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  • CBN Cashless Card Expo Africa starts June 14

    CBN Cashless Card Expo Africa starts June 14

    Central Bank Governor, Mr Godwin Emefiele, is leaving no stone unturned to ensure that the institution’s Cashless CardExpo Africa achieve all its objectives.

    With an expectation of over 3,000 visitors and delegates from various professional leanings and industries across the world, the 2016 CBN Cashless Card Expo Africa, which is scheduled to hold between June 14 and 16 at the Eko Hotel and Suites Victoria Island, Lagos, will raise and find solutions to issues concerning the entire banking, finance and industrial sectors.

    With the retail payment industry experiencing a dramatic shift as e-commerce is already capturing a larger share of sales than ever before and new trends in e-commerce showing that purchase of goods and services can occur with payment made on the point of sale (POS) at a merchant location through the internet, or by telephone, e-commerce has been one of the major catalysts for the retail industry across Africa and globally.

    According to information emerging from CBN, this year’s Cashless Card Expo Africa will focus on the future of retail payment and e-commerce and how innovation will drive this process.

    The conference and exhibition will focus on new users as well the service delivery strategies that would deliver the future of retail payments and e-commerce as top retail payment and e-commerce experts will provide strategies on how to position and enhance your business to guarantee your spot in the ever changing retail and e-commerce industry.

    Other aspects of the conference and exhibition will be: The 2016 Awards and Dinner Ceremony which will take place on Thursday, June 16 at same venue and will enable the audience to win up to N1,000,0000 in shopping vouchers.

    It is put together in conjunction with Intermarc Consulting and would be hosted by Wofai Samuel.

  • Forex: minister takes airlines’ case to CBN

    Forex: minister takes airlines’ case to CBN

    • We’ll assist, says Emefiele  

    the Minister of State, Aviation, Hadi Sirika  led a delegation of indigenous airlines’ operators to the Central Bank of Nigeria (CBN), early in the week to explore ways of  resolving the problem of meeting their foreign exchange requirement.

    His intervention is a fallout of request by the umbrella body of indigenous carriers-Airline Operators of Nigeria (AON).

    According to AON, the difficulty in accessing forex is threatening their operations, and they expressed that non resolution of the situation could lead to the collapse of the air transport sector.

    AON’s Chairman, Captain Nogie Meggison, said the airlines were struggling to keep their operations afloat on account of difficulty in accessing foreign exchange to acquire aircraft spares to carry out maintenance checks, pay foreign crew salaries and allowances; pay for aircraft insurance, and well as carry out simulator training for flight crews.

    Meggison said the inability to access forex constituted the greatest of the many challenges operators are facing.

    Sirika said it is important for the CBN to assist as the challenges facing indigenous carriers could not be ignored because of the role airlines play as the pivot for economic development.

    The CBN Governor, Godwin Emefiele promised to assist domestic carriers by putting them on the priority list to access forex.

    Sirika said: “It is common sense that you buy your airplane in hard currency, you maintain the airplane in hard currency, you buy the spares in hard currency, and even the fuel at some point is purchased in hard currency; so you must be able to access hard currency to operate as an airline.

    “ The CBN governor has  pledged to make available a window for domestic carriers to access foreign exchange,  to include aviation on the priority list in an effort to support domestic airlines their  safety and  operations.”

    On the problem of aviation fuel, the Minister said he had met with the Minister of State for Petroleum Resources who assured  that they would try to get Port Harcourt refinery on-stream before the end of the year to begin refining of  Jet A1 otherwise known as aviation fuel.

    He assured that with some investment, the Kaduna Refinery will be back on-stream to make aviation fuel available.

    ”We are committed to it, we will begin to produce it and if there is anything we can do to bring down the price we will do so. The whole essence of refining it locally is not only to make it available, but it will also make it cheaper. Because then the element of importation is removed,” Sirika said.

    Concerning  direct distribution of Jet A1 to the airports, the Minister said government is working on alternate plans to ensure that aviation fuel supply is factored into the concession arrangement.

    ”we can cause the concessionaire to ensure that the infrastructure is developed around those airports especially that of Lagos, Port Harcourt, Abuja and Kano “ , he said.

    With regard to taxes on aircraft and spare parts, the Minister observed that while the Ministry of Finance holds the position that  there should be no duty on aircraft and spare parts, the Nigeria Customs thinks that the waiver is only on aircraft itself and not on the spares.

