Interview: Lamido Sanusi
To what extent does public expenditure jeopardise price stability and what is being done to control it?
LAMIDO SANUSI: Although $72 per barrel of oil in the 2012 national budget may seem on the high side, we have largely steered clear from excess spending. In fact, we have seen a marked increase in capital expenditure.
To mitigate the negative impact of domestic spending, our focus should be on stabilising our exchange rate. As such, it is important that we rebuild our reserves. The sudden drop in oil prices in 2009 could only be absorbed by the Excess Crude Account, which has been largely depleted as a result. The global economic outlook is still uncertain, and it is vital that we resume our savings so that we are prepared for the worst in case the situation deteriorates. Doing so will depend on an agreement between all political stakeholders involved. Structural adjustment is also of key concern. We need to get to a point where we have an infrastructure whereby the balance sheet of the government is not the major driver of investment.
What does the sector need to develop and what are the priorities for loan growth?
SANUSI: After the clean up of the banks’ balance sheets and their adequate recapitalisation, there is nothing in the system today that is stopping our banks from lending. The question now lies with the counterparties. Vital elements like infrastructure, energy and agricultural transformation is what will bring about bankable companies and projects. In short, the banks are ready for business. The ball now lies in the government’s court.
What is the risk of over-consolidation and what kinds of problems could this pose?
SANUSI: Although the number of banks has decreased, there are actually more big banks now than before the sector was reformed. This means there is greater diversification of assets, which is where a banking sector wants to be. Moreover, Nigeria has the stated political objective to protect the small depositor. In practice, this means we will save banks even if they do not pose any immediate systemic risk.
What are the infrastructural priorities for the nationwide deployment of “Cashlite”?
SANUSI: Instant electronic transfers have been enabled, interconnectivity between ATMs is ensured and mobile banking licences have been issued. This will allow us to leapfrog technologies and include the entire population – most of whom own mobile phones – to enter the financial system. The roll-out over 2012 has been focused on Lagos as, given its proximity to the landing points of fibre-optic cables, it is ideally positioned for technological adoption. We are targeting nationwide deployment of the programme by January 2013.
How can the cost of lending be further reduced and what steps are being taken to address this?
SANUSI: Our move towards a cashless society is just one part of a shared services project. Other ongoing developments concern the outsourcing of cash management and transit, shared data centres, disaster recovery sites and back offices. Aside from the immediate financial gains this entails, human capital is being made available for revenue-generating services, such as debt recovery and client acquisition. We estimate that a successful implementation of these measures will reduce the cost of lending by at least 30%.
How has Islamic banking been developing and what role do you foresee it playing in the future?
SANUSI: Islamic finance is not a unique Nigerian nomenclature. Just as merchant, investment and mortgage banking are recognised globally, so is Islamic finance. It is a $1trn business. South Africa, where Muslims make up 2% of the population, is issuing its own sukuk, or Islamic bond, in recognition that at a time where concerns over sovereign debt in the US and Europe are running high, countries have to tap into other markets where liquidity is still abundant, such as Malaysia and Dubai.
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