Overview

This document is the keynote address delivered by Chief (Dr.) J.O. Sanusi, Governor of the Central Bank of Nigeria (CBN), at the 9th Monetary Policy Forum held on May 6, 2004, at the CBN Auditorium in Abuja. The forum's theme is 'Enhancing Efficiency of the Payments System in Nigeria.' Dr. Sanusi welcomes distinguished senators, honourable members of the House of Representatives, chief executives of banks, captains of industries, and other guests. He explains that the forum is part of a series initiated in 2000 to discuss major policy issues publicly. The focus on the payments system is timely because central banks globally prioritize payments system reform in financial sector agendas, especially in developing and transition economies, to improve monetary management and payment services. Dr. Sanusi notes that financial liberalization and technological developments have led to new instruments but also introduce risks like liquidity, settlement, systemic, credit, and operational risks. An efficient payments system aims to eliminate or minimize these risks, and central banks are concerned with the integrity of their systems. He emphasizes the need for continuous improvement in Nigeria's payments system, which remains largely cash-based, with a currency ratio of narrow money (M1) exceeding 40% as of 2003, compared to less than 10% in mature economies. This situation calls for urgent reforms. The financial system faces challenges in payment processing, including accuracy, efficiency, international standards, cost containment, shorter clearing cycles, risk reduction, and fraud control. The CBN has taken steps to improve the payments system, such as establishing clearing houses nationwide, sponsoring legislation like the Dishonoured Cheques Offences Act and Failed Banks Financial Malpractices in Banks Act, introducing Magnetic Ink Character Recognition (MICR) processing, supporting the Nigeria Inter-bank Settlement System (NIBSS), and implementing a new cheque clearing and settlement arrangement. The wide-area network has reduced intra-bank settlement cycles. Dr. Sanusi highlights electronic money as a critical area for payments system development. Overall, the address underscores the importance of a sound and efficient payments system for financial stability and economic development.

Download