  • Bank directors advise CBN to discuss policies with banks

    Bank directors advise CBN to discuss policies with banks

    Bank directors have urged the Central Bank of Nigeria (CBN) to explore dialogue in addressing key policy issues that affect the industry.

    The new President of Bank Directors Association of Nigeria (BDAN), Sir Steve Omojafor, who disclosed this at the 19th Annual General Meeting (AGM) of the association in Lagos advocated for increased exchange of ideas between both parties on the introduction and implementation of policies to guarantee success of the industry.

    One of the CBN policies that have shaken the banking sector include plan to introduce flexible exchange rate with the intention to curb the rising volatility affecting the naira and foreign exchange reserves.

    Omojafor said BDAN, as the primary all-inclusive platform for all bank directors for both non-executive and executive directors, has a key role to play in getting banks to meet and review matters affecting the industry.

    Sir Omojafor, who is also a director of Zenith Bank Plc, used his address at the occasion to present the achievements of the Association during the 2015 financial year. According to him, the year was characterised by challenges and turbulence in the macro-economic and political environment: including the general elections, issues in the global economic environment, and the attendant CBN’s policies.

    These, he said, had varying impacts on the Nigerian banking industry, but BDAN was nevertheless able to record some remarkable successes in its operations.

    He said the CBN has also included BDAN on the list of ‘Competency Framework for Nigerian Banking Industry’ as a minimum qualification for non-executive directors.

    Another achievement highlighted by Sir Omojafor was the launching of the newly designed BDAN website, which is expected to serve in updating and providing useful information about the association and the banking industry to its members.

  • CBN, banks brainstorm on solution to mass sacking

    CBN, banks brainstorm on solution to mass sacking

    The Bankers’ Committee of the Central Bank of Nigeria (CBN) on Thursday gave assurance that the rate of mass sacking in banks would be reduced within the shortest time possible.

    The committee stated this at the end of its 327th meeting at the headquarters of the CBN in Abuja

    The Managing Director,Standard Chartered Bank,Mrs Bola Adelola, said the mass sacking in the sector was discussed at the meeting.

    Other members of the committee present at the briefing were the Director, Banking Supervision, CBN,Mrs Tokunbo Martins; Managing Director, United Bank for Africa Plc, Mr Phillips Odouza and Managing Director, Union Bank of Nigeria Plc,Mr Emeka Emuwa.

    She said that while the banks understood the economic situation in the country, there would always be reasons for workers to be relieved of their jobs.

    “On the recent news item on retrenchment, we also discussed it and obviously banks understand the implications of people not being in employment. We know what the situation is like in the country.

    “Thus we are looking at ways of ensuring that we minimise many exit from our institutions. There will always be exit as you know because there is fraud and so on and so forth.

    “So we have noted the market sentiments and I am sure that going forward it will be different,” she said.

    Adesola said that the framework for a National Collateral Registry was almost ready and when released, it would facilitate the easy access of loans by bank customers.

    She said based on the guidelines, those seeking loans from banks could use movable assets such as vehicles, fridges, and other home appliances as collaterals.

    “You are all aware that the Central Bank of Nigeria is developing a National Collateral Registry. I am pleased to say that they have put the framework in place and the technology.

    “They have begun to engage stakeholders and we should expect a role out of the collateral registry being available to banks to register movable assets that they lend against.a policy statement will be issued shortly.

    And we expect that that will make more robust the banks’ credit process in lending to customers against movable asset,” she said.

    Meanwhile the Director, Banking Supervision, CBN, Mrs Tokunbo Martins, speaking on financial inclusion strategy, said the rate of Nigerians that were financially included in the financial sector had risen to 60.5 per cent.

    She said the committee planned to ensure that an additional six million people were captured into the financial system before the end of this year.

    “As at today, we have a financial inclusion rate of 60.5 per cent, and you will recall that the target is that by 2020 we should have 80 per cent of the population included.

    “So the CBN has agreed targets with the commercial banks and also microfinance banks and by the end of this year, we hope to increase the inclusion rate by eight per cent.

    “Strategies and milestones have already been mapped out to achieve that target at the end of the year,” she said.

    Also, the Managing Director, United Bank for Africa Plc, Mr Phillips Odouza, said the reason for the delay in releasing the framework for the new flexible foreign exchange policy was to ensure more inputs from stakeholders.

    He said as a result of the huge challenge which the country had experienced in the past in managing foreign exchange, there was need for CBN to consult widely, to come up with a robust foreign exchange management framework.

