The financial and professional services sector, encompassing banking, insurance, capital markets, asset management, pensions, non-interest finance, FinTech, legal, and sustainable finance services, is a cornerstone of economic growth. While this sector facilitates legitimate financial transactions, and supports economic productivity of the wider economy, it can also be exploited for activities detrimental to the economy, such as money laundering (ML), terrorist financing (TF), and proliferation financing (PF). These illicit activities pose risks not only to local economies but also to global financial stability. To mitigate such risks, international bodies like the Financial Action Task Force (FATF)—formed by the G7 in 1987—establish standards and monitor compliance to safeguard the financial ecosystem. FATF’s lists of jurisdictions under increased monitoring (Grey list) or high-risk jurisdictions (Black list) identify countries with strategic deficiencies in combating financial crimes. As of October 2024, three countries/jurisdictions were in the Black list and 24 countries/jurisdictions in the Grey list, including a quarter (14) of countries in Africa, namely Algeria, Angola, Burkina Faso, Cameroon, Cote d’Ivoire, Democratic Republic of Congo, Kenya, Mali, Mozambique, Namibia, Nigeria, South Africa, South Sudan and Tanzania. Being on the FATF’s Grey list could have many significant negative implications, particularly for the two larger economies in Sub-Sahara Africa, Nigeria and South Africa, which were recently added to the list, in October 2023. Grey-listing implies a high-risk profile and projects a poor image to the rest of the world, thereby reducing the ability of the grey-listed country to effectively engage in financial and economic exchanges and possible partnerships and collaboration. Significant negative economic subsequence of grey-listing include: Reduction in Cross-border Transactions and Investment Inflows: Cross-border payments to grey-listed countries could decrease significantly due to increased scrutiny by international financial institutions. An analysis of financial institutions’ exchange data from the SWIFT Institute indicates a 10% reduction in cross-border payments in countries/jurisdictions under increased monitoring (i.e. grey-listed) – (Collin, Cook & Soramaki, ‘The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data’, (November 28, 2024), available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2893790). Grey-listing also reduces financial resources allocated to grey-listed countries by international market actors. The liabilities (investments from international business actors) of financial institutions in the grey-listed nations reduced to as low as 15% – 16% – (Julia Morse, ‘Blacklists, Market Enforcement, and the Global Regime to Combat Terrorist Financing’, (November 28, 2024), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3348622 ). When the Philippines was listed in 2010, its average cross-border liabilities per quarter were $11.5 billion. By 2012 its liabilities had reduced to $8.7 billion and rebounded to pre-listing level by 2014; the country was removed from the list in June 2013. A study estimated that grey-listing could reduce capital inflows by as much as 7.6 percent of GDP annually. In the period when Botswana was listed (2018 – 2021) – (Kida & Paetzold, ‘The Impact of Gray-Listing on Capital Flows: An Analysis Using Machine Learning’, (November 28, 2024), available at https://www.imf.org/en/Publications/WP/Issues/2021/05/27/The-Impact-of-Gray-Listing-on-Capital-Flows-An-Analysis-Using-Machine-Learning-50289), FDI in the diamond sector plummeted and transactions by asset managers with offshore portfolio pension funds became limited – (KPMG South Africa, ‘The Financial Action Taskforce Grey Listing is possible… are you prepared for it?’, (November 29, 2024), available at https://assets.kpmg.com/content/dam/kpmg/za/pdf/2022/the-financial-action-task-force-10.pdf ). When Mauritius was grey-listed in 2020, the Reserve Bank of India halted licenses applications of non-banking financial companies (NBFC) affiliated with Mauritius-based venture capital and private equity funds – (Digbijay Mishra, ‘RBI blocks NBFC plans of Mauritius funded startups’, (November 29, 2024), available at https://timesofindia.indiatimes.com/business/india-business/rbi-blocks-nbfc-plans-of-mauritius-funded-startups/articleshow/77360368.cms). Reduced Development Assistance and High Borrowing Cost: Grey-listing creates perceptions of weak institutional frameworks, discouraging development partners and donor agencies from providing aid. It could also raise risk assessment costs for a disbursement. The International Monetary Fund (IMF) required Pakistan to be removed from the FATF’s Grey list as part of the conditions for a $6 billion bailout programme in 2018 – (Caitlin Maslen, ‘The Impact of Grey-listing by the Financial Action Task Force (FATF)’, (November 28, 2024), available at https://www.u4.no/publications/the-impact-of-grey-listing-by-the-financial-action-task-force-fatf.pdf). Decline