The Nation Newspaper

Tag: cbn

  • ‘Total autonomy for CBN not in public interest’

    ‘Total autonomy for CBN not in public interest’

    Dr. Austin Nweze, a political economist at the Pan Atlantic University, Lagos, in this interview with Ibrahim Apekhade Yusuf holds the view and very strongly too that granting total autonomy to the CBN may not be in the public interest. Excerpts:

    Workings of the CBN

    Basically, they are banker to bankers or banker to bankers. Government cannot deal with the general public without the CBN, they pass through CBN to deal with the public. In fact, we know the mind of government through CBN and other agencies. So, they play a major role as a banker to government and as a custodian of government treasury and they also ensure that there is stability in the financial system. They are also involved in the management of the economy. Monetary policy management is also part of the job of the CBN.

    Normally, government policies are made via the monetary policy or the fiscal policy. Government is in charge of the issue of finance and all of that while the CBN implements the monetary policy. But the two need to work together for there to be synergy. But again, over the years, the CBN has been haggling for autonomy to be independent of any external influence or government influence. By asking for autonomy, they will be able to decide on what and what they should as long as the fiscal side is clear. However, there is a limit to what the CBN can do no matter how autonomous it is. For instance, it cannot work on the fiscal side.

    Case against autonomy

    The danger of having autonomy is also what the former CBN Governor Sanusi Lamido Sanusi did by dolling money out money without checks. He was spending money which went to the wrong hands. He gave some billions to the then Kano state government. So, these are some of the things that we need to balance. For any ministry, the personality of the minister defines that ministry. We need to define the proper role and get ideas from other developed nations on how CBN are being run and all that and see which ideas we can adopt and imbibe in our system here so that it can suit our own style of governance.

    Best practice

    We need to go to other advanced economies and borrow a leaf from them. We can see how the Singapore experience is, how the Taiwan experience is and how the Malaysia experience is and see what they have. These are people that have similar conditions and environment like us in Nigeria, so that we need exactly what we will borrow from them that suits our own culture here as a country.

    Again, we need to be careful of who becomes the CBN governor in the future so that we don’t have people with riotous personality at the helms of affairs at the CBN. A CBN governor needs to be someone who is more conservative, not a talkative. We need somebody who can also be able to take risk and know what it is to run an economy. He must be someone who is discipline, someone who has integrity and is passionate about the country. He must see the big picture because Nigeria is the biggest picture, every other personal, vested, selfish, regional interest will be subsumed under the public interest. So these are some of the qualities we require from the CBN governor, if we have to learn from past mistakes.

     

  • How autonomous is CBN?

    How autonomous is CBN?

    Startling revelations of alleged misappropriation of public funds by the immediate past of President Goodluck Jonathan with the active connivance of the board and management of the Central Bank of Nigeria (CBN) has raised pertinent questions over the autonomy or otherwise of the apex bank, reports Ibrahim Apekhade Yusuf

    Does the federal government has the right to instruct the Central Bank of Nigeria CBN to sign off money from the public vaults without recourse to due process? Who has the mandate to approve the release of funds from the CBN? Does the CBN act in the overriding public interest or is readily influenced by the selfish interest and caprices of a select few? What is the obligor limit of the CBN as far as expenditure is concerned?

    These and many more are questions begging for answers as the issue of propriety or otherwise of the CBN spending spree , especially under former President Goodluck Jonathan is being hotly debated in the court of public opinion.

    Crux of the matter

    The current administration has left no one in doubt of its anti-corruption posture, which is why as the new sheriff in town, it has been scrutinising all the alleged sleaze in high places, literally with a fine tooth comb in its quest to recover stolen public funds, chief among which is the alleged $2billion phantom arms deal, in which the CBN has been named as a major conduit pipe for perpetrating the grand heist.

    The Economic and Financial Crimes Commission (EFCC), The Nation gathered made a breakthrough in tracking how some of the $2billion arms votes and extra-budgetary funds were withdrawn from the CBN based on orders from above.

    According to the anti-graft agency, the alleged massive withdrawal from the CBN was possible because the apex bank was hamstrung though it was careful in obtaining a written directive from ex-President Goodluck Jonathan before releasing part of the funds in question.

    Investigation by The Nation further revealed that the EFCC also discovered that the CBN may have been compelled to release funds for security matters.

    A highly placed source at the agency confided in The Nation that “Investigation has shown some requests for funds or intervention funds from the CBN for security reasons. We are tracking all these requests, approvals and remittances. We are already retrieving some relevant documents from the apex bank in order to ascertain what such funds were actually meant for.

    “One of the key things we discovered was that the CBN management was, however, careful because it made sure it got presidential approval of such requests. We will confront some of the suspects with these documents we have retrieved. They have the opportunity to give the details of how they spent such funds and the arms procured.”

    The workings of CBN

    The CBN was established by the 1958 Act of Parliament, as amended in 1991, 1993, 1997, 1998, 1999 and 2007.

    The apex bank was envisioned to be one of the most efficient and effective of the world’s central banks in promoting and sustaining economic development and whose overriding mission is to be proactive in providing a stable framework for the economic development of Nigeria through the effective, efficient and transparent implementation of monetary and exchange rate policy and management of the financial sector, has performed its functions not without some hiccups, especially in the recent past.

    Antecedence of past CBN governors

    Roy Pentelow Fenton, the first CBN helmsman served from July 1958, retired in 1963 and subsequently passed the baton to the first indigenous CBN governor, Alhaji Aliyu Mai-Bornu, who served from 1963-1967 before the civil war.

    The Nation however, gathered that the CBN, which has suffered a chequered existence thus far, faced its worst time under the military as the government interfered with process and procedures.

    A case which better illustrates this high level of interference is Dr. Paul Ogwuma, who served as CBN under the Abacha military junta, specifically from 1993-1999. He was said to have been a lackey of the late military ruler, who reportedly made him sign off tones of wads in foreign and local currencies all throughout the lifetime of the administration.

    Thankfully, with the return to civil rule in 1999, the incidence of interference was no longer apparent as it was the case during the military reign.