    He warned those involved in currency speculation to desist from such practice. He said once the guidelines were finally released, currency speculators would regret their actions.

    “We also discussed the framework for flexible exchange rate. As you know, the Central Bank has been working on this for sometime. A lot of input has been received.

    “As you know, some other jurisdictions have also implemented the flexible exchange rate model and some of them have done very well and the others are still fine tuning what they have done.

    “In the case of Nigeria, we want to make sure that we come up with a model that is very robust and very comprehensive that will be able to address the major exchange rate issues that we are dealing with.

    “To this extent, we have gotten a lot of input from various stakeholders and these inputs are being distilled with a view of getting a robust flexible exchange rate model.

    “I believe that in a very short while, the exchange rate will be ready. And once this happens, it is going to be made public.And we will adopt it and start working with it immediately,” he said.

  • Banks leverage on CBN’s backing to create millionaires

    Banks leverage on CBN’s backing to create millionaires

    With the support of the Central Bank of Nigeria (CBN), deposit money banks (DMBs) are wooing customers with cash prizes, foreign trips, and gift items via promos that are fast defining the next level of competition. From Skye Bank, First City Monument Bank (FCMB), United Bank for Africa and Fidelity Bank to Diamond Bank, lenders are turning customers to millionaires and home owners, writes COLLINS NWEZE. 

    Call it rewarding loyal customers, or new form of wooing customers, banks have now found a new ground to bring more customers into their deposit net. The reward schemes, coming in the form of promos, are equally turning lucky and loyal customers to instant millionaires.

    Skye Bank, First City Monument Bank (FCMB), United Bank for Africa (UBA), Fidelity Bank and  Diamond Bank are many of the lenders that are giving out hundreds of millions of naira, houses, and other gift prizes to their lucky customers.

    The Central Bank of Nigeria (CBN) which backs the exercise, said there is nothing wrong with such exercises provided the lenders follow set guidelines that are based on transparency and integrity of the reward schemes.

    Speaking on the rising spate of promos in the industry, CBN Deputy Director, Corporate Communications, Isaac Okorafor, said such promos are allowed, and remain ease way to woo customers into the financial sector.

    He said such reward schemes can also promote the CBN’s financial inclusion drive and make banking more interesting for customers.

    For instance, 10 lucky customers of the UBA have won a three-day all expenses paid trip to Kenya as part of its MoneyGram/ Western Union Awoof promo while 40 other customers of the bank have also won various consolation prices like LG Home theatres, Dstv decoders with one year subscription among other items at the raffle draw of the second edition of the promo held in Lagos.

    The winners emerged from customers that sent and received MoneyGram and Western Union money transfers through the bank within from January 25 to April 30.

    Group Head, Consumer and Digital Banking, UBA, Anant Rao said the promo was to reward their customers and appreciate them for using the banks services. He said the lender wants to connect more with their customers, simplify consumer experiences using technology to make banking easier to their customers.

    Equally, when FCMB set-out to execute its 30th anniversary promo, the bank did not fully appreciate the social responsibility value the exercise would present as a life-saving and changing opportunity. What an observer described as an intervention has directly provided a platform which ministered timely aid to Nigerians, including the underprivileged beyond gender, religious and geographical location and limitation.

    Even after several weeks of taking delivery, the newly married, Oluyomi Victor Temidayo is yet to come to grips with the fact that he has now become the proud owner of a brand new Hyundai ix35, full option jeep, courtesy of FCMB Promo

    He was just going about his business when a call came through to his telephone line.  Reluctantly, he picked only to be intimated by the voice on the other end, that he had won a brand new jeep courtesy of a customers’ promo conducted nationwide by the FCMB.

    Like most of the other winners, Oluyomi’s initial reaction was one of doubt and suspicion. Somehow, he followed up on the call and reported at an FCMB branch as directed. The long and short of it all, is he truly emerged as one of the winners of the series of mouth-watering prizes put up by the bank to reward loyal customers. So today, he cruises around in the SUV.

    “Any time I am driving round in this vehicle now, people always stop to admire me. Some people wonder whether it is real, I tell them yes, it is real,’’ he said.Temidayo who operates in the oil and gas sector of the Nigerian economy, described the process which saw him and five others, winning SUVs for their decision to bank with FCMB as very transparent, urging FCMB to sustain the promo and its generally good ethical banking practices. Other beneficiaries include Dangero Adamu from Kebbi, Udo-Afa Gabriel Udoh in Calabar;  Ajitena Saidat Mojirike, in Ibadan; Unuarhe Onovughe Francis in Warri as well as Abubakar Adamu from Gombe.