in Economic Growth: The combined impact of reduced investments, exports, and remittances diminishes overall economic performance. Between 2008 and 2019, the periods Pakistan was grey-listed – (Pakistan was grey listed 2008, 2012 and 2018), it recorded an accumulated gross domestic product (GDP) loss, approximately $38 billion, alongside declines in FDI and exports to $3.6 billion and $4.5 billion, respectively – (Naafey Sardar, ‘Bearing the Cost of Global Politics: The Impact of FATF Grey-Listing on Pakistan’s Economy’, (November 28, 2024), available at https://www.tabadlab.com/wp-content/uploads/2021/02/Tabadlab-Working-Paper-07-Bearing-the-Cost-of-Global-Politics.pdf). Loss of Correspondent Banking Relationships: FATF’s grey-listing could cause exclusion of local banks from the international banking system and loss of correspondent banking relationships. As of 2022, when Zimbabwe exited FATF’s Grey list, the Zimbabwean banks had lost at least 100 correspondent banking relationships and were challenged to establish new partnerships with any international banks – (Mhlanga & Nyamuziwa, ‘Non-compliance led to loss of correspondent banking deals’, (November 28, 2024), available at https://www.newsday.co.zw/business/article/200017815/non-compliance-led-to-loss-of-correspondent-banking-deals). Nigeria being grey-listed could increase scrutiny and due diligence costs for international businesses, adding more pressure to heightened business operations costs – (S&P Global, ‘Nigerian Banking Outlook 2024’, (December 11, 2024), available at https://www.spglobal.com/_assets/documents/ratings/research/101592100.pdf). According to the National Bureau of Statistics, FDI decreased by 33% and 19% in 2022 and 2023, respectively. The country recorded a decrease in annual non-oil exports by more than $300 million in 2023 – (Kelvin Okojie, ‘Nigeria’s Non-oil Exports Drop to $4.5 billion in 2023, Says NEPC’, (December 11, 2024), available at https://businessday.ng/news/article/nigerias-non-oil-exports-drops-to-4-5bn-in-2023-says-nepc/). There is a likelihood that these were influenced by the country’s grey-listing status. While Grey-listing presents challenges, it can also catalyse reforms. Strengthening AML/CFT systems can improve transparency, governance, and global confidence, attracting investments in the long term. For example, Mauritius, after being grey-listed in 2020, leveraged the opportunity to enhance its financial systems and emerged stronger within 18 months. What lessons can Nigeria and other African countries learn from Mauritius, to navigate out of the FATF’s grey-listing and minimize its impacts? Leaning on Mauritius’s exist strategy, there are six focus areas that any country can prioritise for impact: Political Commitment: A unified, high-level commitment led by… Continue reading Navigating Out of the Financial Action Task Force’s Grey-listing: Lessons for Nigeria
Tag: Financial sector in Nigeria
EnterpriseNGR’s YOE Internship Programme Graduates Cohort III Impacting Over 2000 Young Nigerians, Emphasizes Digital Skills for Future Success
EnterpriseNGR’s Youth of Enterprise (YOE) Internship Programme, an initiative dedicated to tackling Nigeria’s persistent challenge of youth unemployment and underemployment, celebrated the graduation of its third cohort on Thursday, 10th October 2024, marking a significant milestone for over 120 young interns across Nigeria. These young people interned at reputable organizations like Coronation, Custodian, Investment One, Polaris Bank, Saroafrica International Ltd, PwC, Nigeria Exchange Group, Access Bank, among others. With the theme “Digital Dreams: Forging Successful Careers in a Connected World,” the event highlighted the critical role of digital skills and forward-thinking mindsets in the modern workforce. Moderated by SACO, renowned Master of Ceremony and Managing Director of Saco Events Limited, the ceremony featured insightful discussions, reflections on the YOE programme’s impact, and motivational words for the graduates. In her opening remarks, Obi Ibekwe, CEO of EnterpriseNGR, commended the graduates for their dedication throughout the programme and encouraged them to embrace the lessons they have learned. “Your journey through YOE has equipped you with skills and knowledge that are essential in today’s ever-evolving landscape. Now, it’s time to apply them with courage and determination as you build your careers,” Ibekwe said. Delivering the keynote speech on “Thriving in the Digital Age: Skills and Mindsets for the Future,” Pai Gamde, Chief Talent Officer at Coronation Group, urged the interns to adopt a future-oriented approach. “The digital age is about agility, creativity, and continuous learning. As you move forward, embrace challenges and view them as opportunities to innovate and grow,” she advised, emphasizing the importance of adaptability in a rapidly changing world. Joy Abara, Head of Programmes at EnterpriseNGR, echoed this sentiment as she encouraged the graduates to maintain the YOE spirit. “Continue to fly the YOE flag