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Slide 1 - Professor Chukwuma C. Soludo, CFR, CBN Governor
Slide 2 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline
Slide 3 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far
Slide 4 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa
Slide 5 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now
Slide 6 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc.
Slide 7 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008)
Slide 8 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate
Slide 9 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN
Slide 10 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN
Slide 11 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate
Slide 12 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework
Slide 13 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination
Slide 14 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b)
Slide 15 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system
Slide 16 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system
Slide 17 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system
Slide 18 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system
Slide 19 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system
Slide 20 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System
Slide 21 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007
Slide 22 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml)
Slide 23 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008)
Slide 24 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence
Slide 25 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation
Slide 26 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy
Slide 27 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS)
Slide 28 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation
Slide 29 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation
Slide 30 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world
Slide 31 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment
Slide 32 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC
Slide 33 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening
Slide 34 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead
Slide 35 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead Effect of the Current Global Economic Crises The current economic crises will reshape the global competitive landscape but CBN will continue to do her best to ensure that our monetary policies are in line with global best practices and reflective of our peculiarities, and that our regulations support the Nigerian economy to achieve her full potential
Slide 36 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead Effect of the Current Global Economic Crises The current economic crises will reshape the global competitive landscape but CBN will continue to do her best to ensure that our monetary policies are in line with global best practices and reflective of our peculiarities, and that our regulations support the Nigerian economy to achieve her full potential The Road Ahead Context: Key Drivers of the Environment for Central Banking in the next 50 Years? Financial globalization will deepen, with intensified cross-border regulation and supervision Globalization with weak governance structures and hence increased uncertainties and vulnerabilities to more devastating future financial crises Regionalism: common currencies and regional central banks (Nigeria just signed an MOU with AUC granting Nigeria hosting right to African Central Bank (ACB). If monetary unions succeed in Africa, there may be no Central Bank of Nigeria in the next 50 years Central Banks increasingly being required to make “financial system stability” an explicit goal, and potentially increasing role in financial system regulation and supervision Increasing integration of financial markets and difficulty of measuring and controlling domestic monetary aggregates
Slide 37 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead Effect of the Current Global Economic Crises The current economic crises will reshape the global competitive landscape but CBN will continue to do her best to ensure that our monetary policies are in line with global best practices and reflective of our peculiarities, and that our regulations support the Nigerian economy to achieve her full potential The Road Ahead Context: Key Drivers of the Environment for Central Banking in the next 50 Years? Financial globalization will deepen, with intensified cross-border regulation and supervision Globalization with weak governance structures and hence increased uncertainties and vulnerabilities to more devastating future financial crises Regionalism: common currencies and regional central banks (Nigeria just signed an MOU with AUC granting Nigeria hosting right to African Central Bank (ACB). If monetary unions succeed in Africa, there may be no Central Bank of Nigeria in the next 50 years Central Banks increasingly being required to make “financial system stability” an explicit goal, and potentially increasing role in financial system regulation and supervision Increasing integration of financial markets and difficulty of measuring and controlling domestic monetary aggregates The Road Ahead Continue to maintain macro stability – price stability consistent with long term economic development Amend BOFIA to strengthen regulation/supervision Other Legal Reforms – to fast-track markets/institutions for efficient credit system Increasing investment in production & processing of timely & robust data for economic management Mortgage and Consumer Credit Reforms Deepen and Mainstream Microfinance System Continued Strengthening of Corporate Governance Capacity Building for Financial System staff (Knowledge, skills) professionalism)
