Cibn capacity building in the nigerian financial industry

CAPACITY BUILDING IN THE NIGERIAN FINANCIAL INDUSTRY: PROSPECTS AND CHALLENGES

A paper presented

By

Joseph Olusegun Ajibola (Ph.D., FCIB, FICA, MNES, ACTI, LLB, BL) Tel.: +2348034409494 Email: joeoluajibola@yahoo.co.uk

FIRST VICE PRESIDENT CHARTERED INSTITUTE OF BANKERS OF NIGERIA

AND

ASSOCIATE PROFESSOR AND HEAD, ECONOMICS, BANKING AND FINANCE, BABCOCK UNIVERSITY, OGUN STATE, NIGERIA

JUNE 2015 1|Page

Introduction The theme of this great event is “Bringing Education to the World”. The Great Philosopher, Aristotle (384 – 322 BC) said and I quote “Education is an ornament in prosperity and a refuge in adversity." Several centuries and generations after, this statement has continued to remain indelible because at the base of some of the notable ideas that have changed or transformed our world is education. From the medieval age of hunting and gathering to the Agrarian age, followed by the Industrial revolution, to the Technology age and the new Information (connection) era, engendered by Globalization and Social Media; it is evident that advancement in knowledge has played a pivotal role. Over the years, man’s quest for knowledge has continued to increase.

It is upon this bedrock of continuous knowledge acquisition that this paper seeks to explore the subject, Capacity Building in the Nigerian Financial Industry: Prospects and Challenges, for enhanced understanding of education that spans across the globe and partnering opportunities for global partners.

Nigeria in brief The country Nigeria is located in the West coast of Africa, with a land mass of 923,770 sq km and water area of 910,770 sq. km. This gives the country a huge potential for Agriculture. The climatic condition is generally tropical with an average room temperature of 27ºC - 30ºC. The country has a total population of over 173.6 Million people (2013) World Bank. The population of Nigeria represents 2.35 percent of the world´s total population which arguably means that one person in every 43 people on the planet is a Nigerian. The culture is shaped by its multiple ethnic group with over 50 languages, 250 dialects and ethnic groups.

Nigeria is blessed with a wide array of natural resources ranging from precious metals, various stones such as Barites, Gypsum, Kaolin and Marble. It is instructive to note that the country Nigeria is also endowed with a bulky wealth of Human Capital in various fields of human endeavours. These unique resources give it an edge over all other Third World countries. For instance, apart from agricultural, mineral and crude oil resources, its population form laudable resources in serving as a large emerging market that triggers production of commodities and also providing large workforce. The combined net effect of 2|Page

these is economic development through an increase in the Gross Domestic Product and social stability.

With the recent rebasing of its GDP, Nigeria is Africa’s largest economy with a GDP of 80.2 Trillion Naira (USD 510 Billion) ahead of South Africa. According to the Nigeria National Bureau of Statistics, the Services sector which includes the financial services industry accounts for about 50% of this figure.

The Nigerian Financial Services industry The Nigerian Financial System is made up of Banks (Deposit Money Banks, Micro Finance Banks, Discount houses, Development banks etc.), and Non-bank Financial Institutions including Insurance, Pension, Mortgage, Capital Market and the Regulatory Institutions such as: • Central Bank of Nigeria (CBN) • National Deposit Insurance Corporation (NDIC) • Securities and Exchange Commission (SEC) • National Insurance Commission (NAICOM) • National Pension Commission (PENCOM) • Federal Mortgage Bank of Nigeria (FMBN) The financial system is dominated by the banking sector, which until recently has the most capitalised companies in the Nigerian Stock Exchange.

Capacity Building in Perspective The recent global economic crisis of 2008 which has been considered by many economists to be the worst financial crisis since the Great Depression of the 1930s was blamed on a number of factors one of which is the “inadequacy of skills and dearth of executive capacity in the banking industry”. As such, the importance of Capacity Building as an essential component of Management of Financial Institutions is no longer a point of controversy.

Indeed, development discourse today is incomplete without emphasizing the need to build adequate and sustainable capacity in all spheres of endeavour.

There is no doubt that the essence of building capacity in all areas of human life, including the financial industry in Nigeria, is to enhance the ability of countries, local institutions and people to efficiently manage development on their own, in a smooth and sustainable way.

