Overview

The document is the text of the 2006 NTA Annual Lecture delivered by Prof. Chukwuma C. Soludo at the Nigerian Institute of International Affairs (NIIA) in Lagos, Nigeria, on December 12, 2006. The lecture, titled 'Financial System Strategy 2020: The Next Development Frontier,' outlines a vision for transforming Nigeria's financial system into a robust driver of economic growth and a potential financial hub in Africa. Soludo begins by acknowledging the invitation and the context of Nigeria's economic progress, noting foundational reforms under the National Economic Empowerment and Development Strategy (NEEDS) and suggesting that Nigeria could become 'the China of Africa' with sustained reforms. He compares Nigeria's financial system unfavorably with those of other countries, highlighting its small size and fragility: Nigeria's GDP in 2005 was 0.907% of the US GDP and 60% of South Africa's GDP, despite having a population three times that of South Africa. Stock market capitalization as a proportion of GDP was 20% in 2005, compared to 235% in South Africa and 118% in Chile and Singapore. The banking sector, with 89 banks, was collectively the size of South Africa's fourth-largest bank in 2003. Insurance penetration was only 6% of the population. Credit by the banking system as a percentage of GDP was below the Sub-Saharan African average. Consumer credit, mortgage financing, and the real estate market were underdeveloped, and the legal, institutional, and regulatory infrastructure was weak. Soludo then details progress under the 13-point banking reform agenda managed by the Central Bank of Nigeria (CBN), including a shift to core central bank mandates, risk-based supervision, a minimum shareholders' fund of N25 billion, banking consolidation, new currency reforms, zero tolerance for infractions, a new microfinance policy, payments system reforms, a new exchange rate policy, and realignment of incentives away from rent-seeking. He also mentions pension reforms (contributory scheme) and growth in long-term funds, as well as capital market and insurance reforms. The lecture outlines the Financial System Strategy 2020 (FSS 2020), a vision to create a robust financial system to drive the emerging Nigerian economy, potentially positioning Nigeria as a financial hub in Africa. A tentative agenda for fast-tracking this includes enhancing legal and regulatory frameworks, deepening capital markets, expanding access to finance, and improving infrastructure. The conclusion emphasizes the need for great visions and plans to leverage the 'next generation of reforms' for economic boom.

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