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Tag: cbn

  • BoI gets CBN licence

    BoI gets CBN licence

    The Bank of Industry (BoI) has secured Central Bank of Nigeria (CBN) licence after meeting the requirements for Development Finance Institutions (DFI).

    A statement by BoI said  CBN  approved its application for the licence, in line with the CBN guidelines which stipulate, “all existing DFIs whether established directly by an Act of the National Assembly, incorporated under Companies and Allied Matters Act (CAMA) or any other law shall be required to obtain license from the CBN.”

    Similarly, the bank noted that to drive industrialisation, it has embarked on strategic and tactical initiatives to reposition its operations.

    “BoI wishes to reiterate our readiness to continue to provide financial support to SMEs and Large Enterprises with good business propositions. The Bank will also continue to provide business support and capacity building for SMEs.

    “We have in recent times taken bold steps, both strategic and tactical, to reposition the Bank among which are the formulation of Strategic Plan 2015-2019; institutionalisation of corporate governance structures; implementation of enterprise wide risk management and compliance systems; and introduction of mobile and digital platforms for interfacing with Nigerian SMEs, thus improving our efficiency.

    ”We have also Introduced cluster specific SME products for Agro-processing, Nollywood, Fashion business, and others; we also expanded our branch network from seven  to 14 offices to bring our services closers to our customers; our operations have also been certified  as we  recently secured the ISO 9001:2008 Quality Management Systems (QMS) Certification as well as secured good credit ratings from Agusto & Co (A-) and Fitch Ratings (BB-).

    ”Our ongoing SME Cluster development initiative will ensure that all credible SMEs in Nigeria can feel the impact of BOI in due course”, the statement read in part.

     

  • Why there is delay in online transfer, by CBN

    DETERMINING the integrity of transfers is the cause of delays in crediting beneficiary accounts in online cash transfers, the Central Bank of Nigeria (CBN) has said.

    Most online transactions allow 20 minutes or more between transaction approval and the time the beneficiary’s account is credited.

    CBN Director, Banking and Payments System Department, ‘Dipo Fatokun, at a briefing in Lagos, said the time control was introduced to enable the account holder get an alert before the beneficiary.

    He said the regulator was taking steps to reduce fraud in e-payment transactions.

    The Payments System Vision 2020, launched in 2013, he said, was meant to achieve the re-organisation of the National Payments Governance Structure and encourage more people to embrace e-payment transactions.

    Fatokun, represented by the CBN Deputy Director,  Banking and Payments System Department, Musa Jimoh, said  the project identified agriculture, smart cities, health, transportation, hotels, entertainment, government flow, education and Consumer Bill Payment as well as direct debits as focus areas.

    However, Fatokun explained that the absence of a unique identifier in the industry has negative consequences on the growth of e-payments and that the need to resolve the challenge that prompted the CBN, in collaboration with the Bankers’Committee to launch the Bank Verification Number (BVN) project. The project, he said, would help build confidence of customers on the e-payment channels and enhance integrity of transactions.

    “The BVN initiative is aimed at protecting bank customers and further strengthening the Nigerian banking system by uniquely identifying all bank customers and acts as a stop-gap, prior to the full implementation of the National Identity Card system,” he said.

    Also, the CBN mandated all banks, switches and processors to comply with Payment Card Industry Data Security Standards (PCIDSS) and, subsequently, conducted an oversight on compliance which showed that most banks had been certified.

    He said the certification lasted for one year and that banks were at various levels of re-certification. He explained that PCIDSS is a global compliance standard for any entity that stores, transmits or processes card payment data.

    CBN, Fatokun said, also directed banks to set up systems that will enable the automatic refund of Automated Teller Machine (ATM) dispense errors to customers. The regulator has also issued guidelines for card issuance and usage meant to provide minimum standards and       requirements for the issuance and usage of payment cards in the country.

    “Its implementation enables issuing banks, other financial institution, processors and cards schemes upgrade and maintain their card operations to ensure optimum security, efficiency, cost effectiveness and customer friendliness,” he said.

    The platform, he added, also serves as a tool for banks and other financial institutions to assess their card issuance portfolio and ensures that consumers that carry Nigerian -issued cards operate within acceptable standards.

    “From a regulatory perspective; the CBN acknowledges that less than optimal, inefficient or poorly designed systems will ultimately have a negative impact on systemic stability, economic development and growth. It has therefore consciously pursued the growth of a payments system that is safe, efficient, cost effective and reliable,” he said.

    He said payment systems have moved from the backroom to the boardroom of organisations given its strategic importance in today’s globalised world.

    He said a well-functioning payment system plays significant role in supporting the economy.

    He explained that such significance prompted the apex bank to promote a payment system where the underserved and non-served are integrated into formal financial services sector.