high in your future endeavors. The skills, network, and experiences you have gained here will serve as a foundation for your professional growth,” she remarked. Announcing the top three performing groups and the overall best intern in Cohort III of the YOE Programme, Ms. Abara commended the winners for their outstanding performance noting that each member of the top three teams and the overall best intern would be rewarded with cash gifts and certificates of merit. The graduation ceremony concluded with a vote of thanks from Zahra Yunusa, YOE Administrator, who praised the graduates and wished them continued success as they embark on their next chapters. EnterpriseNGR remains committed to empowering young Nigerians through the YOE Internship Programme, equipping them with the tools needed to succeed in today’s dynamic job market. Organisations and Business Executives who would like to partner with YOE to shape tomorrow’s leaders can contact YOE at yoe@enterprisengr.com. CONNECT WITH YOE ACROSS SOCIAL MEDIA: Follow YOE across our social media platforms below to stay up to date with our community: Instagram: @youthofenterprise X (Twitter): @YOENigeria Facebook: https://www.facebook.com/YouthofEnterprise Click here to read what renowned HR Expert, Yemi Faseun, says about Empowering Nigeria’s Young Talent for Business Growth.
Lagos City Branding: Boosting Nigeria’s Economic Growth
To grow the domestic economy, nations, among other things, depend on inflows of investments, talent, and tourists from around the world. However, only a few locations are ranked in the top destination list of investors, tourists, and visitors despite the enormous social and economic asset base that nations possess. Most times, countries’ reputation poorly matches their actual position because of misrepresentation and lack of awareness by the global audience. Most of the countries that make it to the top destination lists have to leverage the power of destination branding to create a unique sense of place. Destination branding starts with the goal of developing a distinctive positive image of a location, leveraging dominant attributes like art, culture, lifestyle, value, history and heritage, natural and built environments, landmarks, and the economy that will appeal to the international audience and make the destination more desirable. Today, cities are branded like commercial products: numerous examples abound, from Paris to New York, Glasgow, and the Maldives to Mauritius. Paris, regarded as the world’s most romantic city and a haven for foodies and fashion lovers, leverages many factors, including fashion, art, sports, cultural movements, and iconic landmarks like the Eiffel Tower, Pont du Gard, near Marseille, Place de la Bourse, Bordeaux, Arc de Triomphe, Chateau de Versailles, and Notre-Dame de Paris to achieve a global destination status. This example illustrates how a city’s identity can be a powerful magnet, drawing people, businesses, and investments. New York leveraged the “Big Apple” moniker for a tourism campaign that transformed the city. In 1977, the city embarked on an advertising drive and embraced a campaign with the iconic logo, “I ♥ NY”. The campaign’s success resurrected the city’s image and breathed new life into a tarnished reputation. Also, the city’s significant infrastructure and vibrant financial sector, and arts and culture play a critical role in its larger-than-life reputation. Glasgow adopted a different city branding approach. The city embarked on a crowd-sourced brand identity — “People Make Glasgow” — inviting voices from around the world to shape its brand. The success of the campaign laid in both the slogan and active social media engagements. The “Great Campaign” refers to a series of marketing initiatives launched by the United Kingdom to promote the country’s strengths and assets on the global stage. These campaigns are aimed at attracting international business, tourism, investment, and talent to the UK. The campaigns highlight various aspects of the UK, such as its culture, education, innovation, creativity, and business opportunities. The campaign has been very successful to highlight Great Britain and Northern Ireland as an exciting destination. The Maldives became one of the world’s leading tourist destinations because the Island country recognized the importance of the tourism sector. In 2011, the Island launched a tagline “Maldives…Always Natural” to reflect its eco-friendly environment. In 2020, the Island rebranded to “Maldives…the Sunny Side of Life.” The campaigns carried the message of an Island with tropical paradise and hospitality. The country used them to showcase different aspects of destination experience, marine life, water sports, wellness and leisure, and high-end luxury private Island resorts. Like many other countries, Mauritius purposefully developed its tourism sector and embarked on local and international campaigns and fairs. Tourism now plays a key role in the country’s foreign direct investment, growth, and development. Destination branding is the hallmark of the investment attraction strategy of the tourism sector to promote the growth and development of the domestic economy. The travel and tourism sector is one of the largest economic sectors, contributing $7.7 trillion to the global economy in 2022; the sector’s contribution was projected to reach $9.5 trillion in 2023 and $15.5 trillion by 2033, representing 11.6 percent of the global economy.