    Udo-Afa Gabriel Udoh, another winner of an SUV in the FCMB Millionaire promo, had only been an FCMB customer for three years, but has been running his account consistently.

    “I think they are a very good bank to rely on. I saw sincerity in the process, even when I was not there, I was called from Calabar to pick the car in Port Harcourt.”.

    Incidentally, Udoh is a lecturer at the University of Calabar, and he added that the possession of the car, has no doubt further enhanced his social status, and for this, he thanks the management of First City Monument Bank (FCMB).

    If today, you were to wake Williams Onyemaechi  Onwubuike, who resides in the Abuloma area of Port Harcourt in Rivers State from a deep sleep, he would not waste time before declaring to you that any day, FCMB is a bank of first reckoning, in terms of general banking services and also in view of the level of the transparency surrounding the bank’s promo which has made him a millionaire.

    Onwubiko said, “if I should award them marks in terms of transparency, I should say 101 per cent. I was not even there during the promo; not even aware that a promo was taking place. They only called to alert me that I had won. And lo and behold, it was true, and my money was instantly given to me with ease”.

    The promo held across the 26 Zones and three Regions of the bank nationwide.  The draws were executed through electronic selection of winners. Three lucky customers of the bank were rewarded with N1 million at the Regional draws, while five others went home with other fantastic gifts such as generating sets, LCD television sets, DVD players and consolation prizes at the zonal draws.

    The main drive of the promo was to encourage a savings culture and drive financial inclusion through the provision of rewards and prizes. At the end of the first phase of the promo, a total of 402 customers won prizes such as three Hyundai IX35 Sport Utility Vehicles (SUVs), cash and other gifts.

    According to the bank, three lucky customers of the bank were each rewarded with the star prize of N5 million, while three others won N1 million each at the regional draws held in Lagos, Uyo (Akwa Ibom state) and Abuja. A total of 640 other account holders of FCMB went home with LED televisions, generating sets, decoders, tablets, smart phones and other consolation prizes at the zonal draws held in different parts of the country. The winners emerged at the electronic selection exercise which took place across the three regions and 26 zones of the bank nationwide.

    At the Abuja/North draw, Adamu Oseni received N5 million for emerging as the star prize winner, just as Dorcas Terfa received N1 million. But the winners at the South-East/South-South draw were Mr. Peters Emmanuel who won N5million and Oke Owhubetine who smiled home with N1million. In all a total of 1,932 winners emerged during this particular FCMB Millionaire Promo through the three draws in the season.

    The Senior Vice President/Divisional Head of Retail, FCMB, Olu Akanmu said: “We are excited to once again reward our customers for their patronage and loyalty’’. Our customers are the reason why FCMB exists and as a Bank that is committed to continuously satisfy their needs, this promo is to further show appreciation to existing and potential ones by expanding the reward opportunities that the promo offers them’’.

    FCMB promos have resulted in increased customer engagement largely due to the simplicity built into the participation logistics and the level of transparency that has always characterized the exercise.

    One Okafor won the star prize of N5 million at the Lagos/South-West Regional draw which took place at Matori in Lagos, while Odulawa Tolulope received N1 million. At the Abuja/North Regional draw held in Abuja, Umaru Augustine emerged as the star prize winner of N5 million, just as Aikay and Franscisca Oduoza (a joint account) smiled home with N1 million. In the same vein, Eke Michael won N5 million at the South-East/South-South draw held in Enugu and Stella Taribi was rewarded with N1 million.

    The bank has said that beyond the various prizes that it provides winners, the promo also presents an opportunity to encourage savings culture, financial inclusion and ultimately empower customers.

    “We have more positive offerings in various developmental stages for our customers. We therefore urge the general public to seize the opportunity of the current promotion to commence a relationship with us so as to benefit from our various rewarding and empowering initiatives,” Mr. Olu Akanmu who drives the Retail Division at FCMB reiterated.

    With the first draws of FCMB Millionaire Promo Season 3, around the corner, the Bank’s customers are excited as many look forward to emerging winners. This season which runs till November, 2016, is open to customers to non-customers of FCMB and members of the general public who can open accounts with the bank with specified amount saved. They are all to open accounts with the 33 year old financial institution that has endured. This deliberate corporate social responsibility exercise, as informed by an official of the Bank is one of the many ways FCMB adds to the nation’s socio-economic development.

