Godwin Emefiele, Governor, Central Bank of Nigeria (CBN): Interview

Interview: Godwin Emefiele

What can be done to boost the provision of credit to the private sector in Nigeria?

GODWIN EMEFIELE: The adoption of the Secured Transactions in Movable Assets Act by all players in the Nigerian financial system should be enforced, as it is aimed at tackling the issue of inadequate collateral – one of the major obstacles faced by small and medium-sized enterprises (SMEs) in their effort to access finance. Another initiative includes the quick adoption of the move from fixed assets to movable assets as outlined in the expansion of the Credit Reporting Act. Furthermore, credit information generation should be expanded beyond credit bureaus and financial institutions to include telecoms companies and consumer goods retailers who now provide consumer credit facilities to their clients. Continued and pragmatic intervention by the CBN is also necessary considering financial service providers’ lack of interest in lending to SMEs, despite the fact that they account for over 70% of the Nigerian private sector. We also need to rapidly develop the financial infrastructure in rural areas.

What are some of the principal obstacles to increasing financial intermediation?

EMEFIELE: The main obstacle is Nigeria’s low level of financial literacy. A large share of the financially excluded bankable adults lack knowledge of the benefits that come from accessing financial services. Concurrently, financial service providers often lack adequate understanding of their services, particularly at the micro level. We also have significant infrastructure challenges. Low infrastructure development in rural Nigeria remains a major obstacle to financial intermediation despite the readiness and enthusiasm of the local populations to be integrated into the system. High transaction costs are another issue. The products of the financial system are not varied enough and there is limited adoption, predominantly among savings products. All this adds up to high interest rates and inflation.

How successful has the Anchor Borrowers’ Programme (ABP) been so far?

EMEFIELE: The ABP was introduced in November 2015 as a unique solution to the challenges of large food import bills by ramping up local production of certain commodities along the agricultural value chain through providing access to finance for smallholder farmers. The ABP is designed to ensure that these farmers have access to affordable credit – the annual interest rate is 9% – and increased yield in production. From November 2015 to June 2017, the ABP has successfully linked 195,753 farmers who have cultivated 229,543 ha of rice, wheat, maize, soya beans, cotton and cassava. The programme has also linked 934 fish and poultry farmers to over 64 large-scale processors in 29 states across the country. While successful, much still needs to be done.

How has the Cashless Nigeria policy worked to reduce the volume of cash transactions?

EMEFIELE: The CBN drove this process by educating stakeholders on the cashless policy of the bank and undertook a massive nationwide awareness campaign, starting with the seven states where the policy had first gone live and then moving to the other 30 states in the federation. This exercise allowed us to reach out to all stakeholders, receive feedback on the effectiveness of the programme and align our efforts productively in order to reach our targets. By doing this, the CBN has been able to continuously improve the cashless programme. The policy has gained traction in the nationwide adoption of electronic alternatives to cash. An analysis of financial transactions between 2012 and 2016 shows a downward trend in the volume of cash-based transactions and an increase in electronic payment options, which gives credence to the cashless policy being effective. One strong metric is the use of electronic mediums at the point of sale. This growth has been impressive, with an average increase in transactions of 110% year-on-year between 2012 and 2016.