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What is Capacity Building?

The concept of capacity building means different things to different people. The dictionary definition of capacity relates it with the power of someone or something to perform or do something or to produce something. According to UNDP (1993), capacity is the ability of individuals and organizations or units to perform functions effectively, efficiently or sustainably. In another vein, Johnson (1993), viewed capacity as a country's human, scientific, technological, organizational, institutional and resource capabilities. It is pertinent to note that the concept of capacity itself has development colouration.

Another understanding of capacity as put forward by Obadan (2003), posits it as people, institution and practices that enable a country to achieve its development objectives. He adds that capacity has both human and institutional dimensions with the following components namely: 1.

2.

3.

4.

5.

Skilled human capital Leadership and vision Viable institutions Financial and material resources Effective work practice, including systems, procedures and appropriate incentives

Apart from the above, other dimensions to capacity, in the opinion of Osineye (2000), include technical, financial and investment capacities.

Capacity building, in the words of Nsouli (2000) simply refers to the development of skills and institutions. In the opinion of Dia (1996) capacity building is characterized by three main activities: skill upgrading (general and job specific); procedural improvements and organizational strengthening. Obadan (2003), defined capacity building as those deliberate and incidental endeavours through investment in people, institutions and practices, to enhance human abilities and institutional capacities in the pursuit of development. In the view of Ohiorhenuan and Wunker (1995), capacity building means the process of enhancing' individual skills, or strengthening the competence of a particular organization.

The thrust of the foregoing definitions is that, capacity building has two distinct dimensions, human or skill capacity building and institutional or organizational capacity building. It is crucial also to state here that capacity building as a concept is treated and understood in economic and social development contexts.

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Some Capacity Building Initiatives in the Nigerian Financial Industry There are several Capacity Building Initiatives in the Nigerian Financial industry space but it is important to mention that after the 2008 financial crisis, all the stakeholders in the industry in Nigeria (be it Government, Public and Private) saw the need for an industry coordinated approach to addressing the issue of Capacity Building for the industry. This is with a view to ensuring that practitioners in the industry are adequately equipped with knowledge and skills required to cope with changes in the ever-evolving financial services world. Below are some of the initiatives: • The Competency Framework: The Central Bank of Nigeria and the Bankers Committee in conjunction with The Chartered Institute of Bankers of Nigeria, introduced the Competency Framework for the Banking Industry in Nigeria. The Framework specifies the Competencies (Knowledge and skills), Certification, Qualifications and minimum experience that must be possessed by an individual to occupy any position in the banking industry in Nigeria.

• Microfinance Certification Programme: The Central Bank of Nigeria in conjunction with The Chartered Institute of Bankers of Nigeria, instituted the Microfinance Certification programme in order to build a sustainable skilled work force for the Microfinance sub sector through training and certification of operators and Directors of Microfinance banks in Nigeria. The scheme which took off in 2010 has hitherto produced a total of 3,145 Microfinance Certified Bankers.

• Financial Literacy Programme: The Central Bank of Nigeria and the Bankers Committee in conjunction with The Chartered Institute of Bankers of Nigeria, run series of Financial Literacy programme to educate operators and the general public on matters relating to finance especially with a view to attracting the financially excluded. This scheme is mandatory for all stakeholders.

• Financial Systems Strategy (FSS 2020): The vision of FSS 2020 is that by the year 2020, Nigeria will be the safest and most diversified financial system among emerging markets, supporting the real economy. The goal is to develop and 5|Page

transform Nigeria’s financial sector into a growth catalyst and engineering Nigeria’s evolution into an international financial centre. To this end, A key component of the Financial Services enabler is to develop human capital and attract expertise and this is being driven through a couple of Transformational programmes aimed at building adequate capacity for the Financial Services Industry in Nigeria.

• Bank Academies: The Banks are also setting up Academies in order to ensure that their workforce have access to quality training and Development programmes with a view to addressing observed skills gaps. The Academies under a special arrangement are linked to CIBN Flagship Banking professional qualification (ACIB).

• Sectorial Associations: The Central Bank of Nigeria and the Bankers Committee in conjunction with The Chartered Institute of Bankers of Nigeria, also encourage sectorial Associations such committee of Chief Inspectors of Banks, Committee of Chief Security of Banks etc. Members come together to discuss issues and share best practices among themselves and also handle any other capacity building issues affecting them as a group.