     

  • Business confidence wanes over CBN policies’

    The Organised Private Sector (OPS) has lamented the erosion of the goodwill Nigeria enjoyed at the inception of President Muhammadu Buhari’s administration due to the controversial policies churned out by the Central Bank of Nigeria (CBN) especially the foreign exchange policy that has crippled the real sector.

    President, Lagos Chamber of Commerce and Industry (LCCI) said they have been inundated by reports from foreign missions on the increased defaults recorded by their home businesses as a result of the inability of Nigerian businesses to keep to the terms of their initial payment agreements as a result of their inability to access foreign exchange.

    He said  if the policy is not reversed, it may cripple entrepreneurial spirit of the average indigenous businessman, especially those who are involved in manufacturing, importation and exportation.  “The monetary and fiscal measures so far adopted are taking a huge toll on investors in the free trade zones and the risk of international isolation of Nigeria if current policies were not reversed is high,” he said.

    Very recently, the CBN has taken a number of monetary measures to save the naira and the foreign reserves, which have been on the downward spiral. The apex bank has restricted the use of export proceeds and have excluded importers of 41 items from accessing foreign exchange from the Nigerian markets. The bank has also tightened the forex procedures and set rules on domiciliary account to save the economy.

    But the economy is now faced with a scenario where there is a much greater pressure to move funds out of the economy than bring funds into the economy, Bello cautioned.

    “Round tripping of forex has continued to flourish because of the disparity in the exchange rate between the official and parallel market.

    “Small businesses have moved to neighbouring countries to effect transfers to their suppliers abroad. Many companies are on the brink of collapse because of failure to access forex for raw materials and other critical inputs. Even companies whose inputs are valid for forex also suffer the same fate,” the LCCI president added.

     

    He urged president Buhari to intervene before further damage was done to the private sector and the economy, suggesting that the naira exchange rate should be allowed to reflect the fundamentals of the market.

    “A rate that market fundamentals cannot support would not be sustainable. We suggest the adoption of a market approach with a periodic intervention by the CBN as the capacity permits,” he suggested.

    LCCI Director General, Mr. Muda Yusuf said exporters should be allowed to have unfettered access to their proceeds, saying that the current policy regarding export proceeds was a disincentive. He wondered why an exporter should not be allowed the freedom to choose the bank to do business with.

    He advised CBN to engage with relevant economic ministries in order to bring about coherence in the management of the Nigerian economy, insisting the apex bank is ignorant of manufacturing processes.

    Some of the problems the country faces relate to the problem of poor productivity, he said, urging the Federal Government to accelerate investment in infrastructure and build quality institutions for better productivity in the country.

    He however, identified some positive developments such as improved power  and fuel supply, aggressive war against terrorism and anti-corruption crusade but advised strongly that the CBN forex policy should be discontinued with all the urgency it requires.

  • CBN dollar policy, cement and free trade zones

    The opportunity to be heard is a remarkable difference from what happened few weeks back when we all dressed to our various offices only to be told by our employees that our businesses has been decreed out of existence by the CBN. Not only were the channels of communication wrong, the powers to technically ban those 41 items were highly questionable. Such is the impunity and hostility that has beclouded our business environment and inhibited its growth. Today we live in an economic environment of confusion, policy summersaults and inconsistencies. In most cases, you see yourself standing face to face with, and against the law. We have gotten to a level where our law and the constitution say one thing, and our operators say a different thing.

    The Free Trade Zone is a creation of statute. Its activities are governed by Decree No 63 of 1992. Going by the provisions of this Decree, business enterprises within the zone enjoy some incentives and exemptions.

    Some of these incentives include exemption from all federal, state and Local Government taxes, duties, levies, VAT and foreign exchange regulations. This is clearly written in Section 26A of the decree setting up the free trade zone. By law, the free trade zone and the CBN are institutions of coordinate jurisdiction. Free Trade Zone enterprises are in theory, regarded as a country within a country. The CBN therefore has no legislative authority over the zones. The CBN in realization of this had washed its hands off the fiscal responsibilities of the zones until this recent attempt on the annexation and colonization of the zone. The status confers and imposes certain restrictions as well as obligations on mode, module and medium of exchange. For instance, companies within the zone are incentivised to import foreign currency of any amount and export 100% of same. They are exempted from the buying of forex from the CBN, among others, thereby affirming their quasi autonomy. This suggests that the only avenue open to the operators for the sourcing and procurement of forex was the free funds, or the BDC’s. Depositing and withdrawal of dollar cash was a way of life and has never been under the sledgehammer of the CBN.

    But the dollarization policy which is now being enforced across board and borders has laid comatose the operation of the Free Trade Zone, as the only foreign exchange window open to operators had been shut, padlocked and the key flung into the ocean.

