CBN Promises Sustainable Banking Practices

The Central Bank of Nigeria has stated its commitment to promoting sustainable banking practices through the adoption of International Financial Reporting Standards as part of a broader strategy to attract foreign investment and achieve economic growth.

The Governor of the CBN, Olayemi Cardoso, said that the move aligns with the federal Government’s goal, to reach a Gross Domestic Product of $1 trillion by 2031.

He stated this at the Regulatory Roundtable on the Implementation of ISSB’s Sustainability Reporting Standards in Nigeria, held on Thursday in Abuja.

“It is important to note that sustainability reporting has become important for stakeholders, and many companies are setting sustainability goals and seeking ways to reduce their carbon blueprint.

“The world is moving, and we cannot be spectators. We know that our entities have to live with the global arena and the President of the Federal Republic of Nigeria has set a goal of achieving a GDP of 1 trillion dollars over the next six years,” he said.

Cardoso, who was represented by the Deputy Director, Payments System Policy and Oversight function,
Musa Jimoh, noted that the CBN collaborated with key stakeholders, including banks, discount houses, and other financial institutions, to ensure a smooth adoption process within the banking sector.

He explained that, “In 2010, the Financial Reporting Council of Nigeria unveiled a roadmap for the adoption of IFRS, which mandated that all publicly listed and public interest entities transition to these global standards starting January 1, 2012. Recognising the importance of this transition, he said that the CBN collaborated with key stakeholders, including banks, discount houses, and other financial institutions, to ensure a smooth adoption process within the banking sector.

According to him, the implementation of IFRS in the banking sector, which replaced the previous International Accounting Standard, marked a significant milestone in Nigeria’s financial reporting landscape.

Cardoso added that the transition, despite its complexities, was effectively managed by the CBN, leveraging its experience in earlier IFRS implementations and as a result, the Nigerian banking system has seen substantial growth, both locally and globally, with over 55 subsidiaries, three branches, and four representative offices spread across 30 countries.

He also stated that foreign investments and credit facilities have steadily increased, reflecting growing confidence in Nigeria’s financial system.

The CBN governor said that the bank is now focused on implementing the newer IFRS standards, including IFRS S1 and IFRS S2, to further enhance transparency and financial integrity in the banking sector. He said the bank’s emphasis on adequate disclosure aligns with global best practices, fostering trust between regulators, investors, and the public.

“In addition to financial reporting, the CBN is driving sustainability within the banking sector. In collaboration with the Bankers’ Committee, the CBN introduced sustainable banking practices in 2020. These principles focus on managing environmental and social risks, promoting economic stability, and ensuring access to finance for underserved segments of the economy. The principles also emphasize the importance of transparency, with banks required to disclose their sustainability efforts in their audited financial statements.

“The impact of these sustainability initiatives is evident in the growing number of bank branches and ATMs powered by renewable energy, as well as improved waste management practices across the sector. To encourage compliance, the CBN has instituted the Sustainability Banking Awards, recognizing banks that demonstrate significant progress in integrating environmental and social considerations into their operations,” Cardoso said

He stated further that as the country continues its journey towards implementing new global standards, including those addressing climate-sensitive financial disclosures, the CBN acknowledges the challenges ahead.

He, therefore, emphasised the need for capacity development among stakeholders to ensure successful implementation.

On his part, the Executive Secretary of the Financial Reporting Council, Rabiu Olowo, said that Nigeria is setting a precedent for other African nations as a pioneer in adopting the International Sustainability Standards Board.

Since declaring its early adoption at COP27 in 2022, Olowo said the FRC has been instrumental in guiding businesses through the transition to a more sustainable future. “The establishment of an Adoption Readiness Working Group has been pivotal in developing a clear roadmap for implementing the new standards.