    For the current promo, individuals would need to increase their savings account balance by N50,000 and maintain it for 30 days to stand a chance of becoming one of the four customers to go home with N2 million each at the grand draws. Or  customers can increasing their savings accounts by N10,000 and maintain it for 30 days to stand a chance of becoming one of the 12 customers to go home with N1million each or any of the consolation prizes at the regional draws.

    During the sixth and last draw for the Fidelity Bank Save-4-Shelter promo draw held in Lagos, the bank’s Deputy Managing Director, Alhaji Mohammed Lawal Balarabe said savings is the hallmark on which great economies are built and urged bank customers to embrace savings culture.

    The bank chief, who phoned and congratulated the star prize winner, Ibedu Clara Ego, who won a duplex in Lekki, Lagos, under the Save-4-Shelter promo, said the redemption of the prize shows that the lender keeps its words.

    “The Save-4-Shelter promo was conducted with high level of integrity. As a bank, we always keep our word. Our promos always focus on things that add value to the lives of people and the society,” Balarabe said. He disclosed that the lender will soon unveil another new promo that would equally benefit its customers and create wealth for beneficiaries.

    Deputy Director of the Consumer Protection Council, Joshua Nggada, praised the banks for conducting the promo and the draws, with integrity and transparency.

  • BVN: CBN may shift June deadline for Diaspora customers

    The Central Bank of Nigeria (CBN) is considering shifting the June 30 deadline it gave bank customers in the Diaspora to enroll on the Bank Verification Number (BVN) platform.

    The BVN registration which involves capturing of customers’ physiological or behavioral attributes – fingerprint, signature among others has commenced in some banks’ headquarters and branches across the country.

    CBN Deputy Director, Electronic Payment, Samson Agboola, who made this known at a one-day interactive enlightenment session with stakeholders on the cash-less policy in Lagos at the weekend, said such action would enable affected customers complete their enrollment and link their BVN to banks accounts.

    The deadline was initially extended from January 31 to June 30, this year.

    The extension followed observations by the CBN showing the low percentage of registration of Nigerian banks’ customers in the Diaspora, which is still not addressed.

    This, he said, may be attributed to lack of accessibility to registration centres and unavailability of registration centres in some cities where Nigerian population is high.

    He explained that the BVN has been able to enhance the Know Your Customer (KYC) policy of the apex bank in commercial lenders adding that the BVN captures 22 fields at enrollment.

    Agboola said 57.2 million customers have so far be registered as at May 31, while 34.8 million accounts have been successfully linked to the BVN platform. “The BVN project is key to the development of payment system in Nigeria and remains a bigger step in KYC. For authentification purposes, individuals performing banking transactions such as applying for loans shall be required to identify themselves using their biometric features which will be matched against the information in the central database,” he said.

    Continuing, he said: “Update of customers’ information shall be done at their bank branches physically even as no individual can have two or more BVNs. BVN has 11 digit numbers”.

    The CBN registration guidelines provided by the CBN for clients in Diaspora show that BVN enrolment can be done at offshore branches of any Nigerian bank and through the service centres of the two service providers, Online Integrated Solutions (OIS) and VFS Global, the apex bank engaged.

    The centres provided to further drive enrolment are: London, Leicester and Manchester in the United Kingdom; Dubai; Johannesburg and Cape Town in South Africa; Kuala Lumpur, Malaysia; Beijing, Shanghai and Guangzhou in China; Jeddah, Riyadh and Al Khobar in Saudi Arabia; Atlanta, Houston, San Francisco and Los Angeles in the US. Others are: Toronto and Vancouver in Canada; Paris, France; Rome, Italy; Sao Paulo, Brazil; Ankara, Turkey; Kiev, Ukraine; New Delhi, India; Moscow, Russia; Brisbane, Melbourne, Perth and Sydney in Australia

    Aside China and India, the Nigeria Interbank Settlement System (NIBSS) is also working on extending the BVN project to Washington DC, Johannesburg, and Atlanta. Other cities participating in the scheme are Guangzhou, London, Leicester, Houston and New York City.

  • Banks record N10tr on money transfer, says CBN

    Banks record N10tr on money transfer, says CBN

    Commercial banks have grown the value of transactions done via instant money transfer from N307 million to N10 trillion in five years, the Central Bank of Nigeria (CBN) has said.

