Category: Money

The Central Bank of Nigeria (CBN’s)  half-year activity report showed the interbank transactions  dropped by N667.81 billion in six months ended June 2022.

The report showed that the interbank transactions which stood at  N26.07 trillion in half year 2021, dropped to N25.4 trillion in the first six months of this year.

Also, analysis of the transactions indicated that open-buy-back (OBB) stood at N25.2 trillion, accounting for 99.41 per cent, while the unsecured inter-bank call took up 0.59 per cent or N150.52 billion. 

In the corresponding period of 2021, OBB accounted for N25.86 trillion  or 99.18 per cent, while the unsecured segment recorded N214.40 billion or 0.82 per cent. The sustained recourse to the OBB segment in the review period was attributable to risk aversion by counter-parties, as there was low appetite for unsecured lending in the market. 

The report, signed by Deputy Governor, Economic Policy, Kingsley Obiora, said  money market rates movements was influenced by liquidity conditions in the banking system. 

The contributory factors included the fiscal operations of government; effects of Cash Reserve Ratio operations; deposits and settlement for foreign exchange intervention, as well as the sale and maturities of CBN and government securities. 

“Consequently, the weighted monthly average inter-bank call rates ranged between 4.50 per cent and 14.31 per cent, while the average OBB rate ranged between 6.10 per cent and 10.89 per cent in the review period. On a monthly basis, the highest weighted average rates at the call and OBB segments were 14.31 per cent and 10.89 per cent in January and June, respectively. Conversely, the lowest rates of 4.50 per cent and 6.10 per cent for the call and OBB segments were in January and February, respectively,” he said. 

The highest rate at the inter-bank call and the OBB segments were attributed to the effects of debits for cash reserve requirement and foreign exchange transactions. On the other hand, the lowest rates at the two segments were influenced by liquidity injections and the interplay of interbank transactions. 

“The movement of inter-bank interest rates also oscillated during the review period. The daily OBB rate ranged between 0.57 per cent and 15.29 per cent, compared to the range between 0.36 per cent and 32.91 per cent in the first half of 2021. The daily inter-bank call rate ranged between 4.50 and 16.00 per cent in the first half of 2022 as against the range between 2.00 and 30.00 per cent in the corresponding period of 2021,” he stated.

The COVID-19 pandemic put a damper on a lot of progress over the last three years, but for financial inclusion it was a catalyst that drove a large increase in digital payments amid the global expansion of formal financial services, the World Bank announced.

The bank said developing countries, 71 per cent of people have an account, up from 42 per cent a decade ago. Globally, 76 per cent of adults around the world have an account, up from 51 per cent a decade ago.

In the Global Index 2021 database, the World Bank explained that the expansion created new economic opportunities, narrowing the gender gap in account ownership, and building households’ resilience to better manage financial shocks.

The bank said in developing economies, 36 per cent of adults received a payment into an account, such as private or public sector wage payments, government transfer or pension payments, payments for the sale of agricultural products or domestic remittances.

Of those 36 per cent who received a payment into an account, 83 per cent also make a digital payment, about two- thirds use the account to store money for cash management, and about 40 per cent tell us they use their account to save or to borrow money.

Financial inclusion matters and is the cornerstone of development. When people have a financial account, it enables them to take advantage of other financial services like saving, making payments, accessing credit.

“Findex is showing us that digitalisation of financial services is changing the game,” it said.

The bank said these tremendous gains are also more evenly distributed and come from a greater number of countries than ever before.

The biggest growth has been in the use of digital payments, which surged during COVID-19 mobility restrictions and when cash was perceived as unsanitary.

It said two-thirds of adults worldwide make or receive a digital payment. In developing countries, excluding China where digital payments are widespread, 40 per cent of people who made a digital payment from their account (to a merchant or for a utility service) did so for the very first time since the start of the pandemic.

“Digital payments are typically safer and more convenient, and can be an entry to using other financial services. Findex data show that adults who receive a payment into an account in developing economies make use of financial services more than the average adult.

“The COVID-19 pandemic has highlighted the fundamental role that digital infrastructure can play in rapidly delivering services and social assistance to people. Integration of digital ID, digital payments, and trusted data sharing platforms is critical for serving the poor at scale and connecting communities to opportunities,” Global Director for Digital Development Global Practice, Christine Zhenwei Qiang, said.

  “This report underscores that for many developing country consumers, the gateway to innovative financial services is mobile money, supported by improvements in coverage, affordability and reliability of digital infrastructure,” Qiang added.

The gender gap in account ownership has also shrunk, narrowing from nine to six percentage points in developing countries. The data find that 74 per cent of men but only 68 per cent of women in developing economies had an account.

