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We will provide a sound financial system – Emefiele

By BusinessNews Staff on March 31, 2014

Senate President David Mark: Godwin, you will be with us for so long because you are going to head an important institution. You can see the number of senators who want to ask you questions. We have your CV (curriculum vitae) with us. But is there anything that you wish to tell us that is not in your CV?

Good morning distinguished senators. I thank you for inviting me to the Senate this morning. First of all, l applaud the three senators from Delta State – Senator (Dr.) Ifeanyi Okowa, Senator James Manager and Senator (Emmanuel) Aguariavwodo for the good job they have done in Delta State. I am Godwin Emefiele. I am from Agbor in Delta State.

I am the Chief Executive Officer and Group Managing Director of Zenith Bank Plc. I have had over 23 years of banking experience. Before commencing my banking career, l lectured in finance and insurance at the University of Nigeria, Nsukka (UNN) and University of Port Harcourt respectively. I am also an alumnus of Executive Education at Stanford University, Harvard University (2004) and Wharton Graduate School of Business (2005).

I hold a B.Sc degree from UNN and I was the best graduating student in Finance in 1984. I was retained in UNN for my youth service during which I taught. I obtained Masters of Business Administration (MBA) from the same school in 1986 after which I took up a lecturing job at the University of Port Harcourt. I moved to Lagos later and worked in finance sector and in 1990, l joined Zenith Bank. I became Deputy Managing Director of Zenith in 2001 and in 2010, l became the Managing Director. I am 53 years old.

The core mandate of the CBN is to achieve monetary and price stability, ensure strong exchange rate and build foreign reserve. We will ensure that we have a sound financial system in Nigeria. We will work hard to achieve macro-economy stability in the country where inflation rate will continue to come down. We will also ensure that the interest rate continues to come down.
During my tenure, whatever monetary policy decisions we take will be those that will lead to the improvement in the level of employment in Nigeria because employment is very crucial to national development. Today, we have an employment emergency in Nigeria and we must ensure that whatever decisions we take at the CBN will be those that will lead to improvement in the level of employment in Nigeria.We will ensure that we work with the manufacturing companies to ensure that we improve on their level of production and by extension, ensure that we achieve economic growth and development in Nigeria.

Aside from these core mandates, we will ensure that the CBN and all stakeholders in the economy play a central role towards ensuring that we grow the Nigerian economy in a stable environment. Growing the economy of Nigeria is a very important assignment other than just the core mandate of ensuring that we have a stable environment. We will do this through the adoption of Development Banking Model. We will do this through the adoption of the development banking model that had been tried and tested in different jurisdictions in the world. In fact, in some of the frontiers and emerging markets in the world, we have seen development banking being used as a tool towards achieving economic growth and development and industrialisation.

In the Latin American countries of Brazil and Mexico, development banking was used for their economic growth and development. And today, Brazil is seen to be one of the BRIC (Brazil, Russia, India and China) states in the world.

How do you want to handle CBN coming from the background of being regulated to a regulator? What is your view on the monetary framework and possible devaluation of the naira? And what do you think should be the level of relationship between CBN and the Ministry of Finance?

On the relationship between CBN and Ministry of Finance, Central Bank is the monitoring authority while the Finance Ministry is the fiscal authority. Both agencies must collaborate and work together. It is important that in their relationship, they must work in one direction. They must push in one direction. If we work in opposite directions, what you will find is that we are not going to be able to achieve economic growth and the development that we are talking about. It is important that both the Ministry of Finance and the Central Bank move in one direction.
On devaluation, it is true that we have seen the reserve dropping. It is as a result of speculative attacks on the naira because people think that there will be devaluation as a result of what is happening in the world today. There is no need for anybody to worry about devaluation because it is a very devastating action to be taken in the country particularly because we are an import-dependent country.

Devaluation will hurt the economy. We have an economy that is still very strong with about $39 billion in foreign reserve to sustain about nine months of import. For as long as we have crude prices standing at about $100 per barrel, it is a strong economy. If we allow devaluation to happen, it will hurt the economy. So, because we are import-dependent, if we allow devaluation, many people will lose their jobs. Prices of goods and services will go up. Productivity capacity will come down and eventually lead to inflation. The policy being adopted now which allows us to hold on to exchange rates and ensure that we do not engage in devaluation should be continued.

What is the correlation between the much publicised growth in our economy and the reality on ground? Since the Central Bank started the cashless policy, there are penalties when you withdraw above a certain amount and when you deposit above some amount. Where do those monies go? What is your view on the existence of (Asset Management Company of Nigeria) AMCON?

