FSS 2020: The journey so far

A realisation that the world was rapidly changing and that Nigerian must claim the 21st century was the strong motivator for the adoption of Financial System Strategy 2020 back in 2007. 10 years after and the retirement of Mr. Suleiman Barau, Central Bank of Nigeria (CBN) Deputy Governor in charge of Corporate Services motivated this review of the flagship programme by Sanya Adejokun.

THE global financial architecture as of 2007 was characterised by the fast pace of globalisation; increase in capital flow; broadened scope of investments; rise in global merchandise exports. There was also the emerging role of China; increase in manufacturing capacity and foreign direct investment. At that time, BRIC nations, comprising of Brazil, Russia, India, China has begun to overtake some of the G6 countries based on extrapolation of growth rates, demographic changes, capital accumulation, diminishing returns with development, exchange rates etc. Meanwhile, an extensive work done by Goldman Sachs in 2001 had projected that BRIC would surpass that of the G6 nations.

With BRICS already overtaking the six most advanced nations, there were projections that N11 countries would emerge as the next economic wonders with potential to be ‘BRIC like’ in the future as identified by Goldman Sachs, projecting Nigeria as one of them. Goldman Sachs according to a CBN document in 2007, believes that only 2 countries in Africa will overtake Italy in GDP size by 2015 i.e. Nigeria and Egypt. For Nigeria to achieve this feat and its aim of being part of the 20 largest economies by 2020, she must maintain an annual average growth rate of 12.4% over the next 15 years and focus on developing the following areas. However, some of the economic, structural reforms and political/governance reforms that needed to be fast paced include increase commitment to education; steps towards greater integration into world trade and finance; improved power supply, transportation & telecom infrastructure. Experts also noted that Nigeria must create a more industrial economy and eliminate over-dependence on primary commodities; while also greatly improving the business environment.

Buoyed by this projection and determined to make the vision a success, Central Bank of Nigeria (CBN), in collaboration with key stakeholders in the payments community, developed the National Payments Systems Vision 2020 (NPSV 2020). The NPSV 2020 is a sub-set of the Financial Systems Strategy 2020 (FSS 2020).

Some of the implementing agencies of FSS2020 are Federal Ministry of Finance; Central Bank of Nigeria (CBN) Nigeria Deposit Insurance Corporation (NDIC); Financial Reporting Council (FRC); Debt Management Office (DMO); Small and Medium Enterprises Development Agency (SMEDAN) Federal Mortgage Bank of Nigeria (FMBN); Federal Inland Revenue Service (FIRS); Manufacturers Association of Nigeria (MAN, Nigeria Stock Exchange (NSE); National Insurance Commission (NAICOM); Bank of Agriculture (BOA) Securities and Exchange Commission (SEC) and the National Pension Commission (PenCom) and development partners.

According to the CBN, the continuous interplay of key players in the financial system in line with global best practice is deepening Nigeria’s economy and making it one of the top 20s by 2020.

Alhaji Suleiman Barau, just retired deputy governor of the CBN, in charge of corporate services who also coordinated the project said FSS 2020 ensured profound coordination of the nation’s financial services sector.

Enumerating the milestones so far achieved and the challenges of FSS 2020 under his coordination, Barau, “In measuring the milestone of FSS2020 we have to look at them from the existing sectors perspectives. For the mortgage sector, a robust secondary mortgage system has been created with the CBN and the mortgage operators clearly streamlined, which has led to the establishment of the Nigeria Mortgage Refinancing Company (NMRC).”

“Again, the uniform underwriting standard, which was non-existent, has now been codified and introduced in the mortgage industry to regulate their practise. In addition, the framework for the Mortgage Asset Registry has been developed to capture mortgage transactions on a common IT platform.

“The CBN has also introduced the categorisation of Primary Mortgage Banks into national, state and local governments. The pension asset has grown from about N3 trillion in 2013 to N6.02 trillion in 2017. The Nigerian Sovereign Investment Authority (NSIA) has been appointed advisers to manage the deployment of pension funds into long term infrastructure deployment.