    Sanusi’s experience

    The CBN under Sanusi Lamido Sanusi, who was placed on suspension by President Goodluck Jonathan in January 2014, after reportedly squealing that billions of petrodollars was missing from the coffers, had spearheaded bank reforms and acknowledged making powerful enemies among vested interests in a country where corruption is endemic.

    Sanusi said he received death threats and frequent warnings that he would be fired after he took on bank CEOs who had stolen billions of deposits and who he said had bought political protection or were themselves politicians.

    He called his move, just after taking office in 2009, “a decision that would pitch us against powerful economic and political forces.”

    According to Sanusi, in the course of his duties as the CBN governor, he discovered certain discrepancies in respect of amounts repatriated to the federation account from the proceeds of crude oil sales between the period of January 2012 and July 2013 and that he expressed concern in respect of the said discrepancies and had cause to inform the National Assembly of the said discrepancies because they affect the revenue of the federation and the national economy.

    The erstwhile governor reported that $50 billion worth of oil sold by the NNPC had not been paid to the government.

    Sanusi said corrupt vested interests keep what should be a wealthy country impoverished and are at the heart of 90 percent of the problems confronting the country, from a north eastern Islamic uprising and deadly ethnic strife to a dearth of jobs, education and health care.

    But after the Senate Committee on Finance ordered an independent forensic audit into the missing money, it was discovered that the missing amount was $20 billion.

    Apparently unhappy over Sanusi’s impudence, Jonathan subsequently named a deputy governor to act in Sanusi’s place but also immediately sent to the Senate the name of another banker he proposed as the new custodian of the nation’s Federal Reserve, making clear that he has effectively fired Sanusi.

    Best practice

    •Aremu
    •Aremu

    Prof. Jonathan Aremu, renowned economist and professor of International Economic Relations at the Covenant University, who began his working career in the Research Department of the Central Bank of Nigeria (CBN) in 1980 as an Assistant Economist, and rose through the ranks to become Acting Assistant Director of Research before he voluntarily retired in December 1992, while going down memory lane recalls with nostalgia his days at CBN.

    While reacting to claims that the CBN may have been put pressure under the former administration to release money without following the due process, he said it is absolutely wrong.

    “You don’t do that. The CBN has the responsibility to advice on the direction of the economy through the management of the monetary policy. So to that extent, there is need for the CBN to have autonomy. You know this was exactly what the immediate past CBN governor was saying when he blew the whistle on the unremitted income of the NNPC but he had to be sacked. This sort of thing should not be allowed in the system.”

    Aremu who acknowledged that the CBN has evolved overtime, recalled that during his days at the CBN those at the helms of affairs were apolitical unlike what obtains now.

    “Let me tell you one thing, in my year in CBN when we had the late Ola Vincent in the saddle as the CBN governor, things moved in very good direction. You hardly hear of the man actually talking politics. No. he (Vincent) comes out when it is necessary. That’s the issue. You have to come out when it is necessary. But of recent times, you just see the CBN governors, particularly in the last two administrations talking almost everyday as if they are also members of the political class. That is not good at all. It will injure the kind of sovereignty they give the system because having talked to one party now, what do you want to say to the other parties?”

    On best practice, he said: “Our banking policy system is a direct copy from the Bank of England and you see the chancellor of the Bank of England, has certain specific roles which limits him to certain things and gives him certain autonomy in quite a lot of things. So we need to go back to that. Though we cannot actually copy the model hook, line and sinker because we have different developmental objectives and we’re at different economic development levels. We can actually mix from the level of economic aspiration with our own. But that’s not to jeopardise the orthodox monetary policy of the system.”

  • Cost of forex restrictions on triple concentrate tomato paste

    Cost of forex restrictions on triple concentrate tomato paste

    The Central Bank of Nigeria (CBN) had earlier in the year, restricted 41 items including triple concentrate tomato paste, as part of efforts to defend the naira and salvage dwindling foreign exchange earnings.

    The apex bank had explained that the move became necessary to “encourage local production of these items”, adding that the implementation of the policy will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation.”

    Therefore, as part of a plan to conserve dwindling foreign exchange reserves, Nigeria’s central bank denied the use of foreign exchange from the local market for importers seeking to purchase certain goods, including ‘raw materials’ such as triple concentrate tomato paste.

    The Government through the policy intends to force manufacturers to develop a local supply chain. It is important to recognize triple concentrate tomato paste imports are estimated to be in range of USD50 million per annum.

    Looking at the government policy, the Federal Government may have to do more to convince Nigerians and key stakeholders that its economic policies are not crafted to sink the country’s manufacturing sector as not all stakeholders appear to be on the same page with the government as far as this is concerned.

    There are more negatives than positives. If we look at outcomes we have had in the past months, they are quite drastic on the negative side. Gross Domestic Product (GDP) is declining; underemployment and unemployment are on the increase, the general level of economic activities is getting weaker by the day and also the capital market is quite unstable.

    Considering the position the nation was able to attain after the elections, there came a heightened level of goodwill from both the local and international arena which we had all the opportunity to tap into. Unfortunately, foreign investment has stayed flat from the level we had last year.

    In using import prohibition as a major trade policy instrument, Nigeria has hoped that its balance-of-payments problems would be alleviated, and that the protection offered would induce increased output and employment of the domestic industry.

    Against these postulated positive outcomes must be set several possible negative consequences of import prohibition, including raising the domestic prices of CBN restricted products, disrupting other sectors which use the CBN restricted products as raw materials, depriving government of tariff revenue and creating vested interests among domestic producers of prohibited products and among smugglers.

    Nigeria’s balance-of-payments situation is determined primarily by developments in the world oil market; hence it has not been amenable to changes induced by import restrictions. In any case, it seems clear that protection of domestic producers is the real force behind the use of this policy instrument. But there is little evidence that it has produced the desired result here either.

    For instance, a survey of manufacturing-sector performance conducted by the Manufacturers’ Association of Nigeria does not support the view that the level of capacity utilization was positively related to the degree of local sourcing of raw materials — one of the major channels through which import prohibition was expected to promote increased output and employment.