    The immediate dire consequence of this unfortunate, ill-conceived policy is the suffocation of investments within the zone leading to business closure by investors and foreclosures by banks and other lending institutions. The fall out of this would be litigations arising from breach of contracts, mass retrenchment of workers, loss of revenue by government and loss of face in the international community, and of course, the short circuiting of technology transfers – which is a cardinal factor for the setting up of the Free Trade Zone.

    Why would CBN ban 41 items in the guise that they do not have sufficient dollar to fund their imports only to turn around to ban deposit of the same currency in our banks as a result of excess dollar?

    As the CBN continues to reap from where they did not sow with regards to foreign exchange regulations within the Free Trade Zones, one needs to remind them of the ripple effect of their actions. Secondly they need to observe the thin line that separates the various organs of government as contained in the principles of separation of powers.

    When the CBN cannot give long term loan to a young graduate to buy equipment and commence the production of toothpick, why would they stop the same boy from importing N10,000 toothpick from China where the investment climate is not only conducive but predictable? To do otherwise is impunity and starvation.

    To put up an average cement plant of one million to two million metric tonnes one requires a capital outlay of about $300 – $400 million. This used to be an average of N50 billion to N60 billion. To accomplish this, using the current exchange rate, an intending investor needs an average of N80 billion. It does not stop there: The ugly side of it is that as long as this policy remains, no Nigerian can ever invest again in the cement sector. How, you would ask?

    To put up an investment of this magnitude where banks’ lending is on short-term and double digit interest rate is practically impossible in an economy of today. Let us agree that you get a willing bank to help syndicate the financing, you would be required to put down an equity contribution of about 30%. This translates to about N24 billion. The implication is that you require 10 banks to syndicate your equity alone, and another 20 banks to syndicate the remaining 70%. This is impossible. In addition you need to have your market share and popularize your brand before any bank can take this huge risk on you. What is possible is what has been the practice where backward integration policy was designed for new entrants. These new entrants had attracted an investment of over $20 billion tied to various strategic trade partnerships. These investments are threatened by this dollarization policy.

    As a member of the Presidential Committee that produced the 2009 cement policy, our recommendation was that new entrants should be encouraged to embark on backward integration with some government incentives. This was how Lafarge, Dangote, Unicem, Flour Mills etc started. They formed strategic trade partners who signed technical and business agreements towards local investments. This is how the near success story we have today in the sector

    If we have a success story in cement, why are we buying a bag of cement at N2000 in 2015? In Asia, a bag of cement sells for as low as N350 a bag; in Europe it sells at N500 a bag; in neighbouring West African countries a bag of cement sells for between N1200 and N1400 a bag. When the lie of Nigeria being a net exporter of cement was told by several persons, in several quarters, including the former coordinating minister of the economy, some of us who know covered our faces in shame.

    In a recent survey, the World Bank predicted Nigeria’s cement consumption to be 45 million metric tons. Mind you, consumption is different from demand and supply. With a total installed-not production capacity of cement at over 20 million, Nigeria still has a huge demand gap of between 15 – 20 million metric tons.

    The reality of this deceitful situation will soon hit us when government solves the insurgency situation in the North-east and commences rehabilitation works; moves to fill the over 15 million housing deficit, tackles our huge infrastructural decay; and starts the cement – base road construction, by then, existing cement plants would have started growing old, I bet you, Cement may sell as high as N3000 in this country.

    In my honest opinion, government needs to open the cement space for investors of all sizes to come in. Monopoly should be discouraged. A limit should be set as to maximum investment an individual can invest in any sector of the Nigeria economy to create room for others’ participation. This would also ease credit tension and whittle down risk appetite of banks and other lending institutions.

    This what countries like China and India have done. In China, you have over 9000 functional cement plants and over 800 in India. China for instance, manufactures over 2.42 billion tons of cement per annum, representing 58.6% of global production. In reality Nigeria produces a little above 25 million. What the government of these countries did was to liberalize investment in the sector, encourage and incentivise investors.

    What the CBN Governor has done with the recent foreign exchange restriction on cement and 41 items amounts to a ban and criminalization of businesses.

    Governments world-over encourage investments; you don’t decree, you don’t frustrate, you don’t criminalize. A toothpick importer of today may be a Bill Gate or another Dangote of tomorrow.

    Being a paper presented by Ochiagha Ufomba at the Focus Group Discussion on Impact of CBN Foreign Exchange Policy organized by the Lagos Chamber of Commerce at Oriental Hotel Lagos.

  • CBN advises states to adopt Treasury Single Account

    CBN advises states to adopt Treasury Single Account

    The Central Bank of Nigeria (CBN) yesterday in Abuja advised state governments to adopt the Federal Government’s system of using a single account for all its revenue deposits.