Slide 38 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead Effect of the Current Global Economic Crises The current economic crises will reshape the global competitive landscape but CBN will continue to do her best to ensure that our monetary policies are in line with global best practices and reflective of our peculiarities, and that our regulations support the Nigerian economy to achieve her full potential The Road Ahead Context: Key Drivers of the Environment for Central Banking in the next 50 Years? Financial globalization will deepen, with intensified cross-border regulation and supervision Globalization with weak governance structures and hence increased uncertainties and vulnerabilities to more devastating future financial crises Regionalism: common currencies and regional central banks (Nigeria just signed an MOU with AUC granting Nigeria hosting right to African Central Bank (ACB). If monetary unions succeed in Africa, there may be no Central Bank of Nigeria in the next 50 years Central Banks increasingly being required to make “financial system stability” an explicit goal, and potentially increasing role in financial system regulation and supervision Increasing integration of financial markets and difficulty of measuring and controlling domestic monetary aggregates The Road Ahead Continue to maintain macro stability – price stability consistent with long term economic development Amend BOFIA to strengthen regulation/supervision Other Legal Reforms – to fast-track markets/institutions for efficient credit system Increasing investment in production & processing of timely & robust data for economic management Mortgage and Consumer Credit Reforms Deepen and Mainstream Microfinance System Continued Strengthening of Corporate Governance Capacity Building for Financial System staff (Knowledge, skills) professionalism) The Financial Systems Strategy (FSS 2020) as Medium Term Strategy To make Nigeria Africa’s Financial Centre of choice by 2020 through: Developing Nigeria’s financial sector & engineering Nigeria’s evolution into the International Financial Community Strengthening domestic financial markets Enhancing integration with external financial markets Building an International Financial Centre Providing enabling environment & infrastructure Establishing the financial system as a growth catalyst
Slide 39 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead Effect of the Current Global Economic Crises The current economic crises will reshape the global competitive landscape but CBN will continue to do her best to ensure that our monetary policies are in line with global best practices and reflective of our peculiarities, and that our regulations support the Nigerian economy to achieve her full potential The Road Ahead Context: Key Drivers of the Environment for Central Banking in the next 50 Years? Financial globalization will deepen, with intensified cross-border regulation and supervision Globalization with weak governance structures and hence increased uncertainties and vulnerabilities to more devastating future financial crises Regionalism: common currencies and regional central banks (Nigeria just signed an MOU with AUC granting Nigeria hosting right to African Central Bank (ACB). If monetary unions succeed in Africa, there may be no Central Bank of Nigeria in the next 50 years Central Banks increasingly being required to make “financial system stability” an explicit goal, and potentially increasing role in financial system regulation and supervision Increasing integration of financial markets and difficulty of measuring and controlling domestic monetary aggregates The Road Ahead Continue to maintain macro stability – price stability consistent with long term economic development Amend BOFIA to strengthen regulation/supervision Other Legal Reforms – to fast-track markets/institutions for efficient credit system Increasing investment in production & processing of timely & robust data for economic management Mortgage and Consumer Credit Reforms Deepen and Mainstream Microfinance System Continued Strengthening of Corporate Governance Capacity Building for Financial System staff (Knowledge, skills) professionalism) The Financial Systems Strategy (FSS 2020) as Medium Term Strategy To make Nigeria Africa’s Financial Centre of choice by 2020 through: Developing Nigeria’s financial sector & engineering Nigeria’s evolution into the International Financial Community Strengthening domestic financial markets Enhancing integration with external financial markets Building an International Financial Centre Providing enabling environment & infrastructure Establishing the financial system as a growth catalyst Conclusion The Past is Behind Us, and the Future ahead is full of uncertainties and Challenges. 50 Years is only a beginning, not an end for the Central Bank As Nigeria aspires to claim the 21st Century, the CBN in the next 50 Years must be proactive in leapfrogging the financial system to ensure success Your contributions during this Conference could put us on this sure path!
