Abiodun Adebimpe is the President of the Association of Asset Custodians of Nigeria (AACN). In this interview with BAMIDELE OGUNWUSI, he previews Nigeria’s economic landscape as well as the association’s forthcoming annual conference. Excerpts:
How would you describe the Nigerian economic landscape presently?
Such words as tough, hard, difficult, challenging, dire, and grim, among others, have been variously used to describe the current situation in Nigeria.
This is irrefutable. Looking at it from major economic indicators, the situation will almost seem hopeless, and possibly unnerving.
With soaring inflation rate, high price of food items, massive importation, plummeting crude oil prices, a weakened Naira engendered by Dollar shortage, higher cost of refined petroleum products due to subsidy removal, unemployment, infrastructural deficit and insecurity, the outlook is not exciting.
You cannot expect to have stability in an environment ravaged by hunger and poverty.
The early August protest on #EndBadGovernance is an awakening for the government that social unrest may become inevitable, except things take a better turn.
A very youthful nation like ours cannot afford to sustain the current level of unemployment and minimum wage for long without some threat to the peace and stability of our dear nation.
You, as well as your association, the Association of Asset Custodians of Nigeria, are advocates of a market-friendly economic environment with the inherent opportunities that it engenders.
Will you say the incumbent government is working towards the attainment of this prospect?
Just a little clarification, the market-friendly economic environment that we advocate is still an ideal, though attainable with proper planning and execution.
It is a situation where the government creates the right structures and environment that allow the private sector the latitude to initiate and make most business decisions without much hindrance.
In essence, the forces of demand and supply are allowed to determine the market outcome.
This situation exists in several advanced economies and has created the inherent capacity to build prosperous economies.
In Nigeria, where we hope to see this happen, it remains a far-flung journey. But we must start from somewhere.
The Nigerian economy, given its current structure, is still hugely dependent on the government for funding and direction.
The Naira has lost considerable value against the US Dollar in the last 1 year.
What will be your take on how the CBN has been managing the FX market so far?
There is no perfect solution to tackling any challenge. You devise solutions based on identified challenges.
After a policy or solution is introduced, it is subsequently reviewed to determine whether it is addressing the desired outcome.
Otherwise, you would have to revise your strategy. It becomes a continuum.
The country makes over 90 per cent of its foreign exchange earnings from crude sales.
The proceeds from petroleum exports, which are usually in US Dollars, have, over the years, been used to sustain the value of the local currency.
But, crude oil is a global commodity dependent on the forces of demand and supply. And for quite a while, the global oil market had been unstable, resulting in prices tumbling considerably.
Therefore, the door through which the Dollar was flowing into our treasury and which kept the Naira fairly stable was broken, and with that, the currency came crashing.
With high inflation in mind, what tips would you be offering the CBN in managing the interest rates going forward?
The increasing cost of energy and food prices and the burden it puts on the people naturally arouses the consciousness of everyone about the causal factors and consequences.
Some have said that because Nigeria imports wheat from Russia and Ukraine, the war between the two countries has curbed such imports, resulting in increases in the price of the commodity in Nigeria.
We have also heard that the oil subsidy removal, devaluation of the Naira and unification of forex windows are contributory factors to the soaring inflation in the country.
Of course, there is insecurity ravaging the country with the attendant constraint on farming, particularly in the rural areas.
So, there are clear factors responsible for the worsening inflation rate. Some of these factors are within the range of the regulatory authorities-mainly the CBN and the Federal Government – to contain, while others are well beyond their powers. So, they know where to focus.
So far, the CBN has focused on monetary policies around hiking interest rates to rein in inflation, returning to orthodox monetary policies.
We have also seen efforts by the Federal Government to increase taxes and encourage food importation to curtail inflation.
In some quarters, there is the argument that Nigeria is not quite mature yet to manage a virtual currency and play seamlessly in the crypto market. Where do you stand on this?
I still remember the euphoria that accompanied the introduction of the e-Naira in October 2021, making Nigeria one of the first countries in the world to develop a central bank digital currency.
The expectation was that the country would derive enormous benefits from the initiative.
The then Governor of the CBN announced that the virtual currency was the fruition of a four-year research conducted by the apex bank, and designed to serve as a medium of exchange and store of value.
A sum of N500 million was reportedly minted for the currency’s inauguration.
In summary, I will say the e-Naira was introduced in response to the breakout of the COVID-19 pandemic which prompted swift progression in financial technology.
For the apex bank, it was an opportunity to broaden the payment possibilities in Nigeria and bolster digital financial inclusion.
The digitisation of money and finance fell in line.
However, recent issues with Binance have changed the whole landscape completely. Both the CBN and the Securities & Exchange Commission (SEC) are working to arrive at a good landing for our country as far as digital currencies and assets are concerned.
