CBN urges banks to design impactful business models

…As expert calls for recalibration of national economic strategy

.In order to enable banks operating in the country manage disruptions and make positive environmental and social impact in their quest to deliver value to their stakeholders, the Central Bank of Nigeria (CBN) has encouraged banks to maintain their commitment to sustainability in designing their business models.

This is just as a financial expert has called for the recalibration of the national economic strategy to reduce dependence on the oil/gas sector and boost non-oil sector growth and enjoined strategically investments in the health sector with a focus on domestic production.

Speaking over the weekend while delivering her remarks at a Webinar, organised by the Centre for Financial Studies (CFS) of the Chartered Institute of Bankers of Nigeria (CIBN), Deputy Governor, Financial System Stability, CBN, Mrs. Aishah Ahmad, maintained that Banks and other financial institutions can only survive disruptive events if they fully embrace sustainability principles.

She noted that this had become even more critical during periods of significant disruptions such as the current coronavirus pandemic (COVID-19) ravaging the world.

According to her, though primarily a health crisis, the negative spillover effects on business and the economy are complex and pervasive, considerably slowing economic activities in most countries.

The Webinar tagged, ‘CIBN Advocacy Dialogue Series 2.0’ focused on ‘Enhanced Sustainable Banking (ESB) Model in the Event of Major Economic and Business Disruptions’.

The apex bank deputy governor told over 800 participants who connected to the programme through Zoom and YouTube that prior to the disruption caused by COVID-19 pandemic, financial services were undergoing significant evolution.

She was of the view that Banks have had to modify their business models to address changes caused by innovation, digitalization, new entrants by Fintechs, increasing regulation and changing needs and behavioural patterns of customers.

“These developments have triggered very aggressive changes in the financial services industry, introducing significant dynamism into the industry’s value chain – changing mode the production, delivery and consumption of financial products and services”, she asserted.

She also stated that the CBN has been at the forefront of entrenching sustainable banking principles in the Nigerian banking industry through the implementation of the Nigerian Sustainable Banking Principles (NSBP), which has formally been adopted by the central bank and 33 banks, discount houses and Development Finance Institutions.

On his part, the Vice-Chairman, FMDQ Group, Mr. Jibril Aku, noted that the Nigerian economy was at the risk of a second recession and predicted a new financial order post-COVID-19.

To stimulate economic growth and opportunities, Aku spelt out the critical steps the Policymakers, the banking Sector and Capital Markets should undertake as a matter of urgency.

For the Policymakers, the Vice Chairman FMDQ called for the recalibration of the national economic strategy to reduce dependence on oil/gas sector and boost non-oil sector growth and enjoined strategic investments in the health sector with a focus on domestic production.

He also urged the need for Investment in the digitization of education in public schools to prevent the collapse of the educational system, as well as unified and market, determined exchange rate regime.

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He admonished the banking sector to ensure effective implementation of sustainable banking principles with a focus on economic, social and environmental and governance issues to boost reputation and investor confidence.

While he saw the current situation as an opportunity for digital transformation and growth in e-banking offerings, Aku stressed the need to increase investments in cybersecurity to reduce fraud risk.

Aku, who is also the Chairman of SunTrust Bank Limited, listed the imperatives for the Capital markets as follows: “Support the creation of new funding mechanisms to support economic recovery; Work with regulatory and market shareholders to create incentives that support the growth of a green economy; Ensure that listed companies report on compliance with environmental, social and corporate governance criteria, and enhance capacity building and knowledge enhancement in sustainable finance.”