Slide 40 - Professor Chukwuma C. Soludo, CFR, CBN Governor Outline The Journey So Far Introduction At 50, the Central Bank of Nigeria has come a very long way, and evolved with the Nigerian economy and the Financial System With the Central Bank Ordinance passed on 17th March, 1958; first Governor of CBN (Mr. Fenton) assuming duty on July 24, 1958; first meeting of Board of Directors held on 30th July, of the same year, and the 1958 Act came into full effect on September 15, 1958, the CBN was ready to commence operations which it actually did on 1st July 1959 In 1959, the Nigerian economy was powered mainly by the three regional economies and dominated by groundnuts, palm produce, and cocoa Our Operating Environment: Then and Now Acknowledgements The Executive and Legislative Arms of Government 14 Heads of State; 9 Governors of Central Bank; 126 Directors; 19,563 Staff (5,028 staff serving) 5,356 Pensioners The Ministries and Agencies connected with economic and financial policies and regulation (Ministries of Finance, National Planning, Justice, SEC, NDIC, DMO, OAGF) CEOs of banks and other financial institutions; money market operators Nigerian Stock Exchange; operators of the capital market Nigeria’s Development partners– the IMF, World Bank, UNDP; UKDFID, USAID, EU, etc. CBN Governors (1958 – 2008) Evolution of CBN & Its Mandate In 50 years, the CBN has had three major Acts (1958, 1991, and 2007) with some amendments. There have been periodic interruptions of the Bank’s operational independence, but the 1991 Act (as amended) clearly spelt out the Bank’s operational independence However, it has remained relatively stable in relation to its governance and mandate With 9 Governors in 50 years, the CBN has been spared the volatility in Nigeria’s political history and remained one of the most stable Central Banks in the world The CBN has evolved in terms of its organizational structure, complexity, skill pool, efficiency and effectiveness Evolution of the CBN Evolution of CBN Since the 1958 Act, the mandates of the CBN (with modifications) have included: Ensure monetary and price stability (2007 Act) Issue legal tender currency in Nigeria Maintain external reserves to safeguard the international value of the legal tender currency Promote a sound financial system in Nigeria Act as a banker and provide economic and financial advice to the Federal Government In essence, the CBN is: The Monetary Authority of Nigeria A Regulatory Institution for Banks and Others The Banker and Adviser to the FGN The CBN Mandate Evolution of Monetary Policy in Nigeria Plans to adapt a form of Inflation Targeting framework Outcome: Monetary & Price Stability 1970s, 80s: Improved monetary management 90s: Higher Inflation (fiscal dominance) 2004-2007: Single digit inflation, effective monetary and fiscal coordination Outcome: Increased Credit to Private Sector (N’b) Issuance of Legal Tender and Transformation of Payments System CBN moved from issuance of Nigerian Pounds (July 1959) to issuance of Nigerian Naira since 1973 Denominations issued in response to changing economy Promoted the transformation of the payments system from a predominantly cash to increasingly sophisticated electronic system Issue Legal Tender Currency & Payments System Management of External Reserves Changes in practice have reflected changes in the CBN Law and improvements in the capacity of CBN Staff Framework has moved from passive to active reserve management Collaborated with the World Bank on Reserves Advisory and Management Program (RAMP) in 2003 Established a modern Dealing Room Appointed External Asset Managers to manage a portion of the external reserves Diversified assets portfolio of external reserves in 2007 Management of External Reserves (US$’ml) Reforms in Exchange Rate Management Moved from fixed regime to flexible (market-determined) in 1986 From Retail DAS to wholesale DAS in 2006 Deepened Interbank Forex transactions Liberalised the Forex market Outcomes More Efficient Forex market Higher accumulation of Reserves Convergence of Rates (2006-2008) Outcome: Exchange Rate Convergence Evolution of Banking Supervision 1892 – 1951 1960 – 1965 1966 to date 1986 – 2003 2004-2005 Nigeria following the World Nigeria setting pace for the world 2006 to date: Post-Consolidation Sound Financial System End Dec. ‘03: Pre-Consolidation (Where We Were) 89 banks with 3,282 branches characterised by structural and operational weaknesses such as: Low capital base & poor asset quality Oligopolistic structure; insolvency and illiquidity Weak corporate governance; poor rating of a number of banks Overdependence on public sector funds and income from foreign exchange trading Lack of capacity to support the real sector of the economy New Regulatory Landscape Tightening of Regulation and Supervision Greater emphasis on enforcement of Code of Corporate Governance Resident Examiners have been deployed to banks since January 2009 Standby teams of target examiners being deployed to any bank at any time to ensure timely regulatory actions if necessary Review of Contingency Planning Framework for Systemic Distress in Banks Introduction of Credit Bureau Strengthening of institutional coordination through the Financial Sector Regulatory Coordinating Committee (FSRCC) Adoption of common accounting year end for all banks with effect from end-Dec. 2009, aimed at improving data integrity and comparability