Osinbajo Urges Bankers to support Investments In Housing, “Renewable Energy”
Nigeria’s Vice President, Prof. Yemi Osinbajo has urged banks and financial institutions in Nigeria to support investments in housing, renewable energy and other critical sectors that would drive the economy in the coming years.
Osinbajo stated this on Tuesday at the opening of the 14th Annual Banking and Finance Conference of the Chattered Institute of Bankers of Nigeria CIBN, holding in Abuja.
He pointed out the established link between housing and economic development which contributes to economic outputs in the creation of jobs; demand for materials and related services, also raises the standard of living of occupants and leads to improved health and sanitation.
“These were the justifications we advanced for our mass housing initiative in the Economic Sustainability Plan.
“But the challenge for full implementation remains that the finance sector appears shy or simply have not found the housing finance model that will work.
“Because we do not have a functional mortgage market, we are way behind in home ownership, and our economy is effectively left out of perhaps the most reliable source of generating capital for individuals,” he said.
The vice president admitted that the task was not for bankers alone as there are all round appropriate pricing of mortgages, noting that banks would rather take safe investments like Treasury bill because of their rates.
“Banks had also argued that sterilizing their assets as non interest bearing cash reserves, plus AMCON rates at 0.5% impairs not just liquidity but also return on assets,” he stated.
Vice president Osinbajo said that there are land-titling issues and problems which only state governments can solve adding that “we have been working on these issues with several State governments, in particular Lagos and Kano under our Ease of Doing Business initiatives.”
Prof. Osinbajo called on banks and financial institutions to pay attention to “some of the game changing interventions that the financial sector can make in the light of the extensive implications of climate change mitigation.”
According to him, as the world is committed to zero emissions by 2030, one of the chief considerations especially for developing countries is how to pay for the massive transition to renewable energy.
“This is a significant challenge but also enormous an opportunity. So, the federal government of Nigeria (FGN) integrated a solar strategy for the electrification of 5 million households, serving about 25 million Nigerians in the Economic Sustainability Plan.
“The Central Bank of Nigeria CBN set aside N150billion for the program, made available through Banks CRR via a program administered by the Central Bank of Nigeria.
“The program has three core objectives expanding increasing energy access to 25 million individuals (5 million connections), increasing local content in the off-grid solar value chain and creation of 250,000 new jobs.
“The program is targeted at three key players including assemblers (or manufacturers), distributors and vertically integrated off-grid companies.”
Osinbajo said that the two mechanisms proposed for low-cost funding under the programme are for component manufacturers and off-grid companies.
“For component manufacturers, direct lending through selected commercial banks or local development finance institutions (DFIs) to manufacturing entities backed by an off-taker agreement with SHS distributors or mini grid developers.
“For off-grid companies, direct lending from local development finance institutions (DFIs) to SHS distributors and mini grid developers through a CBN credit facility collateralised by pledged revenues and repaid through cash sweeps.
“The Federal Government also provided subsidies of up to 20% to 30% for each successful installation through the Rural Electrification Agency/World Bank Nigeria Electrification Program (NEP) to further de-risk the transactions.
“The NEP program has been ongoing for the past two years with record collections of 90% and above for NEP Solar Developers showing a low-risk track record.”
Noting that despite these efforts from the federal government, he said “there has been little uptake by commercial banks to catalyze installations or manufacturing for Solar Power Naija.”
He explained that the pioneer transaction was a partnership between Sterling Bank and the Niger Delta Power Holding Company (NDPHC), that saw the NDPHC provide further risk guarantees to get the project through.
The vice president called on banks and financial institutions to take advantage of the Africa Continental Free Trade Area AfCTA agreement and to leverage the Nigerian Interbank Settlements System (NIBSS) as well as the Biometric Verification Number (BVN) to their advantage as both are sources of data and of secure transactions.
President Paul Kagame of Rwanda, who delivered a virtual speech at the event, said that while the Covid-19 pandemic has affected every aspect of the economy, it created opportunity for Africa’s banks to play a leading role in making societies more resilient and more responsive to the needs of the people.
“Indeed, Africa has the resources to fund its own economic growth and reduce dependence on external sources,” President Kagame stated.
He said there was need to integrate new technologies into banks to make them competitive, to increase inclusiveness and access.
“Banking can’t just be a service for the elite. The Africa Continental Free Trade Area is creating new opportunities for pan African trade and investment. Banks with continental reach like the several institutions represented here can lead the way in cementing economic integration.”
Kagame said that governments would provide the enabling environment and protect shareholders’ investments.
Others who spoke at the opening of the conference were the Governor CBN, Godwin Emefiele and the President, Chattered Institute of Bankers of Nigeria CIBN, Bayo Olugbemi.
The theme of the 14th Annual Banking and Finance Conference is Economic Recovery, Inclusion and Transformation: The Role of Bankers.