Bursting economic myths through Financial System Strategy

In order to fast-track the realisation of Vision 2020, the FSS2020 was initiated in August 2006, at the behest of the Central Bank of Nigeria (CBN), which brought together other regulatory agencies. And they agreed among themselves to adopt an integrated and coordinated approach to financial sector reforms able to sustain one of the world’s […]

In order to fast-track the realisation of Vision 2020, the FSS2020 was initiated in August 2006, at the behest of the Central Bank of Nigeria (CBN), which brought together other regulatory agencies. And they agreed among themselves to adopt an integrated and coordinated approach to financial sector reforms able to sustain one of the world’s 20 largest economies, come 2020.
The FSS2020 is driven by the financial market, mortgage market, insurance market and the micro, small and medium enterprises (MSMEs). It is spurred by the need to sustain macroeconomic stability; strengthened by the need to deepen the banking and financial system, beginning with the clear understanding of the concept of money, emboldened by the urgency to evolve appropriate regulations and laws to power the new economy, stimulated to create new avenues for the funding of critical infrastructure, and entwined to enhance a corporate governance regime across the financial sector, among others.
Going forward, MSMEs have remained an essential part of the economic fabric of developing nations as it engineers economic growth. Their advantages cannot be overemphasised: they encourage entrepreneurship, they can be established rapidly and put into operation to produce quick returns. MSMEs development can encourage the process of both inter and intra regional decentralization. They may as well become a countervailing force against the economic dominance of larger enterprises. More generally, the strengthening of MSMEs is seen as a catalyst that motivates the achievement of a wider economic and socio-economic objective, which involves poverty alleviation and employment generation, especially in developing countries like Nigeria. Within this purview, there is the likelihood that MSMEs will utilise labour intensive technologies and thus have an immediate impact on job creation.
The International Labour Organisation (ILO) and the Germany Agency for International Cooperation (GIZ) examined almost 50 research studies and concluded that MSMEs provide two-thirds of all formal jobs in developing countries in Africa, Asia and Latin America, and 80 per cent in low income countries, mainly in sub-Saharan Africa. In Nigeria, the organised manufacturing sector is made up of 95 per cent MSMEs, whereas 5 per cent represents the large corporations.
However, MSMEs in Nigeria is not devoid of challenges, among which include lack of access to finance either to start, expand or modernise their present scope of economic activities, high cost of during business occasioned by poor infrastructure, multiple taxation, inadequate capacity building, high cost of legal documentation, bureaucracy attached to registration, etc. To ameliorate these numerous challenges, FSS2020 have harnessed resources towards ensuring the development and implementation of a simplified corporate governance and standards framework for MSMEs. In this scenario, the establishment of a one-stop shop platform and physical space to enable MSMEs access relevant information and to provide support for registration, taxation, trade and business development, banking services application, business services etc, becomes essential.
The MSMEs corporate governance and business standard is designed to be achieved through the provision of timely, diversified, affordable and dependable financial services to the economically active poor and the enhancement of service delivery. The benefits accruable thereof are the enhancement of quality and credibility, promotion of access to finance, ease of operation to setup, the enabling of integration with international markets and the facilitation of entrepreneurship.
On a broader sense, FSS2020 is creating a business friendly environment for MSMEs, introducing measures to ensure access to adequate and affordable financial services, developing MSMEs manpower, optimising MSME businesses through the promotion and use of modern technologies etc.
On a pedestal of the same magnitude therefore, the CBN, under the compass of FSS2020, has embarked on a transformational programme that involved the development of the Nigeria International Financial Centre (NIFC) within a clearly defined geographic location. The centre is designed to principally attract international financial services institutions and other complimentary businesses.
A dentist once explained why his crowns are always flawless. “Unlike some dentists, I don’t have a problem with the crowns that come back from the lab. If I send them perfect work, they send me perfect crowns,” he said.  This dentist doesn’t worry about the end result. He only focuses on his role in the initial stage of the process.
For the overall goal of FSS2020 to be achieved, the NIFC must seriously focus on deepening and diversifying products, services and institutions to drive the increased participation in the financial market. It should focus on facilitating the reduction of operational and transaction costs, establishing international competitive market infrastructure and ensuring competitiveness of the financial market products and services.
The benefits accruable, among others, include enhanced economic development for Nigeria; deepened domestic financial markets, enhanced integration with external markets, increased infrastructural development, as well as enhanced image, position and world relevance of Nigeria. The key deliverables are administrative, legal and regulatory framework, NIFC building and location, and confirm funding commitment. The risks involved are in the areas of funding, public advocacy gap, buy-in challenge, political challenges, technical competences, security and safety, and project management. The programme implementation team includes the CBN, NSE, NAICOM, Bankers Committee, Office of the President, NEXIM, FIRS, ECOWAS, OAU, SEC, UK Trade and Investment/Common Wealth Office, FSS2020, among others.
All said and done, the stakeholders of FSS2020 have graced the Nigerian economy with gravitas of hope through their numerous economy transformational programmes. Very soon, they will show the world that with tenacity, even the worst can become the best.
Iheanyi resides in Enugu