    There appears to be recognition both within government and among producers that the CBN led import restriction policy is rendered virtually impotent by large-scale smuggling and that this has continued in spite of stiff penalties imposed on those involved with the importation, transportation, storage, display or sale of prohibited items.

    This recognition has not, however, led to the abandonment of the policy; rather, pressure has mounted to enhance its stricter implementation.

    For example, the tomato paste Industry has a total market of 150,000 MT of tomato paste per annum (GTIS 2014) as triple concentrate is not produced in Nigeria, these have to be imported as raw materials to meet the market demand.

    Presently, the total value of this imported tomato paste is 170 million USD. Out of this, the imported triple concentrate of Tomato paste which is used as raw material by the packers is around 50 million USD (as per Industry source), as there are no company as of now producing triple concentrate in the country.

    Hence this raw material is not available at all in Nigeria and there is a huge vacuum of 150, 000 MT which will take years to fill in a progressive and sustainable manner.

    The consumption of Tomato paste in Nigeria is huge and Nigerians love tomatoes! Fresh tomatoes and tomato paste form a major component in almost every Nigerian dish – from delicious red stew to spicy jollof rice/ spaghetti etc. Majority of the farmers in Nigeria specialized in the plantation of fresh pepper, tomatoes etc, face a tough time nurturing & growing this farm produce to a ready-for-consumption stage.

    However, the effort to effectively preserve the harvests while preventing colossal wastage in the absence of the triple concentrate Tomato paste poses a serious economic challenge never to be ignored. It is important to realize that this is an area where Nigeria has little or no strength in preservation of tomato without the use of concentrate.

    As enormously blessed as the country Nigeria in the area of adequate fertile land bringing forth healthy agricultural produce; however, there still lies a huge gap in the area of processing the fresh produce into a finished product to meet the culinary needs of the end consumers. A typical example in the tomato paste industry is the unavailability of the triple concentrate tomato paste in Nigeria, which is the major composition essential in the production of a tomato paste asides the use of fresh tomatoes which can easily sourced locally.

    As a result of the unavailability of this major component (triple concentrate Tomato paste), manufacturers are left with no other choice than resorting to importation in order to fill the gap.

    Presently, there is not a single company in Nigeria producing triple concentrate tomato paste for use. Hence this raw material needs to be imported for reprocessing and pack for retail sales.

    This is why members of the Organised Private Sector (OPS) and the manufacturers differ with the apex bank on the classification and definition of some of the products restricted from access to forex market, stating that some of them are raw materials used in the course of production in their factories.

    The private sector operators, under the aegis of Lagos Chamber of Commerce and Industry (LCCI), raised the alarm at different occasions that many companies are on the brink of collapse because of inability to access foreign exchange for raw materials and other critical inputs. They claimed that many small businesses have moved to neighbouring countries to affect transfers to their suppliers abroad, a situation that encourages operation of offshore bank accounts to the detriment of the Nigerian economy.

    Presenting an impact assessment report on CBN forex policies, LCCI President, Remi Bello, noted that the real sector has been battling some challenges since the implementation of the forex policy as several investments are at risk, with possible job loss. According to him, the policy has negatively affected the financial services sector, manufacturing sector, tyre and rubber industry, pharmaceutical sector, the free trade zones, and furniture and foam manufacturers, among others.

    “The Lagos Chamber of Commerce and Industry (LCCI) and the business community are concerned about the consequences of the CBN approach to the management of foreign exchange market over the last few months. We appreciate the challenge of scarcity of foreign exchange. Tough choices have to be made.

    “But we have serious reservations over the policy choices of the CBN in managing the current crises. Significant disruptions, distortions and dislocations have been created in the business environment by the CBN. Nigeria is under pressure, but you cannot shut all the doors and windows”

    The total investment in tomato paste sector is about 25 Billion Naira in tomato paste packing manufacturing companies, and also more than 10 Billion Naira is  under further stages of investment with direct and indirect (in allied industries) impact on more than 80000 livelihoods. This includes those directly employed in the industry and indirect stakeholders such as suppliers, logistics, sales and distribution etc.

    Since the announcement of the new policy, a few have wondered why triple concentrate tomato paste was included in the list while many commentators have also passionately intoned on why the country continues to import concentrate when our vast quantities of tomato produced by our hardworking farmers across the belts of the country are being wasted or simply ignored.

    Nigerian farmers are working hard to meet up the consumption and raw material demands of tomatoes but the major issue is the fresh tomato yield in Nigeria. The yield presently is about 5.7 MT/Hectare which is too low compared to China’s 51 MT/Hectare and USA’s 80 MT/Hectare.

    It is pertinent to note that because of increased costs of farmer, primarily driven by low yields, costs of fresh tomatoes remain high as farmers expect better returns because of inefficiency in the farming process. This is going to remain the biggest challenge for any out-growers scheme even in a normal scenario.

    Just imagine how much increased pressure will come when there are restrictions for tomato paste in Nigeria. The shortage will increase market prices for fresh, creating further gap and upward pressure on out growers selling price. Ultimately consumers will suffer and inflation will go up.

    Of course, the Federal Government is striving to sustain the tomato industry in the country but the country needs to have a stable economy and survival in the tomato industry as the local production is currently unable to meet the quantity as well as quality requirements of the industry, which may lead to scarcity of raw materials and inflation.

    Also, the economy is feeling the impact as there is inadequate supply of tomato, and desperate food producers’ will use non qualified tomato concentrate thereby jeopardizing public health and safety. The future industrial growth is being threatened because tomato was and is one of the widely used raw materials and migration of industries and investments in Nigeria to other neighboring countries will surely affect the economy.

    Renowned Economist, Bismarck Rewane observed that the decision by the apex bank sends a signal that there is a cash flow problem adding that it could however affect the level of inflows and outflows in the country.

    Dr. Chiken Obidigbo, former chairman of the Manufacturers Association of Nigeria (MAN) in Enugu, Ebonyi and Anambra states, was of the opinion that the CBN’s measure was a mere scratch of the problems besetting the real sector of the economy.

    According to the President of Lagos Chambers of Commerce and Industry (LCCI), Alhaji Bello, expressed concern that many of the products on the list of the 41 products are intermediate goods for example triple Concentrate tomato paste which is a critical input for tomato manufacturing firms as well as other raw materials critical for other sectors of the economy.

