May I begin by commending my brother, Dr. Bode Ayorinde, who has a Doctor of Law and is a former lecturer at the University of Ife. He is also a Fellow of the Chartered Institute of Bankers; the Founder & Pro-Chancellor of Achievers University, Owo and Chairman of the House Technical Committee on Recession. I think Hon. Bode Ayorinde deserves our commendation, not just for those numerous titles, but for this seminal work.
His activism on our political economy is not new, the most recent was the convening of the highly successful Legislative Economic Summit held in Abuja last November, an event that brought together policy makers, members of parliament at both Federal and State levels and stakeholders, and this is perhaps one of the most important summits on the Nigerian economy.
Dr Ayorinde and I share a lot in common and it is not just the similarity in our sartorial tastes, also as academics who have left the academia, but also recognize that those of us in government must engage in detailed study and introspection.
Scholarship is crucial to leadership. Dr Ayorinde has, by this work and his numerous other interventions, shown that the legal academic is no longer just a legal scholar; he is a trans-disciplinary actor, a man of affairs who must be able to make sense of the complexities of Economics, Political Economy, Law and issues of social justice in order to make governance relevant to a large number of people who may not understand those things.
Your Excellency, Rt Hon Speaker, there is no question at all that we are, perhaps, in one of those turning point moments in world history. We are faced with the incredible developments in technology, and hitherto unimaginable disruptions in our assumptions about every aspect of human endeavour, especially economic and business models and trends. We are in an age in which much that had been taken for granted are being challenged anew – trade agreements, economic unions, immigration; even the very idea of ‘truth’ is being challenged.
At the same time as this is happening, traditional institutions are also facing increasing scrutiny: politics, religion, media, technology – and, of course, banking. Banking has been in the spotlight for a while, actually, since the global economic meltdown a decade ago, which saw the uncovering of the clay feet of banking giants once deemed too big to fail.
Some of us will remember the Occupy Wall Street protests followed in quick succession by other protests, focusing on highlighting income inequality, with banks and the banking industry as a whole featuring as key targets of the frustration embodied by the protests. The underlying angst of the dissatisfied majority has been economic inequality, and the obvious lightning rod is the banking industry.
In Nigeria, we have had and continue to have our own questions as well, focused to a large extent on the contributions of banks to what is known as the ‘real’ economy. And these are not just questions for academic circles or subject matter experts.
Nigerians look around and are puzzled by a scenario in which, to cite one example, they give their hard-earned funds to banks at single digit interest rates but cannot get anything less than double digits when they seek loans for their businesses or mortgages for their homes – all of these occurring against a backdrop of what seems to be regular declarations of hefty profits by banks.
I think it was Mark Twain who said that a banker is the man who gives you an umbrella when the sun is shining and snatches it away from you when it starts to rain. I should add that he snatches it with interest.
It is perhaps accurate to say that for most Nigerians, banks have not really significantly impacted their lives or livelihoods.
First, the underbanked population is said to be in the order of about 40%, which means that a significant number do not even have access to banking facilities let alone banking services or products. The majority of those who have bank accounts, for a variety of reasons, are not able to access personal loans, mortgages or business loans. This probably explains why financial inclusion has gained increasing resonance in the past few years.
It is not just access to banks for safekeeping of funds, especially by the poor, those in rural, far-flung parts of the country, but also access by all to financial products designed for low income earners – It is not just about financial inclusion for the poor but for everyone, especially those who earn little or small businesses, should have access to funds coming from the bank.
We experienced that problem firsthand when we started the Conditional Cash Transfer scheme (one of our Social Investment Programmes). This is a scheme where N5000 is given to the poorest and most vulnerable in our society. The first design of it was for one million of the poorest and most vulnerable.
We had relied on the word of the enthusiastic banks that came to us immediately the announcement of the scheme was made that they would be able to make payments to beneficiaries living anywhere in the country. When the scheme started we discovered that this was simply not true.
In any event, making those small payments in distant places where they had no agents simply didn’t make economic sense. The truth is that with the way banking business has been designed, there is little room for real financial inclusion.
Let me quickly add that this is not necessarily the fault of the banks, we run an economic system that essentially favoured the strong and excluded the weak. It has been our task as a government to turn that around, first by a Social Investment Programme which provides in the budget, N500 billion, and of course, a more aggressive financial inclusion strategy.
Our approach is to open up the space for mobile payments, which have proved in other jurisdictions to be an effective democratization of banking services. The Central Bank in a publication as far back as 2012 on Financial Inclusion noted, and I quote “With over 80 million Nigerians known to carry a mobile phone, compared with the between 25 – 30 million banked Nigerians, patronage of this medium of payment has the potential to grow at geometric progression with a potential transaction value of N6.5 billion daily and N1.17 trillion in 6 months.” That was almost six years ago; and as was concluded at the “Unbanked Africa Summit” held in Lagos in 2011, mobile banking through cell phones remains a feasible tool to provide basic financial services to millions of the unbanked in urban and rural communities in Africa.
This is an important point because there are those who feel that the banking system and banking activities should be left purely in the hands of the banks. There is also an ongoing argument as to whether or not we should not take advantage of mobile payments, especially through the telcos.
But, perhaps, of commensurate importance is the point underscored by the Rt. Hon. Speaker, how to give affordable loans especially to medium and small businesses, and how to effect the desires of the business owner for the kinds of profit and dividends that he may wish to pay shareholders.
It is an important consideration in any economy that the banking system must be able to provide loans and I think that some of the ongoing conservations that we are having not only with the banks but across the entire economy will eventually lead to the point where we are able to deliver on the promise of being able to facilitate small and medium businesses.
Hon. Dr. Ayorinde’s ‘Banking Reform in Nigeria: The Law, the Prospects and the Challenges’, is an important book. It invites us to re-examine these questions and more. I think it is very important to have these conversations, with the ultimate goal of defining how the banking industry can seamlessly and supportively fit into our goals and ambitions as a country in need of jobs, growth and prosperity.
Every time we affirm – and by that I mean the current administration – our belief that we fully recognize that Government and the private sector ought to work in close partnership, jointly mobilizing and deploying the capital required to deliver growth and prosperity, we are in essence doing what we have acknowledged, namely; the important role of banks as engines of credit for the manufacturers, SMEs and for investors who will create these jobs and the growth we urgently need.
Most of the important reforms the author suggests are in the area of ‘regulation’, a touchy ideological issue anywhere in the world. He argues that the CBN should be more responsible to the National Assembly. He also felt that the CBN operated too much like an octopus – governing not just regulation of banks but also the whole area of fiscal policy. I’m not going to contend with any of the issues as he has raised them, today is not a day for arguments. Regulation is, of course, at the heart of our whole financial and, hence, our economic system.
One thing we’ve of course, learnt from the last decade is that more often than not it is these ordinary citizens who pay for the misadventures of the financial services sector and the failures of government regulation. Not only do they lose their homes and monies – sometimes even their life’s savings; they also shoulder the costs of bailouts. This is why it is my view that independent governance of the CBN and closer and more regular forensic scrutiny of banks is fundamental. It is not more rules and regulations, it is greater enforcement. It is holding our bankers to account. It is insisting that they keep their books honestly and transparently and to sanction effectively those who so often step out of line.
Let me again congratulate my brother and friend Hon. Bode Ayorinde. I am excited about the conversation that your book has started on our financial system and on our economy, and I believe that it will be a worthwhile contribution to some of the important things that have to be done in our economy today especially with the regulation and reform of our banking system.
Thank you for listening.
Senior Special Assistant to the President (Media & Publicity)
Office of the Vice President
12th March 2018