• FITC (Financial Institutions Training Centre): A Centre owned by the Nigerian Bankers Committee, which comprises the Central bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), all licenced banks and discount houses in Nigeria. The Centre was set up to provide training, consulting and research, promote advancement in knowledge in the practice of banking and related competencies as well as good corporate governance. The Centre has been involved in capacity building for senior executives in the financial services space.

• Centre of Excellence in some Selected Tertiary Institutions: The Central Bank of Nigeria (CBN) is driving capacity building by establishing Centre of Excellence in some selected Nigerian Universities as a means of advancing the study of finance at the post graduate level. The Centre is equipped with structures, facilities and equipment aimed at facilitating learning in the 21st century.

These initiatives among many others have helped to stabilize the industry and set the industry on a good footing for profitability and sustainability.

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The Role of The Chartered Institute of Bankers of Bankers of Nigeria (CIBN) The Chartered Institute of Bankers of Bankers of Nigeria, as the umbrella body for banks and bankers in Nigeria, as parts of its efforts to ensure that practitioners in Nigeria become a reference point for Professionalism and ethics has embarked on a number of Capacity Building initiatives. Below are some of the interventions: • Syllabus Review: The Institute reviewed the syllabus of its Banking Professional Examinations in order to ensure that the contents are contemporary and cover emerging issues within and outside the banking and finance industry that have implications for human capacity knowledge, skills and competencies.

• Certification Programmes: CIBN has also developed 15 new Certification programmes covering key areas of banking for the purpose of building capacity for the industry.

• Professional Examinations: Conducts examinations leading to Certifications e.g.

Associateship Certificate (ACIB), Diploma in Banking, Microfinance Banking Certificate (MCIB) and other Certification programmes.

• Training, Seminars and Workshops: CIBN organises conferences, seminars, workshops and public lectures for all cadres of personnel in the financial industry.

• Publications: The Institute publishes professional Journals such as “The Nigerian Banker” and “The Journal of Banking” as well as “Bankers News”, Textbooks and Examiners’ Reports on the subjects covered in its examinations.

• Competency Framework: CIBN serves as the sole Accreditation Agency under the Competency Framework for the banking industry in Nigeria.

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• Library Service: Operates a Library which is a haven for Researchers, Academics, Students and Professionals. On-line version is also available • Bookshop: CIBN operates a Bookshop which stocks a very large collection of Professional books.

• CCPD Programme: The Compulsory Continuing Professional Development Programme has been revamped in order to ensure that Associates and Fellows are up to date with happenings in the world of banking and finance.

• Expanded routes to ACIB: CIBN has expanded the routes to becoming an ACIB holder in order to be able to attract more people into the professional fold.

• Linkages with Higher institutions: The Institute has linkages with 31 Universities and Polytechnics in Nigeria offering banking and finance programmes. The linkages exist at first degree and Masters Levels. These linkages have helped to infuse practical professional training into the training of Banking and Finance students in our tertiary institutions.

• “Catch them young” scheme: This programme focuses on the young ones to whom the future belongs. The objective is to arouse their interest in the profession early in life and to inculcate the ethics and ethos of the profession into them from a tender age. Some of the Catch them young initiatives include: o Mentoring Scheme o Career Talks o Scholarships • International Collaborations: CIBN maintains international collaborations with various international organizations with the objective of building capacity for the industry. Some of the collaborations include: o IFS London – Certificate for Documentary Credit Specialists (CDCS) o GARP- Global Association of Risk Professionals o International Finance Corporation – collaboration to run Certification in Environmental and Social Risk Management; Corporate Governance

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o Bangor Business School and Institute of Bankers Scotland: CIBN is partnering with Bangor Business School and Institute of Bankers Scotland to run a CBMBA – Chartered Banker MBA. • Collaborations with Government: As part of efforts to ensure that stakeholders at all levels have adequate capacity to execute the task assigned to them, the Institute also collaborates with relevant Government Agencies to run special seminars and workshops as a means of building capacity at that levels. For example, CIBN organizes seminars for : o House Committee on Banking and Currency; o Senate Committee on Banking, Insurance and other financial institutions; o Judges – (National seminar on Banking and Allied Matters).

