Sustainable banking principles will further fortify banks’ business models —CBN


In view of the biting effects of the novel Coronavirus on business operations, the Central Bank of Nigeria (CBN) has observed that adoption of sustainable banking principles would further fortify business models of Deposit Money Banks (DMBs) in the country.

In a Keynote address delivered at a  Webinar on ‘Enhanced Sustainable Banking (ESB) Model In Event of Major Economic and Business Disruptions,’ organised by the Chartered Institute of Bankers of Nigeria (CIBN) and its affiliate Centre for Financial Studies (CIBNCFS), Mrs Aishah Ahmad, Deputy Governor, Financial Systems Stability, CBN, said there has been an increasing focus on sustainable business over the past few years.

According to her, businesses now more than ever before must ensure that communities thrive and are not harmed by the quest for economic gain.

Embracing sustainability, according to her, has several advantages which include greater financial inclusion, gender balancing and greater diversity in the workplace.

“In essence, adoption of sustainable banking principles would further fortify their business models. It is important that certain regulatory issues such as Anti-Money Laundering (AML) are addressed. Nigeria should collaborate with other countries in order to ensure that such risks are managed effectively.

While showing support for the Institute’s activities and briefly discussing the significance of sustainable banking as well as the policy thrust of such issues in Nigeria, Ahmad highlighted the importance of being conscious of the Sustainable Banking Principles released by the CBN in 2012. This, she said, is more important when funding/executing projects in the Agric and Oil & Gas sectors.

The role of banks as an intermediary is more critical now than ever, given the urgent need to drive growth by ensuring credit gets to the right sectors of the economy, she further stated.

Her words: “The banking industry had been undergoing major disruptions before the emergence of the Covid-19 pandemic. Technology and innovation have forced banks to change their business model in order to adopt more digital options.”

Ahmad however assured that due to the ongoing disruption in the banking industry, and their ever-evolving nature, banks are in a better position to weather the storm brought about by the Covid-19 pandemic.

Also, former Chairman, Access Bank Plc and Lead Consultant/Chief Marketing Officer, The Knowledge & Resource Centre (KRC) Limited, Mrs Mosun Belo-Olusoga gave a thorough presentation on the impact of the Covid-19 pandemic on the banking industry and economy as a whole, while proffering solutions for stakeholders post Covid-19.

She said: “Sustainable investment in infrastructure for improving lives and livelihood should be fast-tracked by financial institutions. There should be increased focus on loans to Small and Medium Enterprises

“Deeper focus on lending to agriculture and organic-based industries can create or enhance national financing frameworks to support national development plans. Financial institutions can take action and demonstrate leadership on climate change by allocating capital and steering financial flows towards more low carbon, climate resilient activities.

“Financial Institutions should take steps to change corporate behaviour, influence policy outcomes and build the data, tools and transparency required to embed climate change into how the market functions.

Waste reduction initiatives form a key part of cost reduction strategy and this includes early branch closure policy to cut down electricity costs.”

According to her, as a result of the Covid-19 pandemic, the Nigerian economy would have: businesses in an increasing decline in patronage, particularly in the Airline, Auto and Logistics & Hospitality and Tourism industries; surge in panic buying and in turn inflation rates due to the initial lockdown and measured easing of the lockdown.

Belo-Olusoga further noted that there would be a decline in the value of the Naira which subsequently puts pressure on foreign reserves as well as increased pressure on the Telco Sector as more customers migrate to digital platforms for communication and work.

“Essentially, the economic crisis would mirror the health crisis. Those with underlying conditions would face significant challenges if they are exposed. Sectors expected to thrive during the pandemic are Pharmaceuticals and Healthcare, Online Entertainment & Education as well as E-Commerce

“There would be undue pressure on banking customers across different strategic business units. This is because the ability to generate income to service credit facilities is disrupted. “There would be restraints on financial performance given that banks would experience greater risk of non-performing loans,” she stated.

There is an increase in the likelihood for Capital Adequacy Ratio (CAR) to drop below the regulatory limit and due to the effects of the pandemic, there would likely be concerns regarding asset quality coupled with lower levels of loan recoveries due to inactive markets for collaterals, Belo-Olusoga further warned.



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