The banks said globally 1.4 billion adults remain unbanked. These people are hardest to reach – and more commonly women, poorer, less educated, and living in rural areas.

While digitalising government and other payments is the way to go, much more is needed. Governments, private employers and financial service providers, including fintechs, should work together to lower barriers to access and improving physical, data and financial infrastructure.

“To reach them, governments and the private sector will need to work hand-in-hand to forge the policies and practices needed to build trust in financial service providers, confidence in using financial products, new tailored product designs, as well as a strong and enforceable consumer protection framework,” Lead Economist in Development Economics Vice Presidency and main author of the Global Findex report, Leora Klapper said.

Also, despite this continued growth in account ownership, only about half of adults in developing economies report that they could reliably access extra funds within 30 days if faced with an unexpected expense, according to the Findex findings. And about two-thirds of adults are very worried about at least one area of financial stress, whether it’s paying for medical bills, paying for school fees, paying for regular monthly bills, having enough money for old age.

“Findex is showing us that digitalisation of financial services is changing the game, which is very inspiring for those financially included – and for Bank staff working on these issues,” Global Director for Finance in the Finance, Competitiveness & Innovation (FCI) Global Practice, Jean Pesme said.

“Much more is needed. We need to focus on countries that have made least progress and redouble our efforts to reach the most vulnerable, notably women. This is key to fostering inclusion and increasing resilience,’’ Pesme added.

Banks are reviewing lending rates for loaned funds after the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) decision to raise benchmark interest rate  from 15.5 per cent to 16.5 per cent, analysts have said.

An economist and financial analyst, Michael Ndidi, said the banks are keeping eyes on their rising cost of funds and operational costs which are impacting on their profitability.

The apex bank had raised the Monetary Policy Rate (MPR) by 100 basis points interest rates during last month’s MPC meeting.

According to Ndidi, the rates hike will also lead local industries to review upwards, cost of products at a time that inflation is also rising, and people’s purchasing power weakening.

He said banks do not waste time in raising lending rates, but find it difficult to increase interest on savings.

“I think the CBN should enforce its policy on interest rates on savings and monitor to ensure banks pay the right interest on deposit to savers,” he added.

Analysts at Cordros Capital said the MPC decision was expected based on the CBN’s commitment to reining in rising inflation.

Cordros Capital noted that the Governor of CBN, Mr. Godiwn Emefiele, had in the last two meetings, maintained that the apex bank would maintain its interest rate hikes until there is a deceleration in the inflation path.

Emefiele had pointed out that “time-tested monetary policy has shown that inflation must lag policy rates”.

Nigeria’s debt service costs will continue to rise in the short to medium term, but the country has enough dollar liquidity to service the debts in the next two years.

Report by Fitch Ratings said rising debt service cost will hobble the Nigeria’s ability to use fiscal policy to support economic growth, Fitch’s sovereign ratings director, Jermaine Leonard, said.

Nigeria will spend N6.31 trillion ($14.30 billion) on servicing its domestic and foreign debt next year.

Debt Management Office (DMO) data showed that Nigeria total debt stock stood at $103.3 billion (N42.8 trillion) as at last June 30.

Fitch downgraded Nigeria’s rating to ‘B-‘ with a stable outlook last week, in part due to a deterioration in Nigeria’s debt servicing costs.

The government’s budget deficit as percentage of revenue will rise to 111 per cent next year, up from 74 per cent this year, according to ministry of finance data, showing authorities are spending more than they are collecting to pay off debt.

“That’s going to have a deleterious effect on the government’s ability to use fiscal policy to support economic growth and to do all the things that it needs to do over the next few years,” Leonard told a Lagos conference.

“We do think that this debt servicing issue is something that will remain at the forefront of our concerns over the next two to three years.”

Despite high oil prices, Nigeria’s capacity to increase revenue has been affected by low oil output, a result of vandalism of pipelines and crude theft.

Leonard, however, said Fitch did not see Nigeria announcing a debt restructuring anytime soon and was comfortable that Africa’s biggest economy had enough dollar liquidity to meet external debt repayments in the next two years.

The Central Bank of Nigeria (CBN) and information security stakeholders are taking steps to check the rising cases of cyber attacks

Speaking during the yearly Information Security Society of Africa – Nigeria (ISSAN) Cybersecurity Conference in Lagos, Director, Payments System Management Department,  CBN, Musa Jimoh said the apex bank was committed to building a sustainable payments ecosystem.

He said the CBN will continue to collaborate with organisations that are committed to addressing the  cyber-attacks.