    A report, released by the CBN at a one-day interactive enlightenment session with stakeholders on cash-less policy held in Lagos at the weekend,  said the coverage period were first quarter of 2012 to February this year. The transactions were done through the Nigeria Interbank Settlement System (NIBSS) Instant Payment the only point to point funds transfer service that guarantees instant value to the beneficiary.

    CBN Assistant Director, Banking and Payment System Department, Samson Agboola said that point of sales transaction value  has also risen from N39 million in January, 2012 to N46 billion in February this year while mobile money operators’ transaction rose from N31 billion to N1.1 trillion with 107,571 agents and 29.9 million customers.

    Internet banking transactions moved from N31.5 billion in December 2012 to N40.7 billion in April this year.

    He said the CBN has been able to reduce merchant service charge on Point of Sale (POS) transactions from 1.25 per cent with a cap of N2,000 to 0.75 per cent with cap of N1,200 per transaction.

    The regulator has also  introduced  incentive schemes to encourage electronic payment adoption.

    On job losses in the banking sector, CBN Acting Director, Corporate Communications,  Isaac Okoroafor said banking sector is not the only one affected by job losses.

    He said it is about what the labour law says and about the country’s industrial policy, but remains optimistic that the ministry of labour and the banks would arrive at a reasonable conclusion in their soon-to- be-held meeting.

    He said the interactive session is a way of sensitising stakeholders about the recent policy measures taken by the apex.

    He said for instance, that Financial Literacy Framework adopted in 2013 was reviewed in 2015 and that it adopts a CBN-led multi-stakeholder approach to the delivery of financial education programmes to drive financial inclusion and to promote sustainable economic growth and development.

    Also responding, the General Secretary of National Union of Textile Garments and Tailoring Workers of Nigeria (NUTGTW), Comrade Issa Aremu, said the interactive session has been quite useful.

    According to him, the CBN under Godwin Emefiele has done what labour asked for by insisting that as an import dependent country, Nigeria will not benefit anything from Naira devaluation. “We are happy the CBN has kept to that because any devaluation will have negative impact on workers’ salary,” Aremu said.

    The odds are stacked against Nigeria as it looks to raise debt on the international markets for the first time in almost three years.

  • NEXIM Bank to aid CBN on non-oil sector devt

    NEXIM Bank to aid CBN on non-oil sector devt

    The Nigeria Export-Import Bank (NEXIM) has pledged its support for the Central Bank of Nigeria (CBN’s) financing schemes for the development of the non-oil export sector.

    Acting Managing Director Alhaji Bashir Wali, gave the assurance at a one day forum organised for stakeholders in Kano.

    The forum was organised to expose the guidelines to all exporters, prospective exporters, products associations, bankers and other stakeholders for effective implementation of the schemes.

    Wali said: “Given the negative impact of the current low oil prices and scarcity of foreign exchange on the macro-economic indices and external balance, the need to urgently commence the implementation of the intervention schemes cannot be over- emphasised.”

    He recalled that a Non-Oil Export Stimulation Conference was held on Jan. 29, where strategic inputs were received from stakeholders to facilitate the review of policies and strategies towards additional financing and policy support programmes.

    According to Wali, the conference is aimed at encouraging and stimulating additional investments in the non-oil export sector.

    He said the CBN and NEXIM were committed to the effective implementation of the schemes for the development of the country

    The Controller, CBN Kano, Hajiya Amina Abubakar, said the bank had introduced the financing schemes for the sole aim of lending credence to the non-oil export sector.

    She called for effective implementation of the schemes in line with the indices of the speedy growth of a promising developing economy.

    “NEXIM Bank has a spectacular role to play in complementing the effort of the CBN on granting the N500 billion Export Stimulation Facility and the N50 billion Export Rediscounting and Refinancing Facility,” she added.

  • The CBN adopts a flexible exchange rate adjustment strategy

    The CBN adopts a flexible exchange rate adjustment strategy

    Last week, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, announced that instead of the fixed exchange rate strategy the CBN had decided to adopt a more ‘flexible exchange rate policy’ for the naira. All nine members of the bank’s Monetary Policy Committee (MPC) voted unanimously in favour of the new strategy in the adjustment of the exchange rate of the naira. The MPC stated that the worsening state of the economy and the slide into stagflation called for new strategies and monetary policy reforms. The economy has been in a recession since July, 2015. In response, the CBN is dropping the strategy of a fixed exchange rate for a flexible or floating exchange rate strategy.  The fixed exchange rate strategy had not worked. Some devaluation of the naira had become imperative and could not be put on hold for much longer. The naira had become overvalued because of the external oil shock and higher domestic inflation.