    He revealed that the development will put several investments at risk with implications of job losses, quality of loan access in the banking system and the welfare of citizens.
    He said the list is prone to multiple definitions and discretionary interpretations by agencies and institutions responsible for implementation.

    He said the alternative foreign exchange markets are not deep enough to meet the demand of the essential intermediate products on the exclusion list, saying the exclusion of the items from the forex market is as good as import prohibition.

    He said the policy measure will lead to a widening of exchange differentials between the interbank markets and the parallel markets, adding that the immediate consequence will be rampant round tripping of foreign exchange which the apex bank has limited capacity to nip in the bud.

    He also said the policy has far reaching implications for investors in fabrication, construction and real sector. He said facilities granted to investors affected by the shock of this policy are also at the risk of going bad.

    In an interactive session with the media, Director, African Department of International Monetary Fund, (IMF), Ms Antoinette Sayer recently on the restriction for forex, she said: “The central bank has introduced administrative measures that limit access to foreign exchange and ban certain imports as a way of restricting the demand for foreign exchange.

    “Those are measures that are quite detrimental, we think. It has certainly led to a lot of unhappiness in the private sector, as far as we’ve been aware, and understands that private investors see this as very detrimental to their economic activities.

    “It is not something we think is sustainable or advisable. We hope that there will be an opportunity to review those restrictions and permit the exchange rate to continue to adjust.”

    Forex is required for the enhancement of the nation’s capacity to process raw materials into finished goods, such as factory production lines which help in the economic growth of the country.

    When these and many more segments of the nation’s economy need the scarce foreign exchange to acquire items and equipment that will result in value creation and a concomitant accelerated growth of the overall Nigerian economy, it is therefore foolhardy to jump to policy making without consultation.

    For importers of some raw materials needed for the production of some of the prohibited commodities, the apex bank’s decision is prone to multiple definitions and discretionary interpretations by agencies and institutions responsible for implementation.

    Due to the resultant effect of the forex policy, Nigeria today is losing investments worth billions of naira. So as the low production and high demand for the product both domestic and industrial needs continue to generate much agitation, importation is inevitable for the sustenance of the country’s industrial image.

    For now, importation of the triple concentrate tomato paste concentrate serves, as the best alternative to the non availability of the raw material produced in the country. There should be a progressive building of local capacities to ensure a steady and robust transition to substitute importation in long term.

    This shall motivate serious and organized manufactures who have got impacted by CBN policy to survive and create more employment in times to come. Government should let tomato paste manufacturers to survive and bring about fiscal changes to motivate the industry to participate in backward industry in a structured manner.

  • TSA: CBN admits contract with Remita

    TSA: CBN admits contract with Remita

    •N2tr collected from MDAs, says Emefiele

    Bureaucracy and professionalism clashed yesterday in Abuja.

    Central Bank of Nigeria (CBN) Governor Godwin Emefiele and Accountant General of the Federation (AGF) Ahmed Idris were locked in arguements over the controversial Treasury Single Account (TSA) with SystemSpecs Limited, owner of Remita, an electronic payment solution.

    But SystemSpecs Chief Executive Officer (CEO) John Obaro insisted that his platform had a valid contract with the CBN and deserved to earn its charge as contained in the contract.

    Emefiele, Idris and Obaro spoke at a public hearing on alleged abuse and mismanagement of the TSA regime.

    The Senate instituted the public hearing following claims that the one per cent service charge being paid to Remita under the TSA was a rip-off.

    Emefiele explained the spirit behind the TSA which process he said began in 2010.

    Idris gave the amount collected under the TSA as N1.8 trillion but

    The CBN Governor gave N2.038 trillion as the amount collected from the Ministries, Departments and Agencies (MDAs) as at December 8. But The AGF gave a figure of N1.8 trillion.

    Emefiele said because of the large volume of fund collection under TSA, the payment of one per cent service charge to the service provider, Remita was considered to be too high and exorbitant.

    Emefiele added that the TSA scheme is laudable adding that the Federal Government should be commended for ensuring its full implementation.

    He noted that already the CBN has over N2 trillion, money that should have been lying idle in banks.

    He said that there was no abuse of the TSA as being claimed in some quarters.

    Chairman of the joint committee promptly reminded him that the TSA is not on trial especially when the Senate had commended President Muhammadu Buhari for its implementation.

    On who approved the payment of one per cent service charge to Remita, the CBN governor said he needed to cross check but admitted that that there was an agreement between CBN and Remita.

    He said he was told that Inter-Departmental Committee of the apex bank approved the payment.

    He also told the committee that the Remita platform was designed to handle retail payment.

    Emefiele said that when Remita was appointed as e- payment Solution platform, Nigeria Inter-Banks Settlement System (NIBSS) owned by the CBN was not quite ready to provide the services.

    The CBN boss said that he is not aware that Remita is hosted outside the country adding that all he knows is that Remita is a Nigerian company and hosted in the country.

    Emefiele reiterated that since 2012 when TSA was introduced over N2 trillion had been collected and the volume of collection would continue to increase.

    He said that the agreement stipulated a sharing formula of CBN 10%, banks 40% and Remita 50% of the one per cent service charge.

    Emefiele told the committee that at the reversal of the agreement Remita was asked to refund the N8 billion it collected.

    The company, he said, promptly complied by refunding what it earned.

    The Senate had claimed that Remita received N25 billion in three months.

    The CBN governor said that he is sure that Remita has also realised that the payment of one per cent service charge on all funds collected is exorbitant.

    On alleged upfront payment of the service charge, the CBN governor said he does not think the deduction was made up front from the collection.

    He said, “Monies have been collected and the agreement says you take one per cent of what had been collected.”

    Asked whether he was aware that one per cent was being taken from the funds collected for the Federal Government, Emefiele said:

    “I did not know that one per cent was being taken on that account until we were summoned to the office of the Senate President and I was surprised to hear it. It was immediately that I swung into act to find out who John Obaro is. I called him immediately to refund the money he collected and to reverse the payment.

