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Central Bank of Nigeria Governor, Mr. Godwin Emefiele, in this interview at the end of the Monetary Policy Committee meeting yesterday spoke about recent initiatives by the banking sector regulator. Obinna Chima and James Emejo bring the excerpts:

With the ban on forex sales to BDCs, don’t you think there would be pressure on exchange rate? When you talk about pressure on exchange rate, I don’t see it because if you are sure that you’re conducting a legal business and you are authorised; you want to pay medical bills, you want to pay school fees, you know it is legal, you know it’s not something meant to perpetrate graft and corruption – go to your bank. The bank will take your documentation and they will do your transfers for you. You don’t need a BDC given the fact that we are so disappointed and we cannot continue with the bad practices that is happening there. I had said so about four or five MPC meetings ago that what happens in that market, as insignificant as the volume is, that they are all perpetuating graft, corruption, exchange of bribe money. Instead of taking your naira in big bags, you chose to collect dollar cash in small bags. We will not facilitate that for you again. It is not what a central bank should support. That is the reason we have taken this position today.

Last week, there were reports that the CBN will be unveiling its digital currency. Are you really prepared for this? Yes, digital currency is what central banks all over the world are providing as alternative to the current money arrangement. What are we saying? You have some naira in your account and you chose to convert part of your naira into a digital wallet by way of a digital currency. Of course, when this starts, the CBN will move some of the balances of banks with CBN to digital currency. So, you go to your bank, you have N10 million and you want N2 million out of that into a digital currency, they will debit your account and move it to your wallet which you can spend across countries.

So, we think that this is a noble idea and we are not the first, many other central banks are at advanced stages of revealing their own digital currency. And our own digital currency which is tagged e-Naira will certainly come into operation by October and we are working very hard for this. So, what are the objectives? On payment system, we believe that transactions will be cheaper and more efficient. On the digital economy, the Nigerian economy just like the rest of the world is going digital and cash cannot play in that space. Therefore, the e-Naira which will represent the digital equivalent of cash will be used as the fiat currency to effect transactions.

And of course, in the area of facilitating monetary policy transmission, we believe that the rise of private digital money such as Facebook game and others will mean less visibility to the amount of money in the system and hence inability of monetary authorities to properly transmit monetary policy decisions. And in terms of financial inclusion, we believe that over 30 per cent of bankable adults are still outside the financial system. So, the ability to have offline payment through our e-Naira initiative will bring most of them into the formal financial sector. How ready are we? The use of cash is declining everywhere in the world just as in Nigeria and with the advent of digital commerce which is booming in the country, more and more people are adopting the use of electronic money to facilitate digital commerce. So our e-Naira is a digital representation of cash which means it is a fiat currency that will be just as acceptable as the physical or analogue naira.

We recognise the need for wide stakeholder engagement and education to be able to create awareness for the use of e-Naira as alternative to cash to further drive towards a cashless society. Now, on crypto-currencies, let me say that the Nigerian economy is big enough to accommodate choices people make with regards to how they transact their businesses. I will emphasised that crypto-currencies are private monies which are not regulated by any regulatory authority and therefore, using them is your own individual decision. If you decide to use them, it means you are taking risks. And if you make money, we will wish you good luck, but if you lose money we will laugh at you. But for us at the CBN, we have passed instructions and directives to the banks that they cannot use their banking and payment systems infrastructure to allow crypto-agents or users to use them.

So, that policy still remains in place and I am not sure we are about to change that policy. That will be my response on whether or not crypto currency is allowed. Then by way of update, I must say that we have made advanced progress on our digital currency and we have already appointed Bits Incorporation as our technical partner. They were selected out of 10 other solutions providers based on their performance during a rigorous evaluation process on diverse criteria including technology, ownership and control, implementation timeline, efficiency, ease of adoption, support for Anti Money Laundering and Counter-Financing of Terrorism, platform security, interoperability and implementation experience. So we are pretty confidence that Bits Incorporation has all that is needed to qualify them to be our partners in this journey and I am very sure that we will be making good progress here.

How will you react to allegations that some banks are showing signs of distress? Let me say that all those social media messages going round are fake and indeed fraudulent and the CBN is currently doing everything possible to trail those perpetrators who are bent on creating problems to create banking system instability. We hope to unravel those who are behind it and we will bring them to the public if we find them. But I want to say and I repeat that the strategic health of the Nigerian banking industry remains very strong. For instance at today’s meeting, data was provided to monetary policy committee members and I will say we reviewed the financial soundness indicators of the Nigerian banking industry. For instance, capital adequacy ratio averages 15.5 per cent. For the national banks, they are only meant to have 10 per cent. The international banks, those operating international licenses, they are supposed to operate at 15 per cent. If we have an average of 15.5 per cent, we believe the Nigerian banking industry is well capitalised and can meet any shocks if they arise. Secondly, non-performing loans ratio today stands at 5.7 per cent and our prescribed maximum is five per cent even at a time when there’s global crisis. If we have 5.7 per cent instead of five per cent, I think it’s an indication of a sound banking system.