    Mr Kure Abubakar, Head, Client Services at the CBN, gave the advice while presenting a paper on “Understanding Treasury Single Account (TSA)’’at the close of a two-day workshop on the Fiscal Responsibility Act.

    The News Agency of Nigeria (NAN) reports that the workshop, which began on Tuesday, was organised for government revenue generating Ministries, Departments and Agencies (MDAs).

    He said the TSA, if adopted by states, could help them to get maximum benefits.

    Abubakar, while answering questions from participants, urged them to comply with the Federal Government’s directive and adhere to the Sept. 15 deadline to avoid sanctions.

  • CBN advises state govts to adopt TSA

    CBN advises state govts to adopt TSA

    The Central Bank of Nigeria (CBN) on Wednesday in Abuja advised state governments to adopt the Federal Government’s system of using a single account for all its revenue deposits.

    Mr Kure Abubakar, Head, Client Services at the CBN, gave the advise while presenting a paper on “Understanding Treasury Single Account (TSA)’’at the close of a two day workshop on the Fiscal Responsibility Act.

    The News Agency of Nigeria (NAN) reports that the workshop, which began on Tuesday, was organised for government revenue generating Ministries, Departments and Agencies (MDAs).

    He said the TSA, if adopted by states, could help them to get maximum benefits.

    Abubakar, while answering questions from participants urged them to comply with the Federal Government’s directive and adhere to the Sept. 15 deadline to avoid sanctions.

    On the sidelines of the workshop, he told newsmen that some MDAs had complied and that if others failed to comply, they stood the risk of being sanctioned by the president.

    “There are sanctions and the directive says all erring MDAs will be penalised and that is enough because that is the type of political will we need.

    “If you don’t comply the consequence is yours. I cannot say specific penalties but I believe the president has the authority to penalise either the Managing Director or Chief Executive of such MDA.

    “So those that refuse to comply are on their own or they should show reason to the government why they cannot comply,’’ he said.

    He also said that MDAs that require a waiver could do so by making a presentation to the president stating why such should be granted.

    “The presidential directive says that you can make a presentation to the president for a waiver if necessary.

    “If the justifications are quite good Mr President in his own wisdom can grant the waiver but for now all the MDAs should work towards achieving the deadline of Sept. 15,’’ he said.

    Mr. Khurima Nthara, World Bank Lead Economist and Programme Leader for Nigeria, while commending the Federal Government on the TSA implementation, said that it had been tested in other countries and it had been effective.

    He said the concept would help government to reduce borrowing because it would enable it have a more consolidated view of the cash that it has at hand.

    “I think the TSA has got a very simple concept. You want the government to have a good view of all the cash that it has in one single account.

    “You don’t want the situation that one department or ministry has funds lying idle in one commercial bank when another is in need of those cash and the government has to borrow to make sure that the other ministry or department has access to funds.

    “So the concept of the TSA is that all funds should be consolidated so that whichever agency is in need of cash at the moment should have access to those funds,’’ he said.

    One of the participants, Mr. Ibeh Benneth told NAN that the workshop had helped him to understand how the Fiscal Responsibility Act works and how to go about the TSA remittance.

    He further said that the workshop gave him a better understanding of the importance of the TSA to the nation and that it would ensure transparency in governance.

    “I know I have been hearing of TSA but confronting it very closely today was good.

    “We have discussed it extensively in our organisation but we did not know how to go about it.

    “But now we have an idea and even though we had previously gotten an exemption letter, it is obvious that letter will not work, we have to start the process afresh.

    “We saw the TSA as a directive that government just wants to be seen to be doing something but now I know that it is with good intentions,’’ he said.

     

  • CBN faults JP Morgan’s removal of Nigeria from Bond Index

    CBN faults JP Morgan’s removal of Nigeria from Bond Index

    The Federal Government yesterday faulted J.P. Morgan’s announcement that it would exclude Nigeria from its local-currency emerging market bond indexes tracked by more than $200 billion of funds.It hinged the decision on the Central Bank of Nigeria’s (CBN’s) restrictions on foreign-exchange transactions, which it said prompted investor concerns about a shortage of liquidity. The first phase of the exercise, it said would take place at the end of September, followed by a full exit by the end of October, the New York-based lender said in a statement signed by its spokesman, Patrick Burton.

    But CBN, in a statement last night, signed by its  Director of Communications, Ibrahim Mu’azu, said while it respects the right of the J.P. Morgan to make this decision, it expressed its disagreement with the premise and conclusions upon which the decision was made.

    In the statement jointly issued by the Federal Ministry of Finance, the Debt Management Office and the apex bank, Mu’azu said Nigeria was included in the index in October 2012, based on the existence of an active domestic market for FGN Bonds supported by a Two-Way Quote System, dedicated Market Makers and diverse investors.