[1] The sector is responsible for one in 11 jobs globally, with a total employment of over 295 million as of 2022, and overseas visitors spent a total of $1.1 trillion. At the country level, the contribution of the travel and tourism sector is likewise outstanding. Based on the latest statistics from the World Bank, as of 2019, the number of arrivals in France was 217.9 million, 165.5 million in the US, 40.9 million in the UK, 22.3 million in the United Arab Emirates, 19.1 million in Singapore, and 14.8 in South Africa.[2] The impact of destination branding transcends the travel and tourism sector; successful destination branding benefits trade and investments, businesses, and other economic activities. It facilitates the competitiveness of a location, promoting higher perceived value for goods and services that favours businesses — some visitors and tourists do not shy away from paying a premium for products and services at the destination city. Cities in the Economist Intelligent Unit’s top ten most expensive cities list in 2023, including Singapore, New York, Hong Kong, Paris[3] equally have the highest number of tourists by arrivals. The opposite is also true; Tehran, Ahmedabad, Lagos, Chennai, and Buenos Aires, in the bottom ten positions of the list, are among the least visited cities. Famous cities attract other benefits, including preferred locations for businesses and headquarters of global corporations, high concentration of flow of goods and services by air, land, and sea transports, talent attraction, major global events, and global influence, among others. With many resources and opportunities to leverage, Lagos has the potential to tip the scale for Nigeria’s economic development, riding on destination branding and actively showcasing national strengths on the global stage. According to the World Population Review, Lagos with a population close to 17 million, is the largest city in Nigeria, 3rd and 14th largest in Africa and the world, respectively. The state has rapidly evolved into a pivotal economic and cultural hub in West Africa. Multinational companies span sectors such as banking, insurance, telecommunications, oil and gas, and professional services (accounting, consulting, and legal), and the dynamic business environment with a community of expatriates, establishing Lagos as Nigeria’s economic epicenter and commercial nerve centre. Some of the notable attractions in the city include one of the largest and busiest seaports in Africa,… Continue reading Lagos City Branding: Boosting Nigeria’s Economic Growth
Sustainable Finance: Enhancing Participation Today
A profound transformation is sweeping through the world of investments as investors, once solely focused on financial returns, are now seeking something more, exploring opportunities that promise competitive financial returns and carry the banner of sustainability. Industry leaders are fast recognising that a balanced approach to wealth accumulation, one that considers not just profits but also the well-being of our planet and society — going beyond the dollars and cents to the broader repercussions of our actions — is the way forward. This realization is wildfire igniting the growth of sustainable finance, a field that integrates Environmental, Social, and Governance (ESG) criteria into the heart of investment decision-making. Sustainable finance scrutinizes investment impact on the environment, society, and the ethical governance of the entities invested in. This holistic approach is leading to a significant realignment of business models as capital holders strive to meet evolving customer expectations, adapt to shifting economic landscapes, and adhere to the ever-evolving sustainability standards. This wave is about channeling financial resources into projects that promote environmental well-being and directly support the transition to a zero-carbon economy. The entire financial industry has a critical role to play! It requires financial operators to play offense and respond to sustainability market demands and be ahead of the green supply curve, operating within the global standards and frameworks of the United Nations Principles for Responsible Investment (PRI), United Nations Sustainable Development Goals (SDGs), United Nations Global Compact (UNGC), United Nations Environment Programme Finance Initiative (UNEPFI) Principles for Responsible Banking, Equator Principles, UNEPFI Principles for Sustainable Insurance, and Green Bond Principles, among others. ESG integration is the flagship strategy, reflecting a holistic viewpoint of investors that are not just dipping their toes in the water; they are refining their strategy, moving