insurance institute of Nigeria (CIIN) defined sustainable development as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
According to him, it also refers to the rate of growth which the world could sustain indefinitely.
He said the desire to achieve this led to the decision by the apex bank to adopt some measures and policies in the banking industry recently, adding that all was in an effort to prevent distress in the nation’s financial system.
“As part of our response to address the myriad of challenges, CBN has embarked on the reform of the nation’s financial system which rest on four main pillars. These include; enhancing the quality of banks in the country; establishing financial stability; enabling the evolution of a healthy financial sector and ensuring that the financial sector contributes significantly to the real economy,” he stated.
Sanusi noted that the global financial crisis and the post consolidation weakness in the Nigerian financial system, occasioned by poor risk management activities in some Nigerian Banks, gave rise to a fragile financial system which the central bank had taken significant steps to remedy.
He said in the face of the problem, the CBN had no option than to take the step it took in the light of the prevailing economic circumstances.
“While it is desirable to ensure stability of the system, it is quite imperative to nip perceived distress in the bud and this is the reason the CBN had to stretch itself to sustain the continued existence and effective functioning of the intervened banks in the hope that stakeholders would realize and work towards their resuscitation,” he explained noting that the result so far has been quite encouraging and that the apex bank would remain focused and committed to its goal of facilitating a stable financial system.
He said that sustainable development in the Nigerian financial services environment could be analyzed from two perspectives, the macro and micro environment. The macro-environment, Sanusi said, examines issues bordering on political/regulatory, economic, socio-cultural and technology.
According to him, under the political/regulatory environment, the justification for a regulated environment for financial services is made, among other things to protect the investor in view of the fact that the quality of many financial instruments are not easily accessed, as such, investors must be made aware of the risks, although the investors ares expected to assume some degree of responsibility.
He also said it was meant to reduce the amount of illegal activity on the part of criminals who might use the system to launder money, as well as to attempt to address externalities in the area of actions that could undermine the stability of the financial system, activities of wonder banks or pyramid schemes.
He listed other macro economic issues as; technology and socio-cultural issues relating to exchange rates, levels of debt, new product development, growth of new channels, IT based systems, e-banking (ATM channels), religious banking. All these issues according to him, must be examined to understand how they impact on sustainable financial services delivery.
The CBN boss further said that with regard to the micro environmental issues, it is best analyzed from the stakeholder perspective. This, he emphasized involves examining issues around competition (interbank lending rates), suppliers (IT suppliers, consultants), employees (branch, call-centre staff), strategic partners (mobile phone operators), customers (new/existing) and their activities geared towards sustaining the delivery of efficient financial services.
He said among the several factors that hinder sustainable development in Nigeria are weak corporate governance issue, inefficient judicial system, poor infrastructure, weak regulatory framework among others.