How would you assess the current situation regarding the Ease of Doing Business, protection of investments and building a burgeoning capital market in Nigeria?
The government and other regulatory agencies are doing their best to create a conducive environment for businesses to thrive, including the financial services industry.
Confidence in a system is a principal determinant of the decision to invest in any economy or a capital market.
The COVID-19 pandemic ended with an attendant deepening of technological solutions and innovations across the board.
Looking at your industry, are there still some areas where you think further fine-tuning is required or even strengthened?
Good and hard lessons were learnt from the pandemic. Before its outbreak, the banking sector, at least here in Nigeria, was already moving towards enhanced innovation and digitization, which was aimed at meeting customer expectations of modern banking.
The banking landscape, based on studies and customer feedback, took note of the growing strength of millennials and other tech-savvy groups that you may describe as the digital generation.
Their yearnings almost pushed traditional banking to the precipice and prompted the need for a change of course. The industry went back to the famous drawing board.
While this was ongoing, COVID-19 struck and took the world to largely uncharted waters. The global economy was not just disrupted, it was devastated. Rapid responses were needed; a shift in operational frameworks across sectors became imperative.
So, COVID-19 undoubtedly accelerated and deepened innovation and digitization in the banking industry and, indeed, other sectors of the economy and society at large.
In an interview last year, you were reported to have said that the Nigerian economy has adapted to evolving changes in the macroeconomic space, with its fundamentals remaining very strong. Do you still hold this view?
I still hold the view to a large extent. As I mentioned somewhere in the course of this interview, Nigeria did not become the largest economy in Africa and one of the largest economies in the world for nothing.
You may say that the productive base remains weak, but Nigeria possesses those fundamentals that attract such investments to propel the economy forward.
Take the population for instance; it is not just the largest in Africa and the black world, but it is also dominated by the youth.
This means that apart from being a huge consumer market, it is endowed with the energy and manpower to drive economic growth.
What is the current state of the Nigerian custody industry considering that confidence is a critical anchor in the success of the industry as this enables investors to determine the safety of their assets?
The unprecedented volatility that heightened operational and business risks for global and sub-custodians and their operating models is now a thing of the past.
The industry has since recovered from the macroeconomic disruption caused by COVID-19. Stability has since returned to the markets, and optimism is steadily on the rise.
Regarding your flagship event, the Nigerian Investors Conference, can you provide us with some insight about what to expect in this year’s edition?
The 2024 conference will take place in London, England, at the Double Tree by Hilton London – Docklands Riverside on Thursday, 19 September 2024, at 8:30 am GMT with the theme “Nigeria: Open to the World”.
The conference will project the Nigerian capital market as the leading driver of the country’s economic development. It will also, in line with its tradition, focus on driving sustainability and growth in the financial market, and showcase the continued positive impact the political transition has had on the development of the capital market.
The Central Bank of Nigeria’s (CBN) Deputy Governor, Economic Policy, Mr. Mohammed Abdullahi, will present a keynote address on the CBN’s role in maintaining monetary policies and stability and its current initiative for attracting foreign investment in the capital market.
As part of the conference objectives, we hope to present Nigeria to the world as an attractive investment destination despite the prevailing global economic challenges, while allowing participants to enhance their knowledge and confidence in the Nigerian capital market.
How has AACN evolved over the past 15 years? What has been the major achievement/ success so far and what are the AACN’s goals for the future?
It has been a journey. AACN has evolved over the past 15 years. At the beginning, we were five-member institutions but now we are 11. AACN has made the Nigerian Capital Market more suitable for investors and facilitates the growth of global best practices in our market.
We regulate and harmonise the activities of our members and enhance the exchange of information for their benefit and that of the industry.
Over the past 15 years, we have had several notable achievements, some of which are: Worked with the Central Bank of Nigeria in developing the guidelines for custody of money market and other fixed income instruments; Electronic certificate of capital importation (e-CCI); our collaboration with Securities and Exchange Commission (SEC) on Securities Lending & Borrowing; the mandatory appointment of custodians to registered Collective Investment Schemes as well as privately managed products.
We are currently working with the CSCS on reducing the settlement timeline of equities from T+3 to T+2. The Association is represented on the SEC disciplinary Committee, the SEC Capital Market Retreat Planning Committee, the Board of FMDQ Depository, and the NQX dealing Clerk interview panel.
Our goal for the future is to remain relevant in the capital market by continuing to grow with the global best practices in our market.
How is the association commemorating its 15th anniversary on this momentous occasion? What unique activities or events are scheduled for the anniversary?
To celebrate this year’s 15th anniversary, the AACN is looking at several activities. The capital market will be notified once the plans have been finalised.
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