President, FinTech Association of Nigeria (FinTechNGR), Ade Bajomo said to address the rising rate of cyber-attacks, organisations should collaborate and share information.

According to him, silence keeping  by organisations that had been attacked would not help others, stressing that disclosure, synergy and information sharing on reported cyber-attacks and how it was managed would guide other organisations to put preventive and counter measures in place.

He called on organisations to upgrade their technology to counter cyber-attacks, urging them to have data backup.

 Co-founder/Chief Visionary Officer, Digital Encode, Adewale Obadare, also made case for collaboration, noting the need to strike the balance among the investments in people, technology, and processes to fight cyber-attack and fraud.

He further stated the need to build cybersecurity intelligence quotient, which will comprise Augmented Intelligence to check what is happening on the system real time, Anticipatory Intelligence to analyse what could happen, and Assistive Intelligence to determine what needs to be done.

He recommended that digitisation, digitalisation and digital transformation should be addressed.

 ISSAN President, David Isiavwe said the conference was devoted to further exposing the new threats and trends in the cyber security space and  offering practical steps on what businesses and individuals need to know and do to check the rising tide of the activities of cyber-criminals.

He observed that cyber attackers were getting more sophisticated globally, which is an aftermath of COVID-19 pandemic, stressing that greater awareness must be created to minimise attacks on businesses that may result in losses by various organisations.

Further, Isiavwe, who is also General Manager, Ecobank, made case for customer awareness as well as collaboration by stakeholders.

Polaris Bank has assured that customers and non-customers alike can carry out their transactions via its alternate channels: VULTe, USSD *833#, Polaris Mobile, PolarisXperience, ATMs, and PoS terminals during the Yuletide.

In a statement, the bank’s Group Head, Strategic Brand Management, Nduneche Ezurike, assured of the bank’s readiness to enablecustomers and non-customers enjoy the benefits of using its alternate channels during this festive period.

Nduneche said: “VULTe digital banking platform makes it easy to bank on the go, enabling customers and non-customers to instantly meet their payment needs and obtain loans anywhere and at any time directly from their mobile device.”

He explained that VULTe allows customers to manage their accounts, send money, obtain loans, pay bills, buy airtime, pay merchants, and do other transactions.

“It is secure, reliable, convenient, and available to everyone; we offer our customers more options for sending or receiving money to and from loved ones. They can transfer money to other bank accounts, too,” he added.

The International Monetary Fund (IMF) has welcomed the steady implementation of the tax automation system (TaxPro Max) and recommended stepping up efforts to further expand coverage under a well-designed roadmap and strengthen taxpayer segmentation centering on the Large Taxpayer Offices (LTOs). 

In its report on Nigerian economy, the Fund advised that in the medium-term,  authorities should develop a compliance improvement programme and comprehensive customs modernization programme, improve the effectiveness of the State Internal Revenue Service’s administration of the Pay-As-You-Earn (PAYE) system, and strengthen inter-agency coordination and data sharing.

On tax tax policy reforms, the  mission advised the authorities to consider adjusting tax rates to levels comparable to the average in Economic Community of West African States (ECOWAS) as compliance improves. 

“This includes further increasing the VAT rate to 15 per cent by 2027 in steps while streamlining numerous VAT exemptions based on systemic reviews, increasing excise rates on alcoholic and tobacco products while broadening the base, and rationalizing tax incentives by streamlining tax expenditures based on comprehensive periodic reviews”.

To mitigate food insecurity and cushion the impact of high inflation and fuel subsidy removal on the poor, the mission recommended increasing social spending by up to 1.7 percentage points of Gross Domestic Product (GDP) during 2023-27 in well-targeted programs in coordination with the World Bank and other development partners.

Earlier, on the fund called for policy that allows banks play more role in forex market.

It said a unified and market-clearing exchange rate remains critical to enhancing confidence of foreign investors in the economy.

The IMF insisted that continued forex shortages, a stabilised exchange rate regime, rising inflation, limited debt servicing capacity, and administrative restrictions on current transactions fuel devaluation speculations. 

“These factors hinder much needed capital inflows, encourage outflows and constrain private sector investment. The mission reiterated its past recommendations to move towards a unified and market-clearing exchange rate by dismantling the various exchange rate windows at the CBN accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies.” 

“In the medium term, the CBN should step back from its role as main forex intermediator, limiting interventions to smoothing market volatility and allowing banks to freely determine forex buy-sell rates,” it stated.

The Fund also advised Nigeria to remove fuel subsidies and address oil theft as a major step to narrow fiscal gap.  The Fund advised that  as a near-term priority, there is urgent need to remove fuel subsidies fully and permanently, which disproportionately benefit the well-off, by mid-2023 as planned. 