AMCON is a child of circumstance. It came about as a result of financial crisis to clear toxic assets in the books of some banks and to address the plights of those who lost investments in the capital market. If the agency was not established, some of the banks would have been liquidated today and the customers would have lost their deposits.

On the issue of payment for withdrawal and deposit, it is all about cashless policy that was introduced to the economy last year and this is ongoing in six states of the country and the (Federal Capital Territory) FCT. The cashless policy is a policy that we consider very good and important because all nations of the world today are embracing electronic banking as an electronic channel for doing business. Nigeria, being a very important country in the comity of nations should also embrace the cashless regime. We are going to look at parts of the policy that have to do with penalty being imposed on excess withdrawals. We will review it to ensure that we mop up all the cash that is outside into the banking system notwithstanding the limit but we will encourage people to make sure that they embrace the electronic form of doing business. Then, we could say that when making withdrawals, you should pay something to encourage you to embrace the electronic form of doing business. We will look into that and make it better.

What is your view on banking supervision and oversight of CBN? Why do we keep having high lending and deposit rates? And what is your view regarding amendment to CBN Act?

On the issue of banking supervision, I want to congratulate the management of CBN for doing an excellent job. There was a global financial crisis in 2008/2009 but the CBN since then, has ensured a financial system stability to the extent that today, no customer has lost his money and some banks have been bailed out. For an institution that had done such an excellent job, it should be commended for ensuring strong financial stability in Nigeria.We will be fair; we will be just but we will be firm in whatever we do.I agree with you that the CBN should have Operational Expenditure Profile and Administrative Expenditure Profile. I will always make myself available for clarification on these two subject matters anytime you wish. We will try as much as possible to be transparent, fair and as much as possible, do what is right.

On the exchange rate, we will continue to ensure that we have a strong exchange rate. What the CBN is doing now is to use various instruments of currency policy to ensure that we control the exchange rate. Actually, the exchange rate that the CBN has is N155.00 to $1. We have unofficial markets but the CBN usually intervenes from time to time to bridge the gap between the official and unofficial market rates.

On the interest on lending rate, the national cost of fund in the banking industry today – the cost elements make the rates high but I will try under my leadership to ensure that we intervene and see how deposit rate can be brought down, hence lending rate will also come down.
On amendment to CBN Act, it is the primary responsibility of the National Assembly. However, in doing so, I will appeal that before we take a decision to ammend the CBN Act, let us carry out a deep study, a scientific examination of the issues involved particularly how other countries are doing it. We need to know whether their central banks are independent or not. So, in taking such decision, the National Assembly should take a decision that is just, fair and one that is line with the best world practice. So, the decision is yours.

How do you want to grow the economy and create jobs?

On the issue of unemployment, apart from achieving a macro-economic stability, we will pursue a development banking agenda that will generate employment by substituting import-oriented economy with export-oriented industrialised economy.
We will try and raise bonds and channel it to agriculture and manufacturing sector so that small farmers, small scale industrialists can have access to loans that we will channel through their cooperative societies without demanding stringent collateral.

A lot of people have expressed fears on the effect of appointing a serving banker to serve as CBN governor. How do you want to safeguard the position from abuse? Which policy will you change in the current CBN when you take over? What difference will you make as CBN governor? Why do banks set huge targets for their staff and force them to engage in untidy acts in the struggle to meet those targets?
On the issue of being a banker or an economist managing the CBN, I have taken courses in macro-economy and I have the experience as a banker managing one of the biggest banks in Africa and this positions me adequately to manage the CBN with the professional experience I have garnered in my 27 years in the banking industry. For the post of the CBN governor, you need somebody who is a banker, an economist and who has the wealth of experience to be able to handle this task. On the issue of target to bank marketers, it is what I worry about. The point is that every institution in any part of the world sets performance target. This is often used to reward excellent performance. We will discuss with some of our colleagues to see how some of the negative aspects can be addressed.

How do you want to address the gradual dollarisation of the economy with some organizations now insisting that payment must be made in dollars? Is CBN supposed to be a profit making venture because we are aware of the current management of CBN building hotels and restaurants? After we had appropriated money for CBN in the budget, the bank will go ahead to spend more. Will you sustain this when you take over?

I think one of the core mandates of the Central Bank is to ensure that we maintain a legal tender and people respect it and ensure that whatever is done, that our own naira has to be used as a legal tender. I will take it as a primary responsibility to ensure that the attempt to dollarise the Nigerian economy is discouraged. We should not allow it because it will create problem for the economy.
I will not spend any money in contravention of the law. I will plead that you allow me yield on the issue of monies because these matters are in the court and I don’t want to make any statement that would be seen to be subjudice.

[This Day]

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