By Chinwendu Obienyi
After over 40 years in investment banking and the financial services sector, working with reputable global investment banking and asset management firms, former managing director/ chief executive of the Asset Management Corporation of Nigeria (AMCON), Mr. Mustafa Chike-Obi, recently took the mantle from Dr. Osaretin Demuren as the president, Bank of Directors Association of Nigeria (BDAN).
In a recent interview monitored in Lagos, Chike-Obi, who is also the chairman of Fidelity Bank Plc, spoke on the Nigerian economy and his objectives for BDAN. He equally commented on the significance of Nigeria’s latest GDP growth and what the Federal Government needs to do to achieve the much-talked-about double digit growth.
According to him, “There is no country in the world with a robust economy that has security issues or corruption issues. If your economy is growing and people have hope for a brighter future, they tend not to engage in criminal activity, corruption activity and security issues.”
Congratulations on your role as president of BDAN; how do you feel about it?
I am honoured to be the president of the Bank Directors Association of Nigeria (BDAN), as it is usually a role that is reserved for the so-called Tier-1 banks and the fact that a Fidelity Bank chairman is the president is very encouraging for the bank. I believe that this institution is one of the most prominent in the country and my mission is to really expand on what people have built over the years. I will make sure we intimate the public that BDAN represents the bank and not just bank directors but the business and policies of the banks.
In this regard, we would need to create a better image of the banking industry in Nigeria and I think that BDAN offers us the platform to do so, and I think Nigerians will feel the impact of the association over the next few years.
What is your take on the EFCC’s instruction that banks will be held liable for any institutional fraud?
I think that the current chairman of the EFCC is doing his best to make sure people know where he stands on certain issues and I think that it was a useful statement in which he basically told the banks to be wary and careful as whatever is done in the future, especially with elections coming up, will be looked at and laying down the markers as to what the priorities should be like in the private sector.
I think his first word is economic and I feel that he is also playing a part in building the economy and making sure that bad practices are eliminated. I encourage the proactive dialogue he had with the banks and I think that bank MDs should take note that these are the things that are important to their partners towards achieving economic growth.
Strategies for BDAN
One of the issues for banks today is the AMCON levy and it is strange that I am talking about that, since I was the initiator of the AMCON levy; but when the levy was initiated, we had a 10-year plan for banks to contribute to the AMCON levy. It is now open-ended and I think it will be useful for the banks, the shareholders, AMCON and Central Bank of Nigeria to come up with a definitive plan about how much longer this levy will last. Is it another five years? Because an open-ended commitment that has become the second or third largest item for banks is not helpful and many banks we have today were not around when the levy started.
So, there is more of an equity as to making people pay these large sums or amounts that are open-ended. I would like to engage the CBN and AMCON, particularly, to come up with a plan that shows definitely when this levy will cease so that the banks can plan, because this open-ended commitment is uncomfortable for many banks who would not say it as they are afraid of the regulations, but as BDAN we can discuss that.
Significance of Nigeria’s latest GDP numbers in Q2 2021
This is unalloyed good news and, no matter where you are, you need to start progressing from some place because the fact that we can grow by 5.01 per cent from any base is very encouraging and I am saying that there is a silver lining and I am happy that the Nigerian people are getting back to their lives, and government policies have helped, as the incentives given by the government have helped, so this is good news.
Situating this with the fact that inflation has been moderating at the same time, even though it is still quite high, but, so far, from the economic point of view, this is good news after the devastations of COVID-19.
Is this inflation-led growth?
It is real GDP after it has been adjusted because the nominal GDP was much higher and so it is a real growth and it is impressive. The way GDP is measured is in two phases: the nominal GDP and the real GDP.
So, anytime real GDP is positive, it is a number that has been adjusted and so, yes, an economy can have high inflation-driven growth but it shows up in GDP. Real GDP does not grow if inflation is very high.
Can this growth be consolidated?
It is unlikely that we will sustain the 5.01 per cent growth without significant expansionary policies and so I think there is work to be done on the expansionary side of the economy.
I think the fiscal authorities are focusing too much on raising revenue and that will impact the economy down the road. As for double-digit growth, that is not going to happen except all hands are on deck and committed to double-digit expansion. I expect that, in the next quarter, we will probably get a 3 per cent growth and level up around 2.5 to 3 per cent, given current policies, as we are not aggressive enough in terms of expansionary policies to see the 5 per cent growth sustained.