“The government should also prioritize addressing oil thefts and governance issues in the oil sector to restore production to pre-pandemic levels. Step up implementation of tax administration reforms,” it said.

The value of new cash deposits attracted by banks to their vaults in the last one year rose to N6.69 trillion, the Central Bank of Nigeria (CBN) has announced.

The apex bank’s Deputy Governor, Financial System Stability, Mrs. Aishah Ahmad, who broke the news said commercial banks received additional N6.69 trillion new deposits from depositors between end-February 2021 and end-February 2022.

The total deposits in banks rose from N32.69 trillion in February 2021 to N39.38 trillion in February 2022, creating N6.69 trillion deposit growth. 

In her personal notes to the Monetary Policy Committee (MPC) members posted on the CBN’s website, Mrs. Ahmad said the  financial system remains resilient and continues to provide significant support for domestic economic recovery. 

“Data provided by the CBN staff showed stability in broad financial soundness indicators and sustained improvement in asset quality, alongside growing credit to the private sector,” she said.

According to her, capital adequacy as at February 2022 was at 14.40 per cent. Industry liquidity was also strong at 43.5 per cent over the same period while the non-performing loans ratio declined further to 4.8 per cent in February 2022, from 4.94 per cent in December 2021. 

Mrs. Ahmad, said the state of the industry reflects the case-by-case review of regulatory forbearance, effects of the Global Standing Instruction (GSI) policy, and sound industry risk management practices. 

“Notably, total assets rose to N62.01 trillion in February 2022 from N52.32 trillion in February 2021, while total deposits rose to N39.38 trillion from N32.69 trillion over the same period,” she stated. 

Continuing, she disclosed that banks’ credit to customers also increased by N4.13 trillion between end- February 2021 and end-February 2022 with significant growth in credit to manufacturing, general commerce, and oil and gas sectors. 

“The continued growth in credit particularly to output enhancing sectors is expected to further support economic recovery. However, sustained regulatory vigilance is required to mitigate any potential crystallization of credit risk in the financial system from lingering macroeconomic risks,” she stated. 

On the deposit rates, she noted that the monthly weighted average Open Buyback (OBB) and Inter- bank call rates decreased to 5.81 and 9.30 per cent in February 2022 from 6.00 and 16.00 per cent in January 2022, respectively. 

The decrease in the rates, she said, signifies loose liquidity conditions in the banking system, which could worsen inflation conditions if unchecked. 

“It would also be important to sustain the liquidity management actions of the CBN, which have helped prevent overheating of the economy following increased liquidity injections in response to spillover effects of the pandemic,” she advised. 

Continuing, Mrs. Ahmad, said the uptick in core inflation was mostly due to rising energy prices as a result of the recent scarcity of Premium Motor Spirit (PMS), rise in the cost of Automotive Gas Oil (AGO), and hike in electricity tariff. 

“While the recent spike in domestic prices may be transitory, it is prudent to take forward-looking policy decisions to mitigate unforeseen adverse price developments and manage inflation expectations. Sustained interventions by the Central Bank of Nigeria (CBN) to improve food supply alongside fiscal efforts to contain long standing structural constraints are important considerations in that regard,” she said. 

She said  the “Race to S$200 billion in FX Repatriation” policy of the CBN was designed to boost non-oil export receipts is expected to improve foreign exchange supply and strengthen relative exchange rate stability. 

This policy complements fiscal sector initiatives to diversify the economy and enhances the renewed focus on improving domestic economic productivity. 

Banks and other financial institutions, especially Financial Technology Companies (FinTechs), are taking advantage of the use of mobile apps by their tech-savvy customers by deploying customised and efficient channels. The deployment of the apps will be hastened with the Central Bank of Nigeria’s (CBN) policy on cash withdrawal limits. More customers are expected to download mobile apps as they adjust to the margining trends in the e-payment system that places less emphasis on cash, writes Assistant Business Editor COLLINS NWEZE.

The Central Bank of Nigeria (CBN) took many bank customers by surprise when it reviewed the weekly cash withdrawal limit to N500,000 and N5 million for individual and corporates.

The policy shift, was announced by CBN Director, Banking Supervision Department, Haruna Mustafa, represents about 400 per cent increase, from N100,000 and N1 million withdrawal limit for individual and corporates set by the apex bank in its December 6 circular. 

While the banking community is digesting the policy shift, it has become clear that the use of mobile app, as a payment infrastructure will rise as more people rely less on cash to consummate transactions.

