May 21, 2020 / 3:47 PM / by CIBN / Header Image Credit: CIBN
Being a Communique Issued At The End of The Webinar On COVID-19: Tough Choices for Banking & Other
Businesses Organized By The Chartered Institute of Bankers of
Nigeria and CIBN Centre for Financial Studies (CIBNCFS)
The Webinar on Covid-19: Tough Choices for Banking
& Other Businesses was held on Tuesday, May 5, 2020 via the Zoom Conference
Call Platform. The Webinar is the first installment in the CIBN Advocacy
Dialogue Series aimed at the enlightenment and empowerment of the Institute's
members amidst the Covid-19 pandemic. Part 1 of the series looks at the
implications of the pandemic on banking and other businesses while discussing
opportunities for growth. Other objectives of the Webinar include the
- To identify major challenges in which banks,
businesses and the economy are likely to face as a result of COVID-19
- Generate insightful ideas that can help organizations
survive the Post Covid-19 pandemic crises
- Propose economic solutions that have implications for
businesses and policy makers
- Proffer ideas that can help Nigeria as a country
respond effectively to the multi-dimensional nature of the crises i.e. Health,
economic, security and humanitarian.
- Come up with a message of hope that will help
minimize anxiety and amplify excitement of our numerous stakeholders.
Over four hundred and fifty (450) participants
registered for the Webinar via the Zoom Platform while 157 participants
streamed via YouTube on the day of the event. Participants registered were from
over 25 different cities across 5 countries in 3 different continents.
The Webinar was facilitated by the following
Distinguished Resource Persons
Speaker - Mr. Laoye Jaiyeola, FCIB, Chief Executive Officer, Nigerian Economic
Panellist - Dr. Demola Sogunle, HCIB, Chief Executive, Stanbic IBTC Bank Plc
Panellist - Mr. Olawale Timothy, Director General, Nigeria Employers' Consultative Association (NECA)
Panellist - Dr. Hippolyte L. Fofack, Chief Economist/Director, Research and
International Cooperation, Afrexim Bank
Mr. Dele Alabi, FCIB, Chairman, Research, Strategy & Advocacy Committee,
a. The keynote address was expertly delivered by Mr.
Laoye Jaiyeola, FCIB, Chief Executive Officer, Nigerian Economic Summit Group.
In his address, he x-rayed critical issues affecting the banking sector and
economy as a whole. Highlights of his presentation are discussed as follows:
Nigeria is currently
facing a twin-shocks of:
- Oil shocks - brought about by the low demand for
crude oil products and the drastic fall in oil prices
- Health Shocks - pressure on health care services and
disruption due to the Covid19 Pandemic
ii. Nigeria is facing the
impact of the disruption from 6 (six) different perspectives
- Fiscal Impact - Revenue has significantly
decreased due to the oil shocks. The assumptions of the National budget of
production output of 2.3 million barrels of crude oil per day at the rate of
$57 per barrel is no more realizable because prices per barrel of crude oil
have fallen drastically to less than $18 barrels per day as of May 5, 2020. This
would have significant effects on government revenue and spending. The
resulting impact is that Nigeria would need to increase borrowing to finance
the funding gap. This adds further pressure to the existing budget which
currently allocates 50%-58% of revenue to debt servicing.
- Monetary Impact - The reduction in revenues
received from the sale of crude oil would among other things result in the
downward pressure on Naira and further divergence in exchange rates. The
Monetary Policy Committee of the Central Bank of Nigeria (CBN) in reaction to
the disruption moved official rates from N306 per $1 to N360 per $1. In the
parallel market a dollar now sells for N386.
Furthermore, Inflation would arise from at least three
different areas. These include inflation due to
- the disruption in the supply
chain and reduction in production
- Devaluation of the Naira
- More money being pumped into
the economy due to quantitative easing
It is worth noting that the Monetary Policy authority
responded by releasing stimulus worth N4.5 trillion from cash reserves. The
stimulus is intended for businesses currently struggling with the effects of
the Covid-19 pandemic
- Financial Institutions & Markets/Banking
31% of the banking industry's credit exposure is from
the oil and gas sector. If care is not taken, Nigeria would fall back into
economic recession to the level that have not been seen since 2016. The oil and
gas sector is particularly affected by the pandemic due to the low demand for
crude oil. This could cause a rise in Non-Performing loans considering the
amount of loans given to the sector. Banks are also vulnerable to higher risk
of cybercrime due to the increase in working online
- Other businesses &Households
Due to slow economic activity, businesses and
households are likely to experience a reduction in income levels. In some
hard-hit industries, there would be a loss of livelihoods and change in human
consumption trends and standards of living.
iii. There is a need for
backward integration, diversification and a greater investment in productive
sectors such as agriculture
iv. The tough choices for banks and other businesses
would be on how to build a workforce and economy which would not be disrupted
by changes in commodity prices.
It is important for banks
to balance welfare of their people and profitability
v. We need to build business
models that would ensure the promotion of local substitutes for foreign goods,
particularly intermediate goods
vi. Businesses should leverage
on technology to ensure efficiency and cash flow management
The panel discussions were divided into two (2) rounds
a. Round One: Banks, Businesses and the Economy Post
Covid-19: What are the Implications?
b. Round Two: Second Round: Generating Insightful
Solutions for Survival Post Covid-19
- Round One: Banks, Businesses
and the Economy Post Covid-19: What are the Implications?