beyond basic screening to embrace more advanced approaches like thematic and impact investing. Most investors prefer active ESG integration. They are looking for companies and securities that actively incorporate ESG principles and are willing to engage with investee companies to ensure the positive impacts are real. A survey report in December 2020 by NAVEX Global revealed some fascinating insights. It disclosed that 88% of publicly traded companies had already embraced ESG initiatives; roughly two-thirds of privately owned companies were treading a similar path. Furthermore, in October 2023, Capital Group reported that 90% of investment professionals are weaving ESG considerations into their investment approaches. This is not a passing fad; the proportion of investors consider ESG as core of their investment philosophy is at 33% in Europe, Middle East and Africa (EMEA), 25% in Asia-Pacific, and 9% in North America. And, indeed, the numbers are compelling. In Q3 of 2023, global ESG fund assets had ballooned to approximately $2.7 trillion. The winds of change are blowing, but not every region is experiencing them equally. Europe was at the forefront of this movement, with ESG fund assets commanding an impressive 84% share, followed by the United States with an 11% share. Nigeria’s sustainable finance market is relatively small, but there are significant potential opportunities for tapping into the global sustainability-themed market. While the benefits are widespread, the costs of not taking action could be as high as $450 billion by 2050, according to the Africa Development Bank report. Some growth has been recorded on the back of the government and corporate sector’s efforts. As of 2022, five corporate green bonds valued at ₦32.83 billion and two sovereign green bonds valued at ₦25.69 billion were listed on Nigeria’s exchanges. Total investment in sustainability-focused mutual funds amounted to ₦2.4 billion. Based on the African Development Bank’s estimate, for 2020-2030, Nigeria requires $247.3 billion for its climate finance needs, averaging $22.5 billion annually. With Nigeria’s Climate Change Act and the National Council on Climate Change (NCCC) launched, some vital legal frameworks and structures for building nation-wide sustainable practices are in place, but like many other slow-to-decarbonise economies, there are potential challenges to attracting global sustainability-themed funds. One of the significant hurdles is the heavy reliance on fossil fuels for foreign exchange earnings. A staggering 80% of the government’s revenues come from oil exports. With financial institutions, an additional challenge emerges from the “disproportionate importance on the “Governance” aspect in investors’ decision-making processes, over the “Environmental” and “Social” dimensions of ESG investing.” Hence, “in spite of progress in governance, advancement in the environmental aspect is on the back burner.” A scarcity of expertise in sustainable finance practices presents another hurdle for banks and financial institutions in meeting vital requirements in ESG impact investing and reporting. Limited access to finance in Nigeria constitutes a different set of challenges. While opportunities for sustainable investments exist, such ventures often require substantial financial commitments over medium to long terms. The prevailing short-term financing options in the financing system underscores the need for alternative medium- to long-term funding options, especially for sustainable infrastructure development projects. The prospects of embracing sustainable finance offer compelling advantages for Nigeria. Improved risk management and long-term good financial performance are potential benefits. It also provides a wide range of non-financial benefits. Embracing sustainable finance paves the way for more innovative financial products, such as green bonds and sustainability-linked loans, particularly for financing critical national development projects. Sustainable reporting enhances transparency and accountability, building the reputation of financial institutions as responsible entities. Global investors and lenders increasingly support organizations committed to sustainability. Aligning with the Sustainable Development Goals (SDGs) allows Nigerian financial services players to demonstrate commitment to a sustainable future, impacting economic development and environmental and social well-being locally and globally. Nigeria stands at the crossroads of sustainable finance. This path must now align with global trends to prepare for a future that is economically, socially, and environmentally sustainable. To pave the transition pathways for the country and accelerate progress, below is how stakeholders can drive participation. 1. Develop and implement a national sustainable finance plan: In line with its commitment to global carbon reductions, the federal government has enacted the Climate Change Act and set up the National Council on Climate Change (NCCC).… Continue reading Sustainable Finance: Enhancing Participation Today