    However, in January 2015, J.P. Morgan placed the country on an Index Watch as a result of their concerns in the operations of our Foreign Exchange (FX) Market, such as lack of liquidity for transactions, lack of transparency in the determination of the exchange rate; and lack of a fully functional two-way FX Market.

    Listing the steps taken by CBN, Mu’azu said despite the fact that oil prices have fallen by nearly 60 percent in one year, which should expectedly reduce the amount of liquidity in the market, the regulator ensured that all genuine and effective demand were met, especially those from foreign investors.

    On transparency, the CBN mandated that all FX transactions were posted online in the Reuters Trading Platform so that all stakeholders can easily verify all transactions in the market. In addition, the Official FX Window at the CBN was closed to ensure a level-playing field in the pricing of foreign exchange.

    He noted that a functional two-way FX market already exists in Nigeria. However, given the high propensity for speculation, round tripping, and rent-seeking in the market, it became imperative that participants are not allowed to simply trade currencies but are only in the market to fulfill genuine customer demands to pay for eligible imports and other transactions.

    Mu’azu said CBN’s FX policies have resulted in the stability of the exchange rate in the interbank market over the past seven months and largely eliminated speculators from the market.

    “Despite these positive outcomes, the J. P. Morgan would prefer that we remove this rule; even though it is obvious that doing so would lead to an indeterminate depreciation of the naira. With dwindling oil prices, we believe that an order-based two-way market best serves Nigeria’s interest at the moment,” he said.

    “While we would continue to ensure that there is liquidity and transparency in the market, we would like to note that the market for FGN Bonds remains strong and active due primarily to the strength and diversity of the domestic investor base”.

    Currencies Analyst t Ecobank Nigeria, Olakunle Ezun said Nigeria’s removal from the index will create a negative effect on the prices of current bond portfolios.  However, the subsequent rise in bond yields should provide a new re-entry point for investors interested in Naira denominated assets, which in turn will help boost FX inflows thereby supporting the local currency.

    He also expects bond yields will rise, possibly by around 200 to 300 basis points, which in turn would increase pressure on the naira.  “This will heighten the naira volatility, with further depreciation most likely; as such we expect CBN to either increase the volume/frequency of inter-bank FX intervention or devalue the naira by another 18 per cent to N230 to dollar,” he said yesterday.

    According to him, domestic investors would remain confident about positive real returns in naira denominated assets, but they might need to reassess portfolio composition in order to take advantage of the expected rise in bond yields while minimising any potential losses arising from the fall in bond prices.

    For the banking sector, he said the outcome of the JP Morgan’s decision may create balance sheet position dilemma for deposit money banks (DMBs) that are cut in-between building portfolio holdings in government securities of around 17 to 19 per cent or shrinking balance sheet exposure to corporate risk assets.

    JP Morgan said Nigeria will not be eligible for re-entry for at least 12 months from the date of exclusion, JPMorgan said. The country has a 1.5 per cent weighting in the biggest GBI-EM index, which is tracked by $183.8 billion of funds, according to the bank.

  • Forex: CBN, BDCs head for showdown

    Forex: CBN, BDCs head for showdown

    Bureaux De Change (BDCs) are facing regulatory hurdles over continued foreign exchange (forex) volatility in the wake of falling oil prices. The BDCs jittery that the Central Bank of Nigeria (CBN) may shut them out of the official forex window, writes COLLINS NWEZE.

    Bureaux De Change (BDC) are critical stakeholders in the Central Bank of Nigeria (CBN) – moderated foreign exchange (forex) market. But they are the first point of adjustment every time there is a forex crisis.

    The fear of Association of Bureau De Change Operators of Nigeria (ABCON) president Alhaji Musa Gwadabe that CBN is considering closing the official forex window to BDC operators is not helping matters. It portends a grave danger for operators. Gwadabe linked the fear of closure of the forex window to BDCs as one of the factors fueling naira speculation and hoarding in the market.

    The ABCON chief has therefore sent a letter to the regulator, accusing it of over regulating the sector.

    The group said the increasing challenges arising from over regulation and complex documentation requirements that licensed BDC operators are facing in carrying out their daily legitimate operation, is worrisome.

    These, he said, have had negative impact on their efforts toward compliance to statutory and regulatory requirements.

    The ABCON chief said that six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring, saying this  constitutes multiple regulation of a unit of the financial sub-sector that is only involved as a small market player.

    “A BDC operator is expected to render daily, monthly, quarterly, half yearly and annual returns to these various departments of the same corporate body, which could be very cumbersome, repetitive and time consuming for both the operator and the regulator,” he said in a statement.

