2. If, inspite of the above discriminatory regulations, nationals cannot attract more deposits, restrictions could be placed on acceptance of savings deposit and Government deposits by the transnational affiliates. Apart from encouraging
national banks to get at these deposits, this restriction may encotirage the affiliates to bring in more funds from abroad or "diversify into innovative near-banking activities such as finance companies" —— and try to attract more savings.
3. More important than the above two measures is the need to fix deposit rates locally more or less'at the international levels •- that alone will prevent
temptation for local-people to keep funds abroad somehow or the other arid also dissuade transnational affiliates to take out money to earn more abroad.
110/ p. 24,: IBID.
111/ p. 25, IBID.
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A. Another positive step to prevent transnational affiliates to expand further and to encourage national banks to expand is to prevent transnationals from opening new branches, as was done successfully in countries like India, and Malaysia;
if national banks could be given tax incentives in the^shape of write-off of losses and/or not counting profits of new branches for a period of 3-5 years that would also give them incentives to go into rural areas and mobilise greater savings.
5. In the matter of utilisation of funds, the iirst step to be taken is to
remorve the restrictions on investments in companies by banks, by suitably amending the Banking Companies Act 1969 and thus remove one of the major excuses that is offered for not investingin long-term securities. Permission to participate in the ownership of companies and giving comprehensive insights is likely to lead to a
■■•■-' • ' 112 /
"decrease in the insistence on security for most lending."
6. Instead of the Government financing the specialised long-term institutions like Industrial Development Bank or the Agricultural Co-operative and Development Bank, the banks may be forced ,to lend funds for such inst4.tuti0.ns on a long-term basis, by
giving guarantees, if need be. ■
7. Lending to agriculture is now being guaranteed by the Government and the Central Bank to encourage them to go into areas in which banks were hesitant due to inexperience; similar guaranteeing could perhaps be introduced for lending to small-scale industries, as has been done in India; this will encourage lending to local entrepreneurs with limited means, as external firms are unlikely to go in for small enterprises, and thus help development.
8. The guidelines approach on allocation of credit to the various sectors of ecqnomy could be tightened. As recommended by the Committee on the Nigerian Financial System the, "guidelines should be sufficiently articulated to show a iiiore
110/
detailed classification of the sub-sectors." -:—- A de issued and the enforcement ensured through inspections.
110/
detailed classification of the sub-sectors." -:—- A detailed manual could probably be
112/ F, N. Akpe, "Towards a more responsive Banking System to Promdte Economic Development of Nigeria"
113/ Report of the Committee on the Nigerian Financial System, 1976, pp. 21-22,
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9. In fact, the Financial Review Committee had even recommended different set of guidelines for different banks. Guidelines to transnationals could be different from others - transnationals, who own bulk ot the resources, could be asked to lend a great percentage of resources to the so-called more risky ventures. As long as guarantees are given by the Government and/or the Central Bank, transnationals cannot have reasons to complain.
10. Reasons why the merchant banks have not fulfilled their expectations will have to be investigated, by an independent committee like the Financial Review Committee, if need be, and the constraints, if any, faced by them should;be examined with a'view to remedying them. Amendment of the Banking Act 1969 on longr-term investment may remove one of the constraints; it is better to isolate others also and, .remove them so that merchant banks will serve the purposes for which they were created,
11. Life insurance is an extremely important source of long-term saving in an economy. The position in Nigeria cannot be considered satisfactory by any means. A very small percentage of the people is covered and that too mostly in the urban areas;
even here the transnational affiliates hold nearly 45 per cent of the business. Govern ment should investigate the reasons and initiate steps, like tax incentives, not only
to encourage life insurance but also to penetrate the rural areas where the bulk of the people live. Transnational affiliates, who are the angle major insurers, could be useful instruments for achieving the objectives. ,,7
12. Outflow of resources in the shape of remittance of re-insurance premia still seem to exist to a large extent as the Nigeria Re does not seem to have accepted more than the prescribed compulsory reinsurance. On the other hand, inflow on account of reciprocal insurance appears to be practically stagnant - about fc 5 million as mentioned
by the Nigeria Re in its successive reports. The reasons for this situation require
to be investigated thoroughly. If a country like India is able to balance its outflow
and inflow it is not clear why a middle-income oil exporting country cannot. If Nigeria
Re requires to be strengthened financially by injecting more capital, it is worthwhiledoing it so that in the long-run it will be beneficial. In any case it is worthwhile
having an independent assessment for initiating remedial policy measures.
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13. Lack of adequate actuarial expertise is considered a big lacunae for tailoring policies and premiums suitable to Nigerian conditions. Though there has been progress, influence of transnationals and expatriates, who often cater to trans-nationals, appears very high. A time-bound programme to become self-sufficient is perhaps the only way out. Only that will help outsider insurance companies to treat Nigerian insurance as partners and stop exploitation.
14. Investment pattern of insurance companies is again different from the policies of and guidelines issued by the Government; here again the matter should be examined with a view to removing the constraints, if any. If transnational affiliates are culprits, nothing prevents discriminatory legislation as suggested in the case of transnational affiliated banks.
15. Though a lot of statistics and information is collected by the Central Bank of Nigeria and the Department of Insurance on the banks, and insurance companies, there would not appear to be enough discriminatory analysis of the transnational
affiliates vis-a-vis the national institutions; nor is such separate information published for an Impartial analysis of the transnational affiliates versus others.
Neither the Government nor the Central Bank seem to collect even information on other non-banking financial intermediaries. Though they are perhaps comparatively minor in the views of the Government and the Central Bank, unless enough information is collected and analysed, the various linkages in the economy and the overall impact of the trans national financial institutions and other corporations on the economy of the country will not be clear. It is, therefore, worthwhile for the Central Bank of Nigeria to