• Centre for Financial Studies: The Institute recently set up a Centre for Financial Studies, a thought led institution saddled with the responsibility of driving knowledge events, research and advocacy.

• Issuance of Practice Licence: The Institute also issues Practice Licence to deserving members of the Institute who are bound by a code of conduct and are expected to undergo Compulsory Continuing Professional Development Programme.

• Code of conduct for practitioners: As part of initiatives to maintain ethics and professionalism in the industry, practitioners in the banking sector commit to a code of conduct (Professional Code of Ethics and Business Conduct) • Alliance of African Institute of Bankers (AAIOB): CIBN is a member of AAIOB and was the chair of the Alliance for two terms. One of the objectives of the Alliance is to exchange ideas and best practice among member nations.

Challenges of Capacity Building in Nigeria

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The task of Capacity Building is a very demanding one that requires the cooperation and support of stakeholders at all levels. Here are a few challenges we have observed in our own environment • Technology: there are still some challenges with technology occasioned by inadequate broad band facilities. This is militating against the adoption of e-learning, Computer based testing and other on-line services.

• Power: Inadequate power supply undoubtedly is a major challenge in Nigeria. It is affecting deployment of technology that will drive capacity building as most of the gadgets or equipment will require power to function.

• Budgetary allocation: Funding is still a challenge as budgetary allocation for Capacity Building is either meagre or nothing at all. The first point of call when there is need for cost cutting is always Training and Capacity Building initiatives. It is viewed as a cost and not as an investment.

• Inadequate Study Materials/ Lack of access to the available ones: one major drawback to capacity building in Nigeria is the dearth of study materials and lack of access to the available ones.

• Lack of interest on the part of recipients: It has been observed that some recipients do not show enough enthusiasm and interest in capacity building initiatives. This in turn affects their performance in examinations and even on the job.

• Perception of young ones about the profession: it has been observed that there is a general decline in the number of candidates enrolling for banking and finance programme in our tertiary institutions. This is occasioned by the perception of the young ones about banking and finance profession. Some of the fears expressed is the incessant job loss (job insecurity), too much emphasis on deposit mobilization, long working housr affecting work-life balance.

• Absence of Financial Literacy content in the primary and secondary school’s curricula: The fact that Financial Literacy content is absent in the national curricula of primary and secondary schools in Nigeria is a challenge. Pupils do not understand 10 | P a g e

finance at a tender age and that makes it more challenging to get them interested when they have already formed wrong impression about the subject and the profession.

• Interference of social media: Addiction to social media is now a major challenge which students contend with as it impedes their ability to concentrate on their studies. Valuable productive time are being wasted on WhatsApp, twitter, facebook and youtube. As good as this social media may be, it is now a strong force contending for the time and attention of students vis a vis their studies.

• Political will on the part of Government: The political will of Government to drive capacity building initiatives is sometimes questionable. The Governments are sometimes too slow to act or not responsive or even pay lip service to capacity building initiatives. Certain initiatives will require government bite and when this is absent, it creates a challenge and gives room for failure.

Recommendations In order to address the challenges listed above and some others not listed, the following courses of action are being pursued: • Collaborations: Increased collaborations between Government, public and private institutions locally and internationally. Enormous opportunities exist for collaborations in the area of capacity building in Nigeria. In the area of Technology, study materials, exchange of ideas on best practice etc • Financial Literacy: Financial Literacy is being vigorously pursued to be introduced in the curricula of primary and secondary schools as a means of catching them young before they form erroneous opinion about finance.

• Power: Foreign Direct Investment and domestic private investment in the energy sector are new efforts at resolving the lingering power challenges in Nigeria.

Investors alike should take advantage of the opportunity and invest in the sector especially with the peaceful transition from one civilian government to another.

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• Budgetary allocations: Institutions be it public or private should view capacity building as an investment rather than a cost. As it is often said, “if you don’t train them, don’t blame them”. Hence, institutions and related organisations are also encouraged to provide enough budgetary allocations for capacity building.

• Government Support: The need for the support of government at all levels towards capacity building initiatives cannot be over emphasized. This is no doubt in the interest of the economy at large considering the importance of the financial services sector as a catalyst for national economic growth and development.

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