While the news of the continued growth in the nation’s banking and finance sector in the 2nd quarter of this year was encouraging, Governor of the Central Bank of Nigeria, Godwin Emefiele said the ulti-mate strength of the financial system would depend on three key factors.
The CBN Governor said the factors will insulate the nation’s economy from externally induced disrup-tions as the currently ravaging coronavirus pandemic or any other crisis. He was speaking against the backdrop of the fact that COVID-19 has demonstrated the impact externally induced disruptions could have on the Nigerian economy.
“Ensuring that banks have adequate capital buffers to withstand similar pandemics; developing ade-quate internal controls that will be able to identify potential risks and putting in place measures to con-tain that risk and being able to adapt your business model to changes taking place in the business envi-ronment,” Mr. Emefiele said yesterday at the 13th annual banking & finance conference in Abuja.
Emefiele observed that supply chain disruptions and concentration of production in particular coun-tries has highlighted the difficult challenges countries could face in the event of a major pandemic. “It is therefore imperative from an economic as well as a security perspective, that our banking and finan-cial system works to support growth in sectors that have significant growth potential, and can enhance the resilience of the Nigerian economy, in the face of external shocks.” He added.
He also urged the banking sector to increase lending to agriculture from 4 percent to 10 percent. Over the next 4 years, the banking sector should consider ways under which it could increase its loans to the agriculture sector from 4 percent to 10 percent by 2024.
He called on the banking community to increase its support for the agriculture sector. He told the gathering at Transcorp Hilton hotel that the banking sector has a significant role to play as a facilitator of growth through its intermediation function. ”The banking sector therefore has a significant role to play as a facilitator of growth through its intermediation function,” he said.
Minister of Finance, Budget and National Planning, Zainab Ahmed who was also at the event called on the banking sector to join the federal government in its effort to diversify the nation’s economy.
“As bankers and fund managers, you stand in that position to partner with government in its efforts to diversify the economy and reposition the Country for a sustainable future,” she said.
Mr.s Ahmed urged the gathering to redouble their efforts, to mobilize domestic resources and attract foreign investment to create quality job opportunities for the nation’s teeming youths and lift people out of poverty.
Emefiele said the Nigerian agricultural sector also offers significant opportunity for the nation to earn foreign exchange through the exports of processed agricultural products. With declining foreign ex-change earnings from crude oil, he said banks should consider supporting agro processing companies that are export oriented.
With the decline in foreign exchange earnings and subsequent adjustments in the value of the naira vis-à-vis the US dollar, Emefiele said the CBN has continued to implement a demand management framework, which is designed to support improved production of items that can be produced in Nige-ria, and further conservation of external reserves.
“These measures have helped to prevent a significant decline in our reserves. Our external reserves currently stand at $36 billion and are sufficient to cover 8months of import of goods and services,” he said.