The Nigerian Sustainable Banking Principles – Paving the way for Responsible Business in Nigeria

Anne Stubert looks at the effect of the Sustainable Banking Principles in Nigeria and how they might pave the way for responsible business.

The Nigerian Sustainable Banking Principles – Paving the way for Responsible Business in Nigeria

Entering Lagos – a city of 7 million and the second fastest growing city in Africa – is quite an experience. One is immediately stunned by the chaotic atmosphere, the obvious energy that can only be found in a booming African economy and the feeling that opportunities lie in every corner. For an outsider visiting Lagos for the first time, one will quickly notice the impact and visibility of the booming banking sector – the ATM’s are lined every 100 meters in central Lagos, with adverts everywhere. Nigeria, one of the world’s fastest growing economies, is not all about oil.

The banking sector in Nigeria began in 1890 with the establishment of the African Banking Corporation by a consortium of banks, which included Lloyds and Standard Bank of South Africa. Since its inception the sector has gone through tumultuous periods. In August 2009, the country was hit by a debt crisis that left all 24 banks on the brink of collapse. The Central Bank of Nigeria (CBN), under the new governor Sanusi Lamido Sanusi, bailed out eight banks which were given a deadline to re-capitalise by merging with other banks. Sanusi also led a radical anti-corruption campaign, known as the “Sanusi tsunami”, whose targets included former bank officials.

Sanusi’s efforts to clean up the banking sector has gone beyond anti-corruption to include an effort to formally integrate sustainable business practices into the banking sector through the introduction of the Nigerian Sustainable Banking Principles.  Launched by CBN in 2012, the Principles are the result of an industry wide initiative to drive sustainable growth in the banking sector. The Principles have been signed by a broad range of financial services organisations, including Access Bank (who played a key role in driving the process forward), First City Monument Bank and Standard Chartered Bank of Nigeria.

The nine Principles require the signatories to formally integrate environmental and social risk management into investment and lending decisions, by introducing frameworks to identify, assess and mitigate such risks. They cover areas like environmental and social risk management, governance, transparency and accountability, whilst supporting capacity building in the sector and promoting collaborative partnerships to accelerate progress. In addition, it is impressive to see that they cover the areas of women’s empowerment and financial inclusion. Most importantly, the Principles include specific sector guidelines, specifying risk assessment in the high risk sectors of oil and gas, power and agriculture. When signing the Principles, an organisation commits to a strict timeline of implementation, with clear expectations, deadlines and milestones to meet year on year.

The Principles represent an impressive aim to drive change in a crucial sector of the country’s economy. While the Principles are consistent with international standards such as the Equator Principles, they are tailored for the Nigerian context and development imperative. They are developed by Nigerians and for Nigerians, which is critical to their successful implementation.

As with any standard or principle introduced, the challenge going forward is compliance. In the years to come, it will be critical to demonstrate that the Principles ‘have teeth’. As the governing body, CBN will ensure that the Principles are being adhered to and actions are taken against signatories not complying.

Successful implementation of the Principles will have a significant impact not only on the sustainability of the Nigerian banking sector, but also on the industry sectors of oil and gas, power and agriculture, guided by the Principles’ sector policies. Meanwhile, in a broader context, there is a hope that the Principles will pave the way for sustainability and responsible business practice in Nigeria. With endless potential, one has little doubt that Nigeria will continue to impress.