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Published On: Wed, May 14th, 2014

Evolving sustainable economic growth in Nigeria

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President Goodluck Jonathan

President Goodluck Jonathan

By Emmanuel Acha

In 2001, the Goldman Sachs Group Inc., an American multinational investment banking firm, rated Nigeria as one of the economies in Africa that has the potential of becoming one of the 20 largest economies in the world by 2020.

It, however, recommended that Nigeria must maintain an annual average growth rate of 12.4 per cent over the next 15 years and ensure meaningful development to attain the goal.

The company identified the financial sector and diversified economy as catalysts for achieving the vision.

According to it, the idea is to strengthen the domestic financial market in the country by developing competence and skills for the financial services industry.

The company also recommended improved access to finance, provision of integrated infrastructure for the financial industry and creation of a vibrant capital market for economic stability.

In the light of this, the Federal Government launched the Vision 20: 2020 programme, with the Financial System Strategy (FSS) 2020 as its major component.

One of the aims of the programme is to ensure stability and develop Nigeria’s financial system into a major international financial centre by 2020.

Subsequently, the National Financial Inclusion Strategy (NFIS) was introduced by President Goodluck Jonathan on Oct. 23, 2012 in Abuja.

Reviewing the importance of NFIS, Hajiya Umma Dutse, the Director, Department of Consumer Protection, the Central Bank of Nigeria (CBN), said that it placed emphasis on knowledge acquisition in financial dealings.

Speaking at a consumer sensitisation forum in Enugu recently, Dutse said that the programme was useful because of the fact that a high percentage of stakeholders in the financial sector were not financially literate.

She observed that a significant percentage of the total amount of economic transactions was not even captured in the formal financial system due to this setback.

“This is not good for the nation’s economic growth as it negates the efforts of government toward the FSS 2020 objective of financial inclusion.

“It is imperative that we engender trust and confidence among Nigerians to bring the financially excluded into the formal financial system,’’ she said.

According to Dutse, financial inclusion is the process of increasing access to a broad range of financial services such as payments, savings, remittances, insurance, pension and credit at reasonable costs.

She observed that more than 2.5 billion people worldwide, who made up about the 50 per cent of the world’s working population, lacked access to financial services, particularly in developing countries such as Nigeria.

Mr Issah Idriss of the Department of Development Finance, CBN, said that although Nigeria remained a strong force in sub-Sahara Africa, the country was not doing well in the provision of financial products and services.

“In 2012, the financially excluded reduced to 39.7 per cent from 46.3 per cent in 2010, whereas South Africa, Kenya and Botswana have 26.0, 32.0 and 33.0 percentage exclusion rates respectively.

A survey by Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics in 2011 revealed that there are 17, 284,671 micro, small, and medium enterprises (MSMEs) in Nigeria.

“Out of these, 17, 261,753, making up 99.87 per cent of the MSMEs, are micro enterprises; and they are the foundation for any sustainable financial inclusion programme because they are the bottom of the pyramid,’’ he said.

Idriss said that although the national economy had shown some promises for the realisation of a sustainable financial inclusion, some factors had contributed to the high financial exclusion rate in Nigeria.

He said that the financing gap for the formal and informal micro enterprises stood at N1.79 trillion and N540 billion respectively.

He stressed that this factor had led to low income among Nigerians, adding that about 24 per cent of the adult population in the country earned less than two dollars (about N324) per day.

Idriss said that it was in the light of this challenge that the Consumer Protection Department of the CBN was established.

He said that through the department, a N220-billion-MSMEs Development Fund was set up to provide long-term, low-interest funds for the sector through Participating Financial Institutions (PFIs), with 60 per cent of the funds dedicated to women enterprises.

According to Idriss, the broad target for financial inclusion in Nigeria is to ensure that 80 per cent of the adult population has access to appropriate, affordable and diversified financial services by 2020.

Mrs Ifechukwu Chiobi, Deputy Manager, Department of Consumer Protection, CBN, said that in addition to accessing the fun d, customers of banks ought to be advised on specific products and services of the banking community.

She noted that the banking environment was awash with products and services that might be misleading.

“The relationship between banks and customers is contractual under the law and you will be held responsible for certain actions you take.

“So, you need to ask in-depth questions before going in for any product or service, no matter how stupid your banker thinks such questions are.

“Such products or services may have hidden clauses which you may not have seen and these clauses will turn back to haunt you in the future.

“You have the right to choose what you want and if you choose wrongly you will regret it,” she added.

However, Mr Obinna Akoma, Assistant Manager, Department of Consumer Protection, CBN, observed that the drive to achieve financial inclusion of stakeholders could be hindered by the high prevalence of dud cheques in the system.

“In 2012 alone, 167,000 incidences of dud cheques, valued at N166 million, were processed by the CBN.

“This policy will be at risk if we continue to issue such cheques because it will increase the volume of cash in circulation, as people will lose confidence in the system,’’ he said.

All the same, Akoma noted the current federal administration had renewed its commitment to pursue the vision of transforming Nigeria into one of the 20 largest economies in the world by 2020.

Observers, however, emphasise that in efforts to fulfill the commitment, the banking sector should not deviate from pursuing the goal of responsible and sustainable financial system. NAN

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