    “In addition to the above, the BDC is also under obligation to render same returns to the Economic and Financial Crimes Commission /Nigeria Financial Intelligence Unit, while at the same time reporting to other statutory government establishments, including  the Federal Inland Revenue Service and Corporate Affairs Commission respectively”.

    Gwadabe also disclosed that the BDCs had in recent months, come under severe pressure from the CBN for observed infractions. For instance, the CBN recently suspended 437 BDC operators from the forex window.  The affected BDCs, which were slammed with N2 million fine each for non-rendition of their monthly returns to the apex bank, were also  denied access to the $30,000 weekly allocations to operators by the regulator. The affected firms 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.

    “Unfortunately, some have had to pay high penalties to different departments where instant regulations were violated. The result of this is heavy burden on the BDC considering the little margin of profit allowed on their transactions,” he said.

    The Corporate Affair Commission, he added, has also hiked their incorporation fees and with the review of the operational requirements which made it mandatory for every BDC operator to recapitalise their initial capital and so upgrade their documentation with the CAC, they were charged enormously for the perfecting of their documents.

    Furthermore, the ABCON boss said operators had to grapple with the problem of erratic network at the electronic Financial Analysis and Surveillance System (e-FASS) platform around the country in the last couple of months. This situation, he said, hampered the rendition of BDC returns to the CBN by operators and eventually many were recently penalised as a result thereof.

    He said the documentation requirement to process a Personal Travelling Allowance of say $10,00 requires an international passport, valid visa, ticket among others, making the process cumbersome, complex and inconvenient for both the buyer and the BDC operator. Also, payment for medical fees of say $3,000 requires hospital bill, international passport, ticket, valid visa among others, to consummate the transaction.

    He also faulted the inability of the regulators, statutory agencies to effectively monitor, supervise, train the ever growing number of the BDCs as a result of these multiple and overlapping regulations of the various department of the CBN and other related agencies.

    He said: “The CBN should consider the introduction of dollar denominated cards and coupons to BDCs for retailing to the public. We shall welcome your invitation at your convenience to shed more light on this. We suggest a single BDC directorate at the CBN to be in charge of the BDC sub-sector in order to enhance efficiency, productivity and transparency. This would engender proactive involvement of both the regulators and the BDCs for the growth and dynamism of the sector,” he said.

    “The CBN is to consider as alternative requirement other means of identification such as drivers licence, voters card, and international passport”.

    For instance, the apex bank recently, suspended 437 BDC operators from the forex window, The Nation had reported.

    The affected BDCs, which have been slammed with N2 million fine each for non-rendition of their monthly returns to the apex bank, were  denied access to the $30,000 weekly allocations to operators by the regulator.

    The affected firms 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.

    The source said the level of abuse was so massive that the CBN decided to hit their pockets to serve as deterrent to others. “Given that BDCs were long viewed as a potential source of forex leakage in the system, these measures should boost confidence in the sustainability of the forex band,” the source said.

    Gwadabe confirmed the development, and described the sanctions as punitive, and will further weaken the already fragile naira.

    He said the CBN will make nearly N1 billion when the 437 BDCs pay the stipulated penalties and that will add undue pressure on the finances of the operators already wailing from the burden of increased capital base and N35 million mandatory cautionary deposit.

    “My suggestion to the CBN is that instead of demobilising the affected BDCs for non-rendition by denying them access to forex market, their N35 million cautionary deposit should be debited with the penalty sum,” he said.

    This is coming as CBN had in July, licensed additional 70 BDCs, bringing the total approved operators to 2,688 since the request that operators increase their  capital base from N10 million to N35 million plus another cautionary deposit of N35 million kept with the CBN. There were 3,208 registered BDCs before the apex bank ordered them to recapitalise latest by July 31, 2014.

    The regulator has, however, kept updating its list of BDCs, even though the deadline elapsed since July last year despite earlier stand that it would cease to fund any BDCs that failed to beat the initial deadline.

    Besides, the CBN has consistently adjusted its forex policies to maintain exchange rate stability.

    Chief Economist, Africa Global Research at Standard Chartered Bank, Razia Khan, hinted that the apex bank is already under intense pressure to re-open two-way interbank forex trading.

    In a report: “When perception is not reality” obtained by The Nation, the analyst explained that given the current perceived market shortage of dollar, a re-opening of the market is likely to see dollar-naira trade higher.

    She said the ‘negative watch’ period for the continued inclusion of Nigerian bonds in the widely tracked GBI-EM index was extended in June, to allow the new government the time to formulate policy.

    “Unless interbank determination of the forex rate is reintroduced, with a resulting improvement in forex liquidity, Nigeria risks being excluded from the GBI-EM index. Failure to re-open the FX market may deter direct investment as well. Few foreign investors are ready to commit new investment to Nigeria ahead of an forex adjustment that they believe to be imminent,” she said.