    “Initially I did not know who owns Remita and SystemSpecs until my attention was drawn o it in the Senate President’s office. I have to admit that I did not know about the payment until it came up on the floor of the Senate. That was why I quickly called Mr. Obaro and immediately reversed the payment.”

    Chairman of the committee Enoh praised the courage of the CBN boss for admitting that he did not know about the payment.

    Enoh noted that it is solemn for people in office to admit their error.

    The Accounta General told the Committee that the TSA is meant to focus on resources of government and to ensure that the resources are consolidated and viewed through single window.

    He said that it is also meant to block leakages.

    Idris gave the amount collected under the TSA as N1.8 trillion but the CBN Governor gave N2.038 trillion as the amount collected as at December 8, 2015.

    Idris said that 47 MDAs had enrolled in the TSA scheme adding that it does not mean that that MDAs do not want to enroll.

    He said that the appointment of Remita as e-payment solution platform was a stop-gap because the CBN lacked the capacity to do it when Remita was selected.

    He said that they have been meeting on the way forward until the matter came up in the Senate.

    On charges paid to Remita Idris said: “Whatever charges made by Remita which is about N8 billion, we wish that the matter should be resolved. Now Remita is operating without charge. The matter should be resolved. Remita cannot be operating without charge.

    He told the committee that there was no MoU between the Office of the Accountant General and Remita.

    He added: “What I do know is that when I came I was confronted with the agreement for the appointment of Remita and I refused to sign it because I was not part of the agreement.”

    Idris said that he also refused to endorse the appointment because “I was opposed and disagreed with the level of payment and charges awarded to Remita. There was no agreement between the CBN and the AGF duly signed.”

    He continued, “My office has not made any payment on the operation of the TSA. We have not engaged anybody and no payment. My office is not party to any payment.”

    Idris said that the provision of gateway of collection of government funds is the responsibility of the CBN adding that if the CBN had provided that gate way there would not be any need to appoint Remita.

    He agreed that if Remita provided the services it deserved to be paid.

    In his presentation Obaro, said that the use of Remita started in 2012 with 116 Ministries Departments and Agencies.

    He insisted that his company has valid contract agreement with the CBN and it should be honoured.

    He said that the agreement for the fees was reached in 2013 by a committee comprising the CBN, OAGF, the commercial banks and SystemSpecs at a price of 2.5 per cent, which was reduced to one per cent later.

    Obaro said the use of Remita software had increased transparency with provision of online real time account balances of all MDAs.

    He said that even officers who approve payments were documented as well as those to whom such payments were made, insisting that the company had a valid contract with the CBN and the charges were as agreed to.

    He however said that the OAGF in October, 2015, expressed worry at the percentage and he stressed that the company did not have any problem with a percentage renegotiation.

    He expressed displeasure that the rules of a game could be changed in the middle of a game and a contract rescinded without any explanation.

    Obaro also said that when CBN asked that Remita should refund what it received it promptly complied especially because the CBN is also their regulator.

    On September 14, 2015, the OAGF had expressed concern at a project review meeting about the fees considering the enlarged scope of the project. SystemSpecs was not averse to price renegotiation. We wrote to the CBN that we are open to renegotiation and that an all stakeholders meeting be convened.

    “Three weeks later on October 7, we wrote again that an all stakeholders meeting should be convened to review processing fees.

    “Two weeks later on October 27, we were instructed by the CBN to refund all fees that have accrued to us in accordance with the contract. We strategically chose to comply within 24 hours of receipt of their letter as we did not want to allow the issue of fees in the heat of the moment to becloud the work we have done in the delivery of TSA for Nigeria. While refunding our own portion of the fees as demanded by the CBN however, we accompanied the refund with a fairly worded letter stating why the fees legitimately earned in line with our contract should be refunded to us. How much more could we have demonstrated good faith?

    “On November 11, two weeks after refunding all fees and operating zero fees at the risk of a legal battle with other stakeholders, without hearing our own side of the story, we were erroneously accused of fraud, abuse and mismanagement of the TSA on the hallowed chambers of this highly respected Senate.

    “To say the least sir, we feel used, abused, unappreciated and abandoned by the country for which we stuck out our necks and faith to deliver the platform that made the TSA possible, which in other climes, all citizens would be proud of, acclaimed, encouraged and motivated to further the frontiers of greater technological breakthroughs and innovation.

    “In any case, pray, how could enforcing the terms of a validly signed and subsisting contract amount to fraud while discussions were already ongoing on whether the terms of the valid contract may need to be reviewed to recognize emerging realities? How can discussions on the need to re-negotiate contractual terms due to increased volumes form the basis to seek to throw the baby away with the bath water?”

    The Chairman of the joint committee stressed that no matter how much money was involved, one per cent charge was too exorbitant for the job.

    He commended all parties who made presentation for opening up and directed that all commercial banks not represented must be present at the next hearing of the committee on the matter.

     

  • N220b MSMED Fund: States access N45b, says CBN

    N220b MSMED Fund: States access N45b, says CBN

    The Central Bank of Nigeria (CBN) yesterday said state governments have accessed N45 billion out of the N220 billion Micro, Small, Medium Enterprises Development Fund (MSMEDF) set aside for development.

    The apex bank added that 60 per cent, two per cent and 10 per cent of the MSMEDF had been set aside for women, people with disability and start-ups respectively.

    CBN said it is worried by naira fall at the international market, adding that this has necessitated the introduction of produce, add value and export  (PAVE) programme.

    Its Assistant Director, Development Finance Department, Mr. Babatunde Ogunlaja and Head, External Communications, Corporate Communications Department, Mr. Isaac Okorafor spoke in Ilorin, the Kwara State capital during separate presentations at the CBN’s fair.

    Mr. Ogunlaja said: “CBN is making available interventions. N220 billion MSMEDF comes cheap, affordable and is nine per cent maximum interest inclusive of all charges and it is per annum.  We need to sharpen our  mechanism to be checking the books of financial institutions to make sure they are complying and we enforce compliance.

    “Any one that we release funds to, in five days is supposed to disburse. Kwara State is one the states that disbursed the money fairly well and they are paying back. It is one of those states and I can score them above 80 per cent.”

