You may be new to this concept but the Nigerian government have set a financial model named FSS 2020 which hopes to realise a dream of Nigeria in the top 20 economies by Year 2020. Basically, in this thread let us post relevant information, steps forward and actually realisation of a strand of this enormous dream.
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For Nigeria, Another Road to Financial Hub
This Day (Lagos)
10 May 2007
Posted to the web 11 May 2007
Once more, it appears that the Governor of Central Bank of Nigeria (CBN) Professor Chukwuma C. Soludo, has mounted another catwalk in his effort to sell the Nigerian economy to the international finance community. In his usual out-of-the-box manner of thinking, the apex bank chief has taken up the challenge of engineering an International Financial Centre (IFC) in Nigeria, as a framework to realising the country's desire of becoming one of the 20 largest economies in the world by the year 2020. Today, the buzz word of the moment in the Nigerian financial circle - Financial System Strategy FSS 2020 (FSS 2020) has been receiving banner headlines.
As a first step, Soludo constituted a Steering Committee for the FSS 2020 in August 2006 to serve as a policy making organ to rigorously think through the dream and come up with a Strategic Plan Document to guide the realisation of the FSS 2020 dream.
This time, the task is to deliberately orchestrate the Nigerian Financial firmament to achieve an International Finance Centre (IFC), otherwise known as Financial Hub. Without delving into hardcore definition, a financial hub is a cluster of financial activities with strong international financial institutions presence and an international market focus. It is usually a well-developed integrated financial system characterised by efficiency in mobilization and intermediation of fund/capital between surplus (savers) and scarce (investors) entities.
It is also characterised by availability of diverse financial offerings and products whether in the money or capital market, insurance, mortgage finance and the pension scheme so that an average investor or borrower can readily obtain an efficient bargain in the market.
It presupposes an efficient infrastructure for payment and transfer of fund/capital between places and a well-developed credit system.
A major step taken towards articulating the envisaged financial super structure was the assembling of a broad-based team of experts (technical committee) made of key financial services regulators, project team members, CBN staff, the political class, consultants with technical assistance from the World Bank and the IMF. The project FSS 2020 has its broad objectives as, but not limited to the following: Develop a shared vision and an integrated strategy for the nation's financial system - Develop market and infrastructure strategies that align fully with the strategic intent of the overall system - Develop a partnership of all key stakeholders for the implementation of the strategy with a performance management framework - Establish a communication and collaboration environment for the development and delivery of the strategy.
Spurred by the Goldman Sachs Report in 2001 that projected emerging economies such as Brazil, Russia, India and China (BRIC) to overtake the G6 nations and that Nigeria is projected to be the 20th largest economy in the world in 2025, Soludo strongly feels that history beckons on Nigeria to seize the golden opportunity or remain damned forever. Indeed, the report goes further to project that Nigeria could become the 12th largest economy in the world by 2050 ahead of South Korea, Italy, Canada and others.
More so, given the increasing turmoil in the oil rich Persian Gulf and the Middle East and the inevitable emergence of the Gulf of Guinea as a viable alternative source of energy for the industrialized Western economies; the coast looks clear for Nigeria, as a regional economic power house, to cease the opportunity to place herself to be counted among the global economies.
Those who know better have tried to evaluate likely paths toward arriving at an International Financial Centre. Nations have had to achieve IFC either by way of organic growth of the economy or by deliberate engineering of the economy to gallop at a predetermined growth rate. Known examples of cities that have evolved as IFCs by organic growth include London, New York, Tokyo and Hong Kong; these enjoyed natural evolution to a financial centre characterized by large domestic economy with the presence of companies that are globally active - multinationals.
On the other hand, Nigeria admittedly, seems to be in a haste given her history of many years of wasted opportunities, the pendulum predictably swings in favour of an engineered growth approach. This approach supports faster economic growth of the domestic economy as well as increase in Foreign Direct Investment (FDI). It also envisaged that further investment in infrastructure, at world class levels, may have to be embarked on.
The engineered growth model remains more appealing to the Nigerian historical circumstance due to its shorter time frame. Take for example the Dubai experience, it announced the vision and intension February 2002, with the law establishing Dubai International Financial Centre promulgated June 2004.
The centre opened in September 2004. The Dubai model is basically a regional financial centre with emphasis on the banking sub-market. In the case of Seoul, government adopted a policy by December 2003 while the Bill on the creation and development of a financial hub was issued March 21, 2006. Seoul is modelled as a regional financial centre with concentration on asset management.
Experts prescribe that for Nigeria to realise this dream and its aim of being part of the 20 largest economies by 2020, she must maintain an annual average growth rate of 12.4 per cent over the next 15 years.
Key critical factors have been identified as important growth drivers likely to propel the economy and hence enable Nigeria (or any of the N11 countries) achieve the projected economic bliss.
These include achieving macroeconomic stability in the areas of inflation, government deficit and external debt, macroeconomic conditions as defined by investment rates and openness of the economy, and technological capabilities captured by penetration of PCs, phones and internet.
The likelihood of arriving at the envisaged IFC can be gauged by quality human capital expressed in education and life expectancy, and political conditions measured by political stability, rule of law and corruption. The present economic reforms must be sustained and deepened as means of ensuring efficiency in both productive sector and the various markets.
The strategy, it is expected, would fully synchronize and integrate with the on-going economic reforms and harness the benefits to ensure that Nigeria becomes Africa's Financial Hub and joins the league of top 20 largest economies in the world by 2020.
To this end, sustained efforts should be made to develop, transform and sustain the country as a regional power-house within the ECOWAS sub-region. The large population size, which invariably translates to large market, should be leveraged upon by concerted effort to ensure that higher proportion of the population consists of the middle class through qualitative education.
Nigeria must set its eyes at becoming competitive domestically, by removing constraints in the business environment. Issues such as double taxation, inability to enforce business contract owing to the cumbersome system of obtaining redress in the law courts should be looked into urgently. Improving the competitiveness of the Nigerian market vis-à-vis regionally and globally market presupposes fixing the comatose infrastructure.
Other source of strength is the large pool of resources. Such areas of national strength and comparative advantage, which we failed to take advantage of in the past, should be developed to full potential. These are agricultural production and commodities processing, oil and gas, solid minerals and the budding capital market. To achieve economic transformation, emphasis must be placed on produced (processing and manufacturing) and intangible (knowledge-based) wealth as against (extractive oriented) natural resource wealth.
The degree of success achieved through the engineered growth approach, according to experts, relies essentially upon the quality of leadership of the nation in question. In other words, how fast a nation can achieve in concrete terms, an international financial centre is directly related to the soundness of vision, commitment and the patriotism of the political leadership. Over the years, Nigeria has not been that fortunate to have leaders with such positive attributes on the political saddle.
The only snag with the engineered approach is that it requires deliberate and concerted strategy plus regulation by government to encourage private sector participation in the search for economic relevance. It is only hoped, that the recently concluded election would throw up patriotic political leadership that would appreciate the vision and be committed to its actualisation.
Many people seem worried that the FSS 2020 is coming at a time the deafening noise from the political front was already rising to a crescendo. Whether the emerging political actors would be appreciative of the FSS 2020 vision, see the urgency and live up to the commitment to address the challenges of FSS 2020 remains to be seen.