“Through sensitisation and mass advocacy, PenCom has stepped up prompt settlement of pension claims for retirees, and is embarking on massive technical trainings using the information technology platform to ensure prompt service delivery and implementation of the micro pension scheme.  For the insurance sector, the micro insurance (takaful) and compulsory insurance schemes are being implemented,” Barau said. He noted that the Nigerian Sovereign Investment Authority (NSIA) has been appointed advisers to manage the deployment of pension funds into long term infrastructure deployment. He said through sensitisation and mass advocacy, PenCom has stepped up prompt settlement of pension claims for retirees and is embarking on massive technical trainings, using the Information Technology platform, to ensure prompt service delivery and implementation of the micro pension scheme.

There is also capacity building of insurance and inclusion of insurance in the school curriculum for prompt service delivery. Also, for Micro Small and Medium Enterprises (MSME) Barau said “there are several interventions to improve funding and access to finance for small businesses. There is also the creation of the National Collateral Registry for lending and access to finance by SMEs is a huge milestone, especially with the passage of the Secured Lending Using Movable Assets bill by the National Assembly.”

The retired deputy governor said the FSS 2020 initiatives were carefully tailored to align with the mandate of the relevant institutions that have the responsibility to implement the identified initiatives within the realm of its objectives. “The CBN has achieved a lot in the areas of Payment System Vision 2020, which is an initiative of the FSS 2020, along with the cashless policy of the Federal Government. In the same vein, the SEC has been successful in the implementation of the e-dividend policy, which has always been one of the initiatives FSS 2020 had been advocating; and so many others. The funding of FSS 2020 had been solely borne by the CBN until recently when some of the implementing institutions like PenCom have started making contributions to the funding of the FSS 2020 activities, with others showing interest to do same. Most of the implementing institutions have been providing technical assistance to the running of the programme in the areas they are more specialised.”

He advised Federal Government to “initiate policies that will ease the process of doing business in Nigeria and encourage investment within the country; ensure that there is enabling infrastructure and guarantee maximum peace and security in the country,” which the government is already responding to as a way to make the implementation of the initiatives more successful.

At a review of meeting of the strategy in the last 10 years, which held in Lagos on December 7, which drew participants from all the implementing agencies, Alhaji Barau observed that all the implementing agencies had agreed that despite being positioned as one of the top 25 economies in the world, in terms of GDP, the Nigerian economy and financial sector were not yet where the agencies desired them to be. He noted that the collaboration of the different implementing agencies to forge a common objective for the financial system was a major achievement of his tenure, considering that agencies hitherto worked in silos. He, however, advised that more should be done to achieve the targets set for each of the various financial service areas.

Also speaking at the meeting, CBN Governor, Mr. Godwin Emefiele, tasked implementing agencies to do more in ensuring that Nigeria meets the set strategic vision of being the safest and most diversified financial system among emerging markets supporting the real economy by the year 2020.  He noted that the strategy review meeting was geared towards an appraisal of FSS2020 accomplishments in the past 10 years and to chart overall strategic direction for the next three years and beyond with a view to strengthening Nigeria’s financial system to meet the unfolding challenges in both domestic and international market.

According to him, much had been achieved in the areas of payments system, mortgage; financial market, Pension, Micro, Small and Medium Enterprises; Insurance and Mortgage sectors; and creating linkages in the financial system, he said a lot still needed to be done to ensure financial inclusion and the overall growth of the financial system. He informed the gathering that some Bills had been initiated by FSS2020 to strengthen and deepen the financial system including the Financial Ombudsman Bill for consumer empowerment. Accordingly, he said the FSS2020 would be resubmitting to the National Assembly a Bill for establishment of specific financial consumer ombudsman to address the challenges of protection of consumers of financial services as well as the protection of the integrity of the financial system

He therefore challenged all the collaborating agencies to work closely together to achieve the strategic themes of the project which are to: Strengthen and deepen the domestic markets, enhance integration with the external financial markets and Promote sustainable economic development. He particularly tasked the agencies to assess what had worked well for the implementation of the project and identify what must be done to ensure the success of the project.

Emefiele used the opportunity to pay tribute to the Coordinator of the FSS 2020 Office and CBN Deputy Governor in charge of Corporate Services Directorate, Alhaji Suleiman Barau, whose tenure as Deputy Governor ends in December 2017, for his dedication to the project in spite of the enormous challenges.