    He said the essence of the fair is to sensitise, enlighten,  and create awareness among users of CBN products. “We are simply a regulator. We regulate banks and work with financial institutions. Essentially, there are deliverables and services that we render to the public in the trust of fulfilling our mandate. Even the recipients do not even know by way of right  and they do not have deepen understanding. It is  a feed back system so that we can have a level of customer satisfaction,” he added.

    Mr. Okorafor said that the apex bank is floating policies that will promote stability of the Naira.

    He stressed that: “As a manufacturer, if you start small, you can still produce and export and you make more money. And the Central Bank of Nigeria  is ready to support you even if it requires you using foreign exchange to produce something that you will export, we will give you access  to buy foreign exchange at a reasonable rate.

    “That is the attitude now, produce, add value and export. The 41  items that we have removed from the list from accessibility to foreign exchange means that we are creating market, we are creating an opportunity for people who want to produce and export.”

    “These are things to safeguard our foreign exchange from further depleting and in addition to be sure that at least we do not get to  a state where we enter into more devaluation. That is what will make our money to be worthless. As long as we are doing that, there will be stability of our forex.”

  • 1,700 BDCs lobby CBN to join forex auction next week

    1,700 BDCs lobby CBN to join forex auction next week

    About 1,700 Bureaux De Change (BDC) operators that were on Wednesday refused access to the forex market for non-rendition of returns, are lobbying the Central Bank of Nigeria (CBN) to participate in next week’s auction.

    The CBN gives $30,000 weekly allocation to each BDC operator to meet forex users’ demands.

    The affected BDCs, The Nation learnt yesterday, failed to provide detailed reports on how previous dollars sourced from the CBN were utilised. They failed the returns-rendition test which carries sanctions of fines, or revocation of licences.

    A source said the level of abuse was so massive that the CBN decided to restrict them from accessing the market to serve as deterrent to others.

    CBN Director of Communications, Ibrahim Mu’azu, said the affected BDCs applied for the $30,000 allocation, but were denied because they did not meet the requirement. “They have to render returns before they buy next week,” he told The Nation.

    CBN tightened noose of BDCs when it requested that forex buyers provide their Bank Verification Numbers (BVNs) before transactions are approved. The procedure which has made it increasingly difficult for BDCs to sell all the $30,000 weekly allocation, has led to many operators returning unutilised funds to the apex bank and creating high level of default by non-compliant operators.

    The CBN had last June suspended 437 Bureau De Change (BDC) operators from accessing its weekly dollars sales. The affected BDCs were slammed with N2 million fine each.

    The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe confirmed the development, and described the sanctions as punitive, saying it would further weaken the already fragile naira.

    The apex bank has consistently urged banks, BDCs and Other Financial Institutions (OFIS) on the importance of rendition of returns and compliance with anti-money laundering regulations.

    The regulator always wants to ascertain if lenders are complying with Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regulations.

    “Section 29 of the CBN AML/CFT Regulations, 2013 (as amended) requires financial institutions to maintain all necessary records on transactions, both domestic and international for at least five years after completion of the transactions or such longer period as may be required by the CBN and Nigeria Financial Intelligence Unit (NFIU), provided that this requirement shall apply regardless of whether the account or business relationship is on-going or has been terminated,” it said.

    Financial institutions are expected to maintain records of the identification data, accounts files and business correspondence for at least five years after the termination of an account or business relationship or such longer period as may be required by the CBN and NFIU on a timely basis.

    Financial institutions are required to forward their AML/CFT Compliance Manual to the CBN for off-site review of the document as well as carry out enhanced customer due diligence for high risk customers and effective Know Your Customer (KYC) processes.

  • On CBN’s forex policy

    On its website, the Central Bank of Nigeria (CBN) states that its purpose is the delivery of price and financial stability and the promotion of sustainable economic development. Surely realising this in a country as complex as Nigeria will be no easy task, more so at this time. The price of crude oil has fallen by about 60per cent from its peak in June of last year exposing Nigeria to a term of trade shock and causing an exodus of capital from the country which has put pressure on the Naira. The Central Bank devalued the currency in November and in February, closed the official window but the pressure on the Naira has persisted. The Central Bank has issued several circulars aimed at controlling demand at the forex market, an unconventional move it calls demand management. The most notable has been the restriction of forex flow to importers of 41 items, the ban on cash deposits into domiciliary accounts and the imposition of daily spending limits on foreign purchases by card users.

    Demand management has helped stabilise rates at the interbank market. However the CBNs policy has put the businesses of some of those affected in great peril and the consequent effect on the price and availability of affected goods is beginning to manifest in the real economy. The ban on some importers created a larger black market with the black market premium reaching levels unprecedented that the central bank had to double forex sales to bureau de change operators to discourage practices aimed at profiting from the wide spread but this has in turn made cross border currency smuggling a thriving business, with the players benefiting far more from the CBN policy than the industries the CBN claims its policies would assist.

    Investors have lost faith in the ability of the CBN to hold rates preferring to stay out of Nigerian assets for as long as the exchange rate uncertainty persists, a major reason the Nigerian stock market has one of the worst year-to-date performances in the world. In a recent development, JP Morgan announced it will remove Nigeria from its Emerging Market Government Bond Index citing reduced liquidity at the interbank market and reduced transparency from the CBNs policy that have made it difficult for investors to exit the market.

    The demand management policy has been widely criticised, with most of the critics calling for an outright devaluation of the naira and some even asserting that the country will gain from the boost to exports. However it is important to note that Nigeria has unique attributes that makes it different from the typical economy with responses to policy actions that have in certain times diverged from the typical economy. This sometimes calls for situations where the central bank’s effort to manage economic shocks should include the use of unconventional measures. Nigeria’s non-oil export, which would benefit from devaluation, is virtually non- existent. Historical data shows that the Naira’s downtrend over several decades has occurred with a simultaneous contraction in non-oil exports as against an expected increase suggesting the role of other factors hindering the growth of non-oil exports in Nigeria. While these factors persist, devaluation will not yield the expected boost to exports. In addition, Nigeria happens to be a low income country with over two-thirds of its population living below the poverty threshold. The country also doubles as highly import dependent, relying on imports for much of its consumer products. Devaluation in such an economy is sure to cause hardship for a majority of the population, throwing many Nigerians into poverty.