Thirdly, liquidity ratio for the banking industry today is 41.4 per cent. What is expected is a minimum of 30 per cent and if the banks have an average of 41.3 per cent, we believe that’s an indication of sound liquidity in the banking system. Total assets in the banking industry from the data that we saw today rose from N37.8 trillion in May 2019, two years ago and today total assets of the banking industry N53.6 trillion as at June 2021. Total deposits in banking industry has increased from N22.83 trillion in May 2019 to N33.85 trillion in June 2021. Gross loans have grown from N15.4 trillion in June 2019, to N22.04 trillion in June 2021. Like I said earlier, non-performing loans ratios have dropped from as high as 11.17 per cent in May 2019, to 5.7 per cent in June 2021, against a maximum threshold of five per cent. So, where lies the issues on distress? I will like to appeal to members of the banking public to go about and conduct their banking business with any bank of their choice.

We are monitoring the banks and where we find that there’s some weaknesses in some, we will target the shareholders. That is because we have often told the shareholders and insiders that they don’t own the banks alone. Our analysis shows that if you look at the balance sheet of an average five year-old bank, the size of the deposits in those banks is almost 10 times the paid up capital of those banks. So, if you ask me, who owns banks? I will say it is depositors that own the banks and not the shareholders. The shareholders just have what I call the fiduciary responsibility which they must perform but where we find them wanting, we will take them out so that the banks can survive and depositors don’t lose their money.

What is the update on the infraco as you had promised that it would take off this quarter? Yes, I made a commitment that during the first quarter of 2021 that infraco would take-off and you are reminding me that this is July and we are about entering August, which is the middle of the third quarter. But the update is that it takes a process for an Infrastructure Corporation that is meant to be raising about N14 trillion and N1 trillion equity from the owners, it takes a process to set up such institution that must be established in line with world’s best global practice. And it starts with appointing the transaction adviser, which is KPMG, and the appointment of asset managers which we have done.

I expect that in the course of this week, we would place an advert on the appointment of the Chief Executive Officer and the Chief Investment Officer of the Infraco and he has to be a world-class person who understands infrastructure financing and infrastructure business and must be a well-respected person. So, we are not just going to take any person because we want to make sure that we get this right. If we get it right, then it would be easy for us to raise N15 trillion, so that we can go to another phase. Let’s not forget, Nigeria’s infrastructural deficit is so wide that we consider N15 trillion to still be a drop and that is why we must get this right, so that the world would welcome us when we go for a second, a third and a fourth.

During a lecture you delivered at the University of Lagos, you lamented the gap between theory and practice and talked about plans by the CBN to encourage entrepreneurship, what steps have been taken towards that? It is true. Why should we have people who graduated from the university after studying agriculture and yet we say that Nigeria has a lot of agriculture potential, but the graduates in agricultural science, agricultural extension and yet they don’t own farms. So, we are trying to see that if you are a graduate of agriculture for instance, we would like to work with the universities to ensure that these persons are supported to see that even before they graduate they own farms, conduct research on seedlings, fertilisers and other inputs. I repeat, this is the time to go into agriculture. Don’t forget, as a result of the COVID-19, every country has closed up.

We got to a point where people who produce drugs held on to their drugs, and people who produced food, held back their food. So, how would a 200 million population country survive? That is the reason we are saying if assessing credit is your problem, we would solve that problem for you, but just be committed to see that when you take a loan, you repay. So, between the time when I held that lecture at UNILAG and now, we have sent our Development Finance officers to all the universities. They met with the Committee of Vice Chancellors and they have gone to each of the universities to assess the needs based on a framework to support the initiatives of the universities. It is not about agriculture alone. Why should a pharmacy graduate leave the school and become just a drug dispenser and you cannot produce common sanitiser? We would provide our Youth Entrepreneurship Development Programme for you.

We don’t mind to collaborate with the NYSC and the universities to cease the NYSC and degree certificates of the beneficiaries and give the graduates money to go into business so that they can create jobs for themselves and others. That is what we need. We are talking about developing the entrepreneurial skill in our young men and women. Agriculture in Nigeria today I can beat my chest to say is the most profitable you can imagine today. There are people we gave loans of about N10 billion under our prime anchor programme. After we collected their produce as repayment of their loans and paid them more than N10 billion as cash, and they are enjoying themselves. So, while will you as a youth sit down and be looking for job when your entrepreneurial skill can be developed. That is why we are saying we must bridge the gap between what you studied in school and that when you graduate you can practice because your entrepreneurial skills have been developed. The framework would be out, it is a programme we are very excited about and we are hoping that our universities would embrace this for the good of our country.

Inflation further dropped from 17.9 per cent in May to 17.75 per cent in June and yet food prices are high, why is it so? When you say inflation, it means prices are going up. Only that in this case, the rate of increase is decelerating. We are hoping that we would get to a point where we are not talking about inflation, but deflation. We are making progress to see that the rate of increase in prices is reducing and our data supports the fact that. In fact, we are unhappy that the rate is slow. But we are all going to work together to see that it comes down very fast.

Will the CBN be considering increasing its interventions in the Agric, Small and medium enterprise scheme (AGSMEIS) and others? The MPC has identified the fact that through these intervention facilities, we have seen our objectives of price and monetary stability being achieved. The MPC has encouraged the management of the CBN to do more. So, we would continue to do more. But we are appealing that when you take money you use it for good reasons and pay back. It is not a national cake, it is not a grant, but a loan and you must repay. Let me warn, if you think the money and you will not pay under some kind of funny arrangement, let me tell you that you will pay because we have your data, we know where you are and we would find you. So, use it for good purpose and after using it, you can use your profit to go to the bar or to marry. But don’t go to the bar with the principal because you must repay.