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  • BDCs fight CBN over fresh rules

    Bureaux De Change (BDCs) have risen to fight the Central Bank of Nigeria (CBN) over its recapitalisation of their operation.

    The Association of Bureaux De Change Operators of Nigeria (ABCON) said the recapitalisation was an indirect attempt to empower few operators and force many into liquidation.

    Last week, CBN amended the fresh capital requirements for BDCs unveiled on June 23 and extended the deadline to July 31.

    In a circular, Director, Financial Policy and Regulation at CBN Kelvin Amugo said interest would be paid on the mandatory cautionary deposit of N35 million, based on the savings account rate.

    The CBN, Amugo said, would  on expiration of the deadline, cease to fund any BDC that fails to comply with the fresh requirements.

    But ABCON President Alhaji Aminu Gwadabe said the amendments were far from the recommendations made by the association during a meeting with the CBN Governor, Mr Godwin Emefiele on July 1.

    “We recommended that deadline for compliance should not be less than one year as it is the tradition of the CBN in the recapitalisation exercise for other regulated entities. This is because no organisation can meet the statutory requirements for recapitalisation, either by raising fresh capital or through mergers/acquisition, within the period stipulated as deadline by the CBN for BDCs to meet the new minimum capital requirements. By asking BDCs to recapitalise within one month, the CBN is probably asking them to disregard these statutory requirements, and hence commit illegality.

    “We also recommended that the mandatory caution deposit should be eliminated as there is no justification for such deposit. BDCs are not deposit taking organisations, we operate on cash and carry basis. We pay for CBN dollars two days in advance. So there is no need for such deposits,” Gwadabe said.

    ABCON, he said, also rejected the CBN decision to limit the weekly dollar sale to BDCs that meet the new requirements by July 31. This, he said, would bring back the activities of black market and fake currency operation, which the BDCs were  able to abolish following their emergence as monetary tool of the CBN in 2006.

    The policy, Gwadabe said, would give banks opportunity to  hijack the weekly dollar sales to BDCs. “Before CBN started selling dollars to BDCs in 2006, banks were not interested in BDC business. But as soon as the dollar sale started, they saw it as an avenue to make cheap profit, and pressurised the CBN to categorise the sub-sector into Class “A” and Class “B” BDCs.

    He explained that the minimum capital requirement for Class “A” BDCs, mostly owned by banks and money bags,  was set at N500 million, adding that they were allowed to buy $1 million per week, while Class “B” BDCs  with N10 million minimum capital requirement, were allowed to buy just $50,000 per week. That was how the CBN allowed the banks and money bags to hijack the dollar sales to BDCs in 2009, he added.

    “This, we believe is what will happen once the CBN limits dollar sales to BDCs that meet the N35 million minimum capital requirement, and mandatory caution deposit.  It is an indirect way of handing over the weekly dollar sales to banks and money bags, which had no interest in BDC business until CBN started selling dollars to BDCs.”

    “The savings interest rate on caution deposit should also be reviewed to reflect market reality as the chunk of deposits to be realised by the CBN would be placed in treasury bills that attract between nine and 10 per cent per annum presently,” Gwadabe said.

  • CBN pensioners urge Emefelie to reverse 15 % slash

    CBN pensioners urge Emefelie to reverse 15 % slash

    Central Bank of Nigeria’s (CBN) pensioners have urged the Governor, Godwin Emefelie, to  reverse the 15 per cent reduction in their monthly pensions.

    They said the arbitrary deduction applied to 1,604 of them that retired before June 1, 2000, urging that Emefiele  should restore their pension to what it was from July 2011 to February this year.

    They have therefore called for a refund of the total deductions.

    “With your expected gracious intervention, we are hopeful that we are going to start receiving our normal pension as from the end of this month – July 2014, or perhaps, not later than from August this year,” they said.

    In a statement by the Concerned CBN Pensioners, signed by Wale Adebayo and Felix Obi, the former workers explained that on February 26 this year, over 1,600 of them received alerts from their bankers notifying them the slash.

    The statement read: “Initially, we thought it was a mistake that would be corrected the next month or shortly thereafter. But when we enquired from some top officers of the CBN