    The CBN is not the first to use unconventional measures to try to maintain economic stability. Indeed manyregulatory banks across the world, after running out of conventional ammunition, resorted to atypical measures to restore economic stability during and after the 2008 financial crises. Thus the CBN in trying to achieve its mandate should be innovative in its approach to steer the economy out of crises especially when it has run out of orthodox options. However it is important for policy makers to know that our world of irrational decision makers is far more complex than the most sophisticated economic models used to guide them in decision making. In this situation, there will always be policy risks that are either hidden from sight or grossly underestimated by these models. This makes it necessary for a policy maker about to enter uncharted territory to ensure that the expected benefits of such a move far outweigh the visible risk if he is to be reasonably confident of emerging successful. However in my opinion, the CBN policy of demand management doesnot meet that criterion.

    An alternative to demand management with much less potential to do damage is for the CBN to create a separate forex market for investors where the Naira will be sold at a discount to the price at the interbank market. The price spread between both markets should be wide enough to eliminate the perceived risk by investors. To give its move some credibility, the CBN would have to admit that the Naira is overvalued but at the same time try to hit home its message that the peculiarity of Nigeria’s economy would make a further devaluation contrary to its mandate of maintaining economic stability.

    The bank might further highlight the object of its move which is to address the exchange rate uncertainty that has deterred investors from Nigerian assets. The use of forward guidance will be instrumental in gaining investors’ confidence, portraying the Central Bank as proactive and strategic in its use of unconventional monetary policy. Forward guidance has been used by major central banks to calm financial markets through periods of unconventional monetary policy, proving to be most useful during transition periods. If implemented, this move will boost foreign investments in Nigeria which will in turn improve the forex receipt of the CBN giving it a leeway to reverse at least the most unhelpful of its demand management measures which have been largely reactive and have exposed Nigerians to both hidden and unhidden risk.

    A well-structured market for investors as a sole policy move will be helpful in the short to medium term. Beyond that, it will be less effective in maintaining economic stability especially if the price of crude oil doesnot improve. Thus it should be seen as a way to buy time for the CBN to implement a well-planned import substitution policy with distinct medium and long term objectives. The CBN should work on a strategy with a medium term objective of boosting both our export volumes and the competitiveness of local substitutes to our major imports.

    For the long term objective, the CBN should collaborate with government in identifying and promoting industries where Nigeria has a strong comparative advantage. Such a strategy should not focus on using trade restrictions but rather on carrying out targeted actions that will significantly improve business conditions for local industries. Decades of restricting international trade in Nigeria, save a few cases, have failed to bring about the desired effect of stimulating local production primarily due to Nigeria’s peculiarity as a safe haven for corrupt practices. The beneficiaries of trade restriction have been smugglers and privileged holders of import waivers with the worsening of living conditions for the rest of the population.

     

    • Uyi, 500-Level Medicine and Surgery, UNIBEN
  • Money laundering: CBN may blacklist banks

    Money laundering: CBN may blacklist banks

    •’Domicilliary accounts not frozen’

    The Deputy Governor of the Central Bank of Nigeria in charge of Financial System Surveillance (FSS) , Mr. Okechukwu Joseph Nnanna, yesterday said the apex bank may blacklist banks used for money laundering.

    He also said management and directors of such banks will be in trouble.

    The CBN deputy governor said he could not say exactly how much of looted funds had been recovered and deposited in CBN.

    Nnanna, who spoke with reporters in Abuja on the sideline of a workshop organised by the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA), said it would no longer be business as usual.

    He said: “Any bank which we discover has been used, or manipulated by criminals who launder money, corrupt politicians who launder money, that bank and directors would be held accountable.

    “Not only paying fines, we can also ask them to be blacklisted and will never work in the financial system any more. That is a very severe punishment.

    “People who finance terrorists come in different guises; they may be genuine businessmen who after a while may turn to be criminals but what is important is for the banks to make sure that the customer who comes to deposit money and withdraw money, they must know who he is. Not only knowing who he is, they must know his or her business.”

    Asked what CBN is doing to check money laundering, the Deputy Governor said the apex bank has put in place many control mechanisms.

    He added: “At the CBN, we are doing a great deal. The bank has in fact put in place a regime of controls particularly for commercial banks. Know Your Customers (KYC) is a very serious affair with us.

    “ You don’t go to the bank and open an account and go and lodge in N5 million, N10 million without you being reported to the NFIU and to the EFCC. You will be reported to explain the source of that money.

    “We are not saying that Nigerians are all criminals. If you are a genuine businessman and you lodge in N1 billion there is nothing wrong with that but if you have N5000 and all of a sudden, you brought N10 million, we would like to know.

    “The CBN in collaboration with the National Financial Intelligence Unit (NFIU) would like to know the source of that money and that we are doing very religiously.”

    Responding to a question on what the government has lost to money laundering, he said: “Nigeria as a government hasn’t lost money so to say. But it is actually the businessmen and particularly foreigners through 419 scams, and the amount is really indeterminate.

    “If I give you a number, I think that would be very misleading; I think NFIU would be in a position to give you such number.”

    On the looted funds in CBN, the Deputy Governor was not forthcoming on the actual amount.

    He said: “The president said so, and I am not qualified to contradict him. I wasn’t told that amount of money. If I tell you the figure, I would be lying. The Central Bank of Nigeria is the banker to the government so if the government recovers such money, where will it go? It will go to the CBN.

    “You are the one saying it is there but I am not disputing that. What I am saying is that the Central Bank of Nigeria is the banker to the government. We keep dropping money, all money.”

    Nnanna denied that the CBN deliberately frozen domiciliary accounts of innocent Nigerians.

    He added: “We didn’t freeze them, they were not frozen. And let me use this opportunity to explain what domiciliary account is all about. Domiciliary account does not mean Nigerians in Nigeria, living in Nigeria using the Naira to buy dollars from the Bureau de Change operators or black market and substituting the Naira for dollars or pound sterling. That is not domiciliary account.