Adoption of the International Financial Reporting Standards (IFRS) Initially 25 (now 24) well capitalized banks owned by the Private Sector Asset Base grew by 439.4% between 2003 and March 2009 Capital adequacy ratio was 22% by end December 2008 Ratio of non-performing loans to total loans down from 22% in 2003 to 6% in 2008 About 10 Nigerian banks in top 1,000 banks in the world, and 3 in top 2,000 companies in the world (none in 2003) Nigerian banks as Nigeria’s leading multinationals Branch Expansion outside Nigeria - 37 in Africa and 9 outside Africa More effective supervision (24 rather than 89) Microfinance Banks - 866 licensed (104 under AIP) Sound Financial System: Post- Consolidation The Nigerian Banking Sector Pre and Post Consolidation Outcome In spite of the Global Crises and the banks’ exposure to the capital market: Banks total exposure to Capital market as at end January 2009 was N784 billion or about 10% of total loans Amount banks are prepared to turn over to an Asset Management Company (AMCON) if such were set up by end of the year = N 350– N 400 billion or approx 4 – 5% of loans as at Feb. 2009 About 15 banks would have no need for AMCON Total Non-performing loans as percentage of total as at Feb. 28, 2009 = 6.2% (Estimated non-performing loans as at end of December 2009 = about 7.4%) CAMELS rating of the banks as at end-December 2008, showed an average composite score of 62 per cent and average industry rating is satisfactory Average capital adequacy ratio of 22 per cent, among the highest in the world Banker and Adviser to Government CBN is always a key partner in the development of Government Economic Policies and various National Development Plans since inception The Bank provides periodic Economic and Financial advice to Government As Banker to the Federal Government – deployed first rate IT infrastructure to ensure e-payment Developmental Activities Targeted Funding Facilities CBN Funding Contributions to the establishment of DFIs: NEXIM; BOI; FMBN; NACRDB; AFC Agricultural Credit Guaranteed Scheme Fund (ACGSF) Microcredit Fund (N50 billion) Small and Medium Enterprises Loans Scheme (1&11) Small and Medium Enterprises Equity Investment Scheme (SMEEIS) Recent N200 billion Fund for Large Scale Commercial Agriculture Entrepreneurship Development Centres (EDCs) in 3 Zones since 2008 (trained 9,000 people so far, and expected to create 525,000 jobs in 3-5 years) Active Foundation Role in Establishment of NDIC and SEC Corporate Social Responsibility Support to tertiary institutions Provides Technical and financial support to the National Bureau of Statistics Support for Government and Professional Institutions in capacity development and strengthening The Road Ahead Effect of the Current Global Economic Crises The current economic crises will reshape the global competitive landscape but CBN will continue to do her best to ensure that our monetary policies are in line with global best practices and reflective of our peculiarities, and that our regulations support the Nigerian economy to achieve her full potential The Road Ahead Context: Key Drivers of the Environment for Central Banking in the next 50 Years? Financial globalization will deepen, with intensified cross-border regulation and supervision Globalization with weak governance structures and hence increased uncertainties and vulnerabilities to more devastating future financial crises Regionalism: common currencies and regional central banks (Nigeria just signed an MOU with AUC granting Nigeria hosting right to African Central Bank (ACB). If monetary unions succeed in Africa, there may be no Central Bank of Nigeria in the next 50 years Central Banks increasingly being required to make “financial system stability” an explicit goal, and potentially increasing role in financial system regulation and supervision Increasing integration of financial markets and difficulty of measuring and controlling domestic monetary aggregates The Road Ahead Continue to maintain macro stability – price stability consistent with long term economic development Amend BOFIA to strengthen regulation/supervision Other Legal Reforms – to fast-track markets/institutions for efficient credit system Increasing investment in production & processing of timely & robust data for economic management Mortgage and Consumer Credit Reforms Deepen and Mainstream Microfinance System Continued Strengthening of Corporate Governance Capacity Building for Financial System staff (Knowledge, skills) professionalism) The Financial Systems Strategy (FSS 2020) as Medium Term Strategy To make Nigeria Africa’s Financial Centre of choice by 2020 through: Developing Nigeria’s financial sector & engineering Nigeria’s evolution into the International Financial Community Strengthening domestic financial markets Enhancing integration with external financial markets Building an International Financial Centre Providing enabling environment & infrastructure Establishing the financial system as a growth catalyst Conclusion The Past is Behind Us, and the Future ahead is full of uncertainties and Challenges. 50 Years is only a beginning, not an end for the Central Bank As Nigeria aspires to claim the 21st Century, the CBN in the next 50 Years must be proactive in leapfrogging the financial system to ensure success Your contributions during this Conference could put us on this sure path! Thank You so much as you join us in …….