    Khan said Nigeria’s changing economic fundamentals call for a rethink of forex policy, in order to better absorb external shocks.

    “We see Nigeria’s current account surplus moving to a deficit, both in 2015 and in the years ahead. The pace of accumulation of new forex reserves will not easily support a fixed exchange rate system.

    With a fixed exchange rate, forex reserves rather than the naira bear the brunt of any external shock, hurting Nigeria’s creditworthiness, and potentially raising the cost of any external borrowing,” she predicted.

    The economist said the risk is that the longer it takes to re-open the forex market, the greater the likelihood of forex overshooting when conditions do eventually normalise.

    She said the debate over forex policy would continue to take centre-stage in this quarter, culminating in a reopening of the interbank forex market, and a likely move higher in the dollar-naira exchange rates. “The authorities, mindful of other reform priorities and the need to limit inflation, are unlikely to favour naira depreciation for its own sake. These reform priorities include a probable doubling of the rate of Value Added Tax to 10 per cent in order to boost state government revenue, as well as some form of fuel subsidy adjustment,” she said.

    The CBN had, after a series of measures aimed at arresting the continued fall in naira value, announced the closure of the RDAS, thereby, leaving the interbank foreign exchange market as the only official one.

    The decision became necessary given the wide gap between the rates at the CBN official exchange market and the interbank market; a development which analysts said largely fuelled the current speculative activities in the foreign exchange market in the country.

    The RDAS or official forex window allows banks and other authorised dealers to place bids on behalf of individual clients who qualify to buy forex at the official auction.

    Unlike the Wholesale Dutch Auction System (WDAS) scrapped in September 2013 over widespread abuse, the RDAS allows the CBN to monitor more accurately various sources of forex demand and any potential duplication of demand in the system to address speculation in the market which has put naira under pressure.

    The CBN is also closely monitoring BDCs to ensure they comply with anti-money laundering policies. The regulator has consistently urged banks, BDCs and Other Financial Institutions (OFIS) on the importance of rendition of returns and compliance with anti-money laundering regulations.

    CBN Director, Banking Supervision, Mrs Tokunbo Martins said during the Chartered Institute of Bankers of Nigeria (CIBN) anti-money laundering workshop held in Abuja, that the CBN always wants to ascertain if lenders are complying with Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regulations.

    Matins said: “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”.

    She disclosed that 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.

    She said that 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.

     

     

  • Stakeholders kick against CBN’s time limit on complaints’ resolution

    Stakeholders kick against CBN’s time limit on complaints’ resolution

    • ‘Don’t protect banks against customers’

    Stakeholders have criticised attempts by the Central bank of Nigeria (CBN) to put a time frame within which bank customers can bring in complaints of overcharging and claim of refund.

    Contrary to Sections 57 (1)(a) & (b) and Section 58 of the Limitation Act, which provide that time does not begin to run in the case of fraud or mistake of the defendant, until the plaintiff has discovered the fraud or mistake, CBN’s six-year time-limit for complaints and claim of refund for overcharging implies that except bank customers discover the fraud or mistake of banks in not complying with their obligations and overcharging their customers within six years, the bank customer will lose its right to complain and the bank can keep the money overcharged the customer.

    Responding to newspaper publications that the apex bank has fixed time limits within which to resolve complaints by customers relating to certain charges considered excessive, stakeholders in the banking sector including some major depositors and bank customers who asked not to be identified for fear of victimization, said such a directive, in addition to its being illegal, would amount to the regulator aiding banks to fleece customers.

    Mr. Gbadebo Olatokunbo, a leading investors’ rights activist, said the apex bank should not place any time limit as this would amount aiding the banks to shortchange the customers.

    “The issue of time limit should not be there as most bank customers don’t even know when the banks are overcharging and deducting their money. Putting any time limit is uncalled for; once a customer discovered overcharging or excessive deduction, then the customer should be able to get refund no matter how long, even if it is 12 years,” Olatokunbo said.

    He related a personal experience with a bank that deducted certain charges from a retirees’ group account where he was a member, without any previous consent from the group.

    Mr Adeleke Abayomi, a customer of a top-five bank, said the time limit was a disservice to banks’ customers noting that the complainants should be able to get refund in as much as the offending bank is still operational.

    Other stakeholders argued that when any bank unlawfully debits the customer’s account and takes away money thereby depriving the customer the use of it, it amounts to stealing, stressing that the action amounted to an economic crime that the Economic and Financial Crimes Commission (EFCC), should investigate.

    They pointed out that when these unlawful actions are perpetrated by banks with the connivance of government officials at a particular time, “for any pecuniary benefit of such government officials, it will amount to aiding and abetting a crime.