    Now, in my article in this column in October, 2015, I had urged the CBN to devalue the naira promptly. I could not see how the unrealistic official exchange rate of the naira could be maintained in view of the ‘external shock’ caused by the sharp decline in our oil revenues. I considered the naira exchange rate overvalued. The difference between the nominal official exchange rate and the parallel market rate of the naira had widened. Now, the proposed flexibility in exchange rate management by the CBN means the naira is to be devalued by a rate to be determined by the CBN. This will be based on the supply and demand for foreign exchange. In other words market forces will, to a large extent, now determine the exchange rate of the naira. Market forces may not be perfect, but human judgment is less perfect.. It is said that a stitch in time saves nine. The fact is that if we do not devalue the naira now compelling economic and financial developments will force us to do so later at a higher cost. The delay in devaluing the naira now will prove to be more costly later. The proposed flexible exchange rate adjustment is a sensible alternative to the rigid but doomed course the CBN was pursuing in its exchange rate management. The CBN has not yet announced a new naira exchange rate.  Of course, this new policy will need to be complemented by other policy instruments, including a moderation in money supply. How this can be achieved with an expansionary budget this year remains to be seen. The delivery of the intervention funds will have to be appropriately moderated to avoid additional downward pressure on the exchange rate of the naira.

    According to the Governor of the Central Bank the review was in response to the recognition that the economy was in a state of ‘stagflation’ (combined stagnation in economic growth and high levels of inflation in the domestic economy) and that a flexible exchange rate policy was the ‘least risky of the options open to the bank in Nigeria’s current economic and financial situation.’ The Governor added that one source of the stagflation was the delay in securing an early passage of the 2016 federal budget and the consequent time lag in implementing the stimulus package in the budget. But he should have added that growing uncertainties over the naira exchange rate added to the trend towards stagflation in the economy. Both local and foreign investments had to be put on hold pending stability in the naira exchange rate and other fundamentals of the economy, such as interest and inflation rates, both of which are now rising. Stability in the macro economy has to be restored. The banking sector and financial analysts have reported that foreign investment and equities have dropped by 74 per cent in reaction to currency overvaluation. Productivity in the industrial sector has also been falling in response to these uncertainties and a possible consumer resistance to increased prices, some of which is speculative. This has led to some job losses. An overvalued currency leads to currency speculation, capital flight and money laundering. It undermines economic growth. Industry has reacted to the new policy positively.

    For these reasons I fully support the new CBN policy of flexibility in the naira exchange. The response of the CBN to the grave economic situation is appropriate. Like the hike in the oil price, we had to bite the bullet again on exchange rate adjustment. The adoption of the new flexible exchange rate policy reflects these realities amply. My regret is that, for political reasons, including President Buhari’s known reservations about a floating exchange rate, the CBN waited for far too long to come to terms with these realities, which include a steady decline in foreign exchange earnings and low GDP growth rate, the lowest for decades. Much valuable time was lost in the doomed attempt to avoid a devaluation of the naira promptly. This strategy was bound to fail in view of the increasing demand for foreign exchange and the fall in Nigeria’s foreign reserves. Now that oil prices are on the rise again there will be a temptation to delay the necessary devaluation or to allow it to fall below the net effective exchange rate of the naira. This must be avoided at all costs.

    As admitted by Mr. Emefiele, the previous rigidity in exchange rate management, and the refusal of the CBN to consider some devaluation in the exchange rate of the naira, did not work. It could not have worked. Since 2015 the economy has been in a recession. Mr. Emefiele acknowledged this fact in the following statement by him: “As a stop gap the CBN has continued to deploy all the instruments within its control (including the resolve to resist devaluation) in the hope of keeping the economy afloat. These actions, however, proved to be insufficient to fully avert the impending ‘economic contraction’. In March 2016, the CBN tried the option of a tight monetary policy to stabilize the naira. But the 2016 budget is expansionary and inflationary. It was bound to put pressure on the exchange rate. A deputy governor in the bank is reported to have warned that when the 2016 budget comes into play these inflationary pressures on the exchange rate will certainly increase, compounding the CBN’s exchange rate dilemma. The planned financial stimulus package has to be moderated.