    “Domiciliary account is when we live  in foreign countries, like in the US, in the UK, South Africa,  and you are working there, and you wan part of your money deposited in your country, then it would be through wire transfer.

    “I took time to go to our banks during the height of domiciliary accounts. I found out that the queue for people who were depositing dollars and pound sterling was three times longer than the queue who were depositing Naira. What type of economy is that? That is not domiciliary accounts, that is called currency substitution which no country should tolerate; that is why we stopped it.

    “The people who have their money in their accounts, it is still their money; the CBN did not seize it; it is still their money; you can go and withdraw it but you cannot deposit it anywhere.

    If your bank says they don’t have the dollars, then you should ask them, what happened to the dollars you gave them. So we never told them not to pay back their customers.”

     

  • CBN may blacklist banks used for money laundering – Official

    CBN may blacklist banks used for money laundering – Official

    The Deputy Governor of the Central Bank of Nigeria in charge of Financial System Surveillance (FSS), Mr. Okechukwu Joseph Nnanna, on Tuesday said the apex bank may blacklist banks used for money laundering.

    He also said management and directors of such banks will be in trouble.

    The CBN official also said he cannot say exactly how much of looted funds had been recovered and deposited in CBN.

    Nnanna, who spoke with journalists in Abuja on the sideline of a workshop organised by the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA), said it will no longer be business as usual.

    He said: Any bank which we discover has been used, or manipulated by criminals who launder money, corrupt politicians who launder money, that bank and directors would be held accountable.

    “Not only paying fines, we can also ask them to be blacklisted and will never work in the financial system any more. That is a very severe punishment.

    “People who finance terrorists come in different guises, they may be genuine businessmen who after a while may turn to be criminals but what is important is for the banks to make sure that the customer who comes to deposit money and withdraw money, they must know who he is. Not only knowing who he is, they must know his or her business.”

    Asked what CBN is doing to check money laundering, the deputy governor said the apex bank has put in place many control mechanisms.

    He added: “At the CBN, we are doing a great deal. The bank has in fact put in place a regime of controls particularly for commercial banks. Know Your Customers (KYC) is a very serious affair with us.

    “You don’t go to the bank and open an account and go and lodge in N5 million, N10 million without you being reported to the NFIU and to the EFCC. You will be reported to explain the source of that money.

    “We are not saying that Nigerians are all criminals. If you are a genuine businessman and you lodge in N1 billion there is nothing wrong with that but if you have N5,000 and all of a sudden, you brought  N10 million, we would like to know.

    “The CBN in collaboration with the National Financial Intelligence Unit (NFIU) would like to know the source of that money and that we are doing very religiously.”

  • CBN, NPA, others to implement Cargo Tracking Note

    CBN, NPA, others to implement Cargo Tracking Note

    •Council to review Inland Depots policy 

    THE Central Bank of Nigeria (CBN), Nigerian Ports Authority (NPA), Nigerian Shippers’ Council (NSC) and the Nigeria Customs Service (NCS) will implement the International Cargo Tracking Note (ICTN), The Nation has learnt.

    ICTN is a security measure for checking cargoes coming to the country.

    Revenues generated from its execution will go to the Federation Account. The proposal for the management of the fund, findings revealed, has been submitted to Minister of Transport Rotimi Amaechi.

    Also, a former Director-General, Government Inspectorate of Shipping, Mr Olu Akinsoji, said the ICTN would reduce corruption and promote security and integrity of cargoes.

    He said the ICTN would also increase Foreign Direct Investments (FDI), prevent dumping or diversion of cargoes and create room for efficient collection of revenues.

    Akinsoji, the acting chairman, Society of Nigerian Mariners (SNM) and former administrator of Maritime Academy of Nigerian in Oron, Akwa Ibom State, said: “Many countries are operating the regime and are enjoying the benefits.The CTN will reduce corruption and promote security and integrity of cargo,” he said.

    Speaking with reporters in Lagos, Director of Commercial Shipping Services of the Council, Mrs. Dabney Shall-Holma, said the CBN team would operate from the first and second floors of the headquarters of the Council in Apapa.

    The team with the Customs is expected to offload real-time information received from the ICTN onto the Nigeria Customs Information System (NICIS) for processing.

    Mrs. Shall-Holma said the ICTN would assist the government to ensure transparency in the system of shipping, and check under-declaration, leakages and conspiracies.

    ‘’It is real time information that will be made available and will be received instantaneously and offloaded to the Customs NCIS.

    “Right now, we are working with a team from CBN to do the offloading on our behalf. That is why the second and first floors have been dedicated for that purpose, so that we can ensure that the benefits  from Cargo Tracking Note would truly accrue and government revenue will increase.

    “Apart from ensuring that there is transparency on revenue earned, we are looking at under-declaration, leakages and conspiracies here and there, and unrecorded vessels calling at the ports,” she said.

    Mrs. Shall-Holma said ICTN is  rigid, so when information about a vessel bound for Nigeria is filed, the NSC will know within two hours. If there is any variance in the information on under-declaration, the NSC can quickly inform relevant authorities, such as the Customs, NPA and the Nigerian Maritime Administration and Safety Agency (NIMASA).

    She said ICTN would eliminate  fraud. “We would now be able to block leakages and wastages.”

    Meanwhile, the Executive Secretary of the Council, Mr Hassan Bello, has said the agency is reviewing the viability of some Inland Container Deports (ICDs).

    “We are reviewing the policy of Inland Container Deports (ICDs), and we will ensure that some of them become operational by next year. The Plateau State Governor had visited us over the ICD and we appreciate his visit.

    “We are also looking at Kebbi, Bauchi, Osun, Enugu and other states to determine their viability. Our policy is not just to have ICDs all over the country, we need to talk with Customs because they are very important.

    “Customs appearance in those inland ports would be determined by the traffic of goods coming to such depots and the volumes they can handle.

    “So, it is important to note that it is not strictly a Shippers’ Council thing but an industry issue; we need cooperation of stakeholders, such as Customs and terminal operators. There must be connectivity between the seaport and the inland container depots and we are also asking the states to provide basic infrastructure like access roads to make them attractive for business.”