    “Therefore setting a time limit like CBN has done is really dangerous and it will shelter, encourage and protect the perpetrators of these crimes – bankers and government officials – because we all know that some elected officials have two terms of four years each, that is eight years. Therefore an elected official may connive with bank officials to fleece the government confers with excessive charges on facilities (shared with the bank) in the first two-years of his tenure, knowing that his immunity will cover him during his tenure and when he has left office and his immunity has expired, CBN’s time limit will continue his protection.

    They said the cases over which the CBN is interfering, or seeks to be legislating, such as excess interest charges; excess management fees charges; excess Team Loan Repayment charges; fees charged above Bankers tariffs; excess charges on restructured team loans; excess penal interest charges and excess COT charges, among others, amount to civil wrongs, criminal offences and constitutional breaches of the rights of their customers, which are already covered and addressed in the Constitution.

    As they put stated, “it is a civil wrong and amounts to breach of contract if these charges are not in accordance with the terms of the facilities granted the customer. It is criminal in many ways as it amounts to an offence of stealing under the Criminal Code Cap C38 Laws of the Federation of Nigeria,” pointing out that a person who fraudulently takes anything capable of being stolen, or fraudulently converts to his own use or to the use of any other person anything capable of being stolen, is said to steal that thing.

    And in the case of money, it is sufficient if the intent is to use it at the will of the person who takes or converts it although he may intend afterwards to repay the amount to the owner.

    The stakeholders argued that no one can be dispossessed of his property, including money – without due process. “Therefore if any bank has unlawfully debited into a customer’s account some millions or billions of naira, the customer has the right to complain under Section 44 of the Constitution and CBN has no right to limit when the complaint can be made, as CBN is not the National Assembly nor a State Assembly”.

    They said: “The CBN is a creation of statute, the CBN Act. It can only exercise powers granted to it under that Act and under the Banks and Other Financial Institutions Act. These statutes give the CBN limited powers to issue subsidiary legislations to regulate banks. This right does not include right to limit the rights of Companies and individuals who are customers of banks, stressing that their rights are more than banking rights.

    Citing decided cases, the stakeholders said: “Where the acts complained about are continuous acts – for instance where the bank made more than one unlawful debit to the customer’s accounts – the time limit do not apply or better still, starts to count on the date of the last debit”.

    “Where the injury complained of is a continuing one, time does not begin to run for the purpose of the application of a limitation law until the cessation of the event leading to the cause of action. In other words, “continuance of injury” means the continuance or repeat of the act which caused the injury.”

    Stakeholders call on President Buhari to direct CBN to withdraw this circular in the overall interest of the banking public and pursuant to the President’s fight against corruption and impunity.

    “CBN should not be seen or perceived to be protecting banks against their customers. And many banks don’t need this support as they simply do not over charge their customers. CBN should hold the banks accountable to CBN, their customers and the Nigerian state,” they argued.

  • CBN reviews mobile money rule to accommodate telcos

    CBN reviews mobile money rule to accommodate telcos

    The Central Bank of Nigeria (CBN) is reviewing its tight regulatory policy on mobile money to make  telcos play more role in the adoption of the initiative which aims at driving financial inclusion across the country.

    Under CBN’s rule, the telcos’roles have been reduced to nothing as the transactions merely passed through their ubiquitous network of infrastructure. But the apex bank said it had realised that the telcos have huge infrastructure spread across the country and could actually provide the enabling infrastructure for mobile money agents to work effectively.

    Its Deputy Director, Banking and Payment System Department, Mr. Musa Itokpa Jimoh, said: “The telcos have outlets and so they can come in as super-agents, which means, we can leverage on some of these infrastructure to provide mobile financial services and that is basically what we are doing. So, all outlets of the telecommunication companies are going to act as agents.”

    According to him, with this review, which allows for the participation of the telecommunication companies, mobile money will get a huge boost.

    Already, three telcos have applied for super agent to drive the mobile money scheme, which started over three years ago to provide basic financial services to Nigerians without bank accounts, as well as to help drive financial inclusion.

    Three years on, adoption has been very slow in a country that boasts of over 146 million active mobile subscribers. Several surveys had attributed the slow pace of adopting the mobile money services to the low public awareness. Another challenge had been low number of agents as well as inadequate infrastructure, according to IT Pulse.

    The telecom companies have the platform and widespread network with which mobile money transaction can best thrive, but the apex declined to license them, saying they don’t want a clash of interest between banks and telecommunications operators.

    According to CBN, a  research was conducted that revealed the telecoms operators have more subscribers and wider network area for the penetration of mobile money, but the banks have the financial strength to drive the process much better.CBN encouraged telecommunications operators to partner with licensed banks and other financial and non-financial institutions in driving the scheme, since they have the platform on which mobile money transactions will thrive.