    It is difficult to understand why the CBN should expect anything other than a contraction in the economy when its exchange rate management strategy was not pro growth but contraction. Inflationary pressures through an expansionary fiscal and monetary policy were bound to aggravate our economic problem as high levels of inflation tend to undermine economic growth. The administrative import restrictions introduced by the CBN were certainly not pro-growth. They were intended to reduce imports and the demand for foreign exchange. This was bound to lead to a recession. If the objective was growth these fiscal and monetary measures could not have worked unless we got the economic fundamentals, including the naira exchange rate, right. Economic growth, not stagnation, should be the prime objective of our strategy of diversification of the revenue base. Diversification of the structure of our economy, still largely dependent on oil exports and revenues, will be enhanced by a realistic net effective exchange rate of the naira. It will restore the economic fundamentals to equilibrium and substantially increase the scope for higher prices in the agricultural sector and higher income for farmers. Government’s revenue too will increase. It will also promote other non-oil exports. All the available evidence suggests that, on average, countries where currency reforms have been implemented in a timely manner have also achieved better economic performance.

    Effectively, the real beneficiaries of the strategy of import controls and restrictions are our neighbors, with the loss to Nigeria of considerable import duties and revenue. This is bound to affect revenue derived by the government from non-oil sources. Increased tariff on non-essential imports would have been a better alternative to import restrictions. The same objective of reducing demand for forex would have been achieved with selective tariff increases. The CBN says it will open a ‘special window’ for vital imports. Obviously, the target here is industrial imports. But this could lead to abuses such as money laundering, capital flight and a distortion in prices.

    In addition, Nigerians hold a lot of foreign currencies (including looted funds) abroad over which the CBN has no control and which can easily be utilized for imports into Nigeria. Some of these funds are channeled through the parallel market over which, again, the CBN has no control. It is a source which the CBN should not ignore. Some $5 billion is involved. But if the naira exchange rate is considered to be unrealistic then these Nigerians with large foreign currencies will not go through official sources (the CBN) in making remittances to Nigeria, but through the parallel market. It is far better for the CBN and our economy for these funds to be channeled through official sources than through the parallel market as this will continue to drag the exchange rate of the naira down. But this will only happen if we narrow the difference in exchange rates between the official and parallel markets.

    Now that the CBN is compelled by our economic and financial realities to reverse itself on its exchange rate strategy and policy it should stay the course. The CBN should be given the leeway and autonomy it needs to manage our monetary policy more efficiently. Change involves breaking with the past and taking tough decisions when necessary to achieve better results. This is where we are now. The devaluation of the naira is one such tough measure needed now. In Africa, Angola and South Africa, among others, have already devalued their currencies by over 15 per cent in response to the external shock.

  • CBN okays 2,998 BDCs’ licences

    CBN okays 2,998 BDCs’ licences

    The operating licences for 2,998 Bureaux de Change (BDCs) that met the N35 million mandatory capital base have been confirmed by the Central Bank of Nigeria (CBN).

    The number, up by 34 from the previous approval, wass in line with the bank’s plan to deepen the foreign exchange market by getting more BDCs involved in the retail end of the market, ahead of the implementation of its newly introduced flexible exchange rate policy.

    Prior to the confirmation, 2,964 BDCs were operating.

    The data, released by the bank at the weekend, showed that 34 BDCs recapitalised in the last three months, bringing the total number of operators to 2,998.

    The CBN has also refunded nearly the N100 billion mandatory caution deposits to all the BDCs, after it stopped operators from accessing forex from official windows.  Each licenced BDC got N35 million.

    A circular by CBN’s Director, Financial Policy & Regulation, Kelvin Amugo, said the decision followed  developments in the in BDCs’operations in the economy, prompting the apex bank to refund the mandatory caution deposit of N35 million each to all registered BDC operators.

    He however, said the regulator will retain the N1 million licencing fee paid by each of the operators. Amugo urged all eligible BDCs to apply for refund of their caution deposit, attaching evidence of payment and bank transfer details.

    The CBN also spoke of a plan to reopen the banks’ dollar window, shut earlier in the year, for the licenced BDCs.

    Reacting, President, Association of Bureau De Change Operator of Nigeria (ABCON), Aminu Gwadabe described the cash refund as a welcome development.

    He described the development as an indication that the CBN has finally shut its doors to the BDCs. He said since the caution deposit was to enable operators’ access the official forex window, the stoppage of dollar sales to BDCs by the CBN means the fund should be refunded.