Earlier, mobile apps were making huge inroads into the financial services sector bringing flexibility, safety and convenience to users. 

The deepening integration of digital technologies into almost every facet of people’s lives has transformed the way they communicate, socialise, learn do business and conduct financial transactions.

Hence, banks are not only competing for the mobile Apps space, but launching new ones targeted at enhancing the banking experience of large pool of their customer base and bringing services closer to the people. Banking apps are not only retaining users with push and in-app notifications but are attracting prospective users who want improved banking experience and better security of transactions.

CBN Deputy Governor, Financial System Stability, Mrs. Aishah Ahmad,said the challenge of banking product security and abuse was impacting the adoption of products.

Speaking at the Financial Institutions Training Centre/Nigeria Interbank Settlement System Virtual Think_Nnovation Conference  in Lagos, she explained that if people found out that digital channels were getting more secured and that there were opportunities they could leverage when they have challenges, there are more chances that they would embrace the channels. But if they discovered that the security of the platforms were reducing, this could lead to reduction in the use and adoption of digital services, she added.

Ecobank Nigeria says its Omni Lite App is a highly secure and integrated electronic banking platform designed to help clients manage their business accounts online in a secure, flexible, efficient and convenient manner.

 The app is in line with Ecobank’s policy direction to meet and surpass customers’ expectations, noting that it will bring flexibility, safer and convenient banking to the users. It is available to its users, urging them to download it from the Apple Store (IOS) or the Play Store (Android).

 ”With the new Omni Lite App, users can view their accounts and transactions in one place, make payments and pay bills with ease, set up multiple users with different access launch, make and manage loan payment, book time deposits and view exchange rates,” the bank said.

Coronation Merchant Bank has launched a mobile banking application. The app  provides customers with access to their accounts as well as the ability to perform transactions seamlessly without the need for in-person banking. The bank said mobile App is helping customers navigate the challenges induced by the COVID-19 pandemic.

Analysts said banks are serving between 70 and 80  per cent of its customers through mobile App and other digital platforms.

They said the COVID-19 pandemic has given the bank an opportunity to test the resilience of its investment in technology.

But analysts have said that financial services sector is particularly susceptible to cybercrime given its crucial role of financial intermediation in a highly connected financial system. Aside significant financial losses, the sector is also exposed to potential compromise and loss of customer data, and disruption of operations, which undermine app users’ confidence in financial system stability and which financial services operators are trying to address.

Other highlights of the policy

In a letter to  All Deposit Money Banks (DMBS) and Other Financial Institutions-Payment Service Banks (PSBs). Primary Mortgage Banks (PMBs), Microfinance Banks (MFBs), Mobile Money Operators (MMOs) and Agents, he said his   review followed feedback received from stakeholders.

He said: “The maximum weekly limit for cash withdrawal across all channels by individuals and corporate organisations shall be N500,000.00 and N5 million. In compelling circumstances where cash withdrawal above the limits in above is required for legitimate purposes, such requests shall be subject to a processing fee of  three per cent and five per cent for individuals and corporate organisations.”

The apex bank also directed that third party cheques above N100,000 shall not be paid over the counter, while the limit of N10 million on clearing cheques still subsisted.

It further directed financial institutions that where the limit set is to be exceeded, to obtain valid means of identification of the payee (National ID, International Passport, or Driver’s Licence); Bank Verification Number (BVN) of the payee, Tax Identification Number (TIN) of both the payee and the payer from the customer, at the minimum, and upload same on the CBN portal created for the purpose.

The apex bank also said approval  by the Managing Director/CEO of the financial institution for the withdrawal is also required for customers exceeding set cash withdrawal limit. 

“Monthly returns on cash withdrawal transactions above the specified limits should be rendered to the Banking Supervision, Other Financial Institutions Supervision and Payments System Management Departments as applicable.

Compliance with AML/CFT regulations relating to KYC, on-going customer due diligence, currency and suspicious transaction reporting etc. is mandatory in all circumstances,” the report said. 

It added that customers should be encouraged to use alternative channels (internet banking, mobile banking apps, USSD cards/POS, eNaira, etc.) to conduct their banking transactions.

“Bank and mobile money agents are important participants in the financial system, enabling access to financial services in underserved and rural communities. They will continue to perform these strategic functions, in line with existing regulations governing their activities”

“The CBN recognises the vital role that cash plays in supporting underserved and rural communities and will ensure an inclusive approach as it implements the transition to a more cash-less society,” it said. 

“All banks and OFIs are to note that aiding and abetting the circumvention of this policy will attract severe sanctions The above directives supersede that of December 6, 2022 and take effect nationwide,”it added.