The first round of discussions sought to identify the
implications of Covid-19 on the banking industry and the real economy. The
session also shed light on information employers and policy makers should know
in order to fully equip themselves against ensuing uncertainties.
Highlights of the Session are as
- The Nigerian economy must be diversified particularly
within the context of revenue sources. The Oil sector only contributes
approximately 10% to GDP however, approximately 90% of government revenues come
from this sector. We must look at other sectors which contribute significantly
more to GDP such as Agriculture 25%, ICT 12% and Trade 16%
- The government must find creative ways for such
sectors to generate revenue for government
- The government should balance lives with livelihoods.
That is, the government should focus on saving lives while simultaneously
saving the economy.
- All 36 states of the federation should look inward
for value creation. All states are well endowed with at least one resource.
- Businesses need to be given moratorium and tax
holidays within their state to ensure their survival during the pandemic.
- The Federal and State Inland Revenue services should
ensure the removal of middlemen from tax collection exercises
- Given the lower levels of productivity and measured
resumption from lockdown, bank customers would be heavily impacted. They would
have trouble meeting obligations due to loss of income.
- There are two silos of tough choices.
- Businesses could either weather the storm and persist till all works out or
- Count their losses and move on
- While NECA is not a regulatory body, they perform due
diligence when developing guidelines. Therefore, full but voluntary compliance
- Nigeria received approximately $25 billion in
remittances as of 2018. This translates to approximately 80% of the National
Budget. This is a key component/driver of growth, however, the Covid-19
pandemic would disrupt such earnings.
- Historically, Africa has been on the receiving end of
global exogenous shocks with systematic and direct transmission of such shocks.
As a solution:
- Africa could solve this by diversifying away from primary goods
- Increasing Intra-African trade by at least 50%.
- Africa needs to grow its pharmaceutical industry as 90% of such products are
imported with severe implications for balance of payments
- Second Round: Generating
Insightful Solutions for Survival Post Covid-19
In Round 2, the discussions focused on possible
solutions and opportunities which banks and other businesses could leverage on
to survive and thrive despite the pandemic
Highlights of the Session are as
- In order to block the exogenous shocks, Nigeria must
build a strong capital base. This would come from long term investments.
Nigeria must attract long term investments through Foreign Direct Investment
rather than foreign portfolio investment (hot money) which we currently have,
and lay foundation to mobilize financial resources
- SMEs need to be identified and supported to ensure
they survive the current disruptions to their businesses. This could be in the
form of extension of moratorium to protect SMEs
- Furthermore, there must be both Monetary and Fiscal
policy support for SMEs e.g. reduction in interest rates and increased
- Financial Institutions should invest in the future
workforce which comprises of Data Scientists, Artificial Intelligence, Big Data
and Programming specialists
- The CBN should not assume monopoly of knowledge. They
should ensure a wide array of consultations before arriving at decisions
- The banking industry must fully embrace automated
solutions to ensure efficiency
- Workforce in the Banking Industry need to be
re-trained in order to be aligned with digital roadmap of the banking industry
- The current position in the country is cyclical and
will not be permanent. Despite the crisis, there are some opportunities that
can be leveraged on. For example, we still have certain industries thriving in
the country, such as Information Technology, Communications, Power, etc.
Recommendations from the session are outlined as
Banking Industry & Other
- Businesses need to rethink their strategies and
models in order to survive the current disruption
- Businesses should leverage on technology to ensure
- Ensure proper cash flow management, as cash remains
- Consider synergy and collaboration with other players
within the industry
- In terms of palliatives to give to staff, businesses
should prioritize health and safety of their staff. For example, if possible,
employers should discourage public transportation
- Banks should maintain a more diversified portfolio to
avert concentration risk and spike in NPLs
- Banks should also strengthen cyber controls to
mitigate against anticipated increase in frauds and operational losses.
Government & Regulatory
- It should be the prerogative of the employer to
determine terms and conditions of how to run their business and how to manage
- Reduce Red-Tapeism in the dispersant of palliatives
to SMEs e.g. stimulus packages
- Change dynamic of Foreign Direct Investment to
attract long term investments (patient money) rather than the foreign portfolio
investments (hot money) currently within the country
- In order to ensure productivity, the government
should sell idle assets or lend towards more productive activities.
- The government should ensure that the decrease in
price of Premium Motor Spirit (PMS) is backed by legal provisions.
- The value of PMS and other crude oil products sold in
Nigeria should be controlled by market forces and not artificial controls e.g.
- The government should ensure diversification from
primary product such as crude oil to ensure protection from external
- Diversification is also key so as to change the
monopoly of sources of government revenue
- There should be greater focus on the real sector -
agriculture, manufacturing and SMEs. The government should provide creative
ways to gain revenue from these sectors
- At the sub-national level, the state governments need
to look inwards more, to significantly increase their Internally Generated
Revenue (IGR). Of course there is a need to consistently improve on the level
of infrastructure in the country to make these things happen.
- The CBN, BOI, BOA, NSIA and other similar
institutions have a significant role to play in reflating the economy and
jump-starting activities in the real sector, particularly among the SMEs.
The aim of the Webinar was to enlighten and empower
the Institute's stakeholders on tough choices and possible solutions to
disruptions brought about by the Covid-19 pandemic. The sessions were expertly
handled by the distinguished panelist with a wide array of solutions proffered.
It is clear that the government must diversify the economy away from over
reliance on crude oil, and businesses must rethink their business models and
strategies to survive the effects of the current pandemic
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