Strategies to achieve double-digit growth
The thing that concerns me the most is that every government agency is trying to raise revenue without considering the impact it will have on the economy and I think that we should go out and argue over that as well as VAT. Truth is that people are over-taxed and if you over-tax an economy without growth, what happens is that the economy does not grow because the government is a very lavish spender of money. The private sector spends money more efficiently than the government and taking money from the private sector to hand it over to the government is not the way to grow the economy. So, we need to have a discussion where the private sector and the public sector do things together to grow the economy, and I am not seeing much of that synergy at this time.
In terms of economic management, does it surprise you that this administration is without an economic adviser at the policy level?
I have always been surprised that the President of Nigeria never appointed a chief economic adviser; it may be cosmetic or not, but it is important that, when you are dealing with something, you show people that you care about it. However, I am sure they have their reasons for not doing that. I think Nigeria’s primary issue is not security or corruption, it is rather the economy. There is no country in the world with a robust economy that has security issues or corruption issues. If your economy is growing and people have a hope for a brighter future, they tend not to engage in criminal activity, corruption activity and security issues. So, I think corruption and security challenges are a function of lack of economic direction and I think more effort should be directed towards fixing the economy. If we have the double-digit economic growth and there are jobs for people and the infrastructure are working, in fact all Nigerians will experience minimal security and corruption challenges. So, it is high time we focused on growing the economy at double digits. Let us work together to do it and get the next President in 2023 who has an economic vision, economic mindset, to resolve the nation’s serious issues. This partisan stuff that everyone is talking about has not helped us and will not help us in the future. So, the earlier we charted a new course that emphasizes economic development the better for all of us.
What role will BDAN play in all you have said?
First, we need to project the image of banks better and we also need to make sure that banks are playing their role in the economy. As an association, BDAN will need to partner with government agencies, banking groups, to make sure that it is difficult to steal money, hide stolen money or launder stolen money. As a matter of fact, we need to do many other things to show that we are true partners with government toward the economic growth of Nigeria and not just as profit-making enterprises.
It is a step at a time and one of the first things I want to do is to review the constitution of BDAN. We need to have a policy arm, legislative arm, so that we can engage more proactively in all the bank issues so that banks can properly play their roles in society and the economy as practiced everywhere.
When all the institutions of the state are performing optimally, issues of insecurity, banditry and corruption will be drastically reduced and everyone will be happy for it.
We want an economy that works for the good of the citizens and it would be the key focus of BDAN to build a synergy with public sector so that things would work out better.
Fintechs are raising money, when will traditional banks play a big role in investing in Fintech companies?
There is a difference between Fintech and a Fintech company. Fintech is just financial technology and every bank uses it. Every time you do Internet banking, it is financial technology you are using and Fintech companies are companies devoted fully to doing things related to financial technology and not things the traditional banks are doing. My feeling is that, eventually, all banks will be using financial technology and will be doing everything that the Fintechs are doing today. We are not as frightened with what the Fintech companies are doing as people think but the CBN has to allow us to close some branches across the country; the idea of branch banking is not effective because people can bank without going to the branches. One of the things we have to look at is the cost of maintaining branches as opposed to the cost of using financial technology, and I can assure that we are going to be Fintech users going forward, but we are not threatened.
Do you think the economic advisory group of the Presidency has been effective? What should be the appropriate role of the state governments in achieving inclusive economic growth?
Let me address the issue of the Economic Advisory Council, which is composed of very high-minded intelligent people. I always felt that Presidents are not good consumers of policy documents of the kind that emerge from that kind of body. Those work outputs from them should have been going to a Chief Economic Adviser who will sit there every day and condense their output, so the President can act on it. Giving a President a briefing every three months is not actionable. I was always worried that although the council was well-constituted, the channels for their output to convert into action are not there. Unfortunately, my fear has proven to be true because they don’t seem to have had the impact that we all hoped they would have when they were constituted. So, I wish they would have a Chief Economic Adviser who they will submit their output to and then that Chief Economic Adviser will condense it for the president’s action.The problem is that federal regulators are too powerful in this country. And so, in the end and beyond the power that the regulators wield at the federal level, we don’t have the ability for states or even companies to do much without running to the federal government for this approval or that approval. Look at the value added tax issue, which the court has said clearly states that states should collect, the Federal Inland Revenue Service (FIRS) is still objecting to it and insisting it should be paid to FIRS. So, until the federal regulators realise that they are partners in business, and that they are not dictators in business, I think we are going to have to keep running to the Federal Government to help with the growth of the economy and that is unfortunate. The states and private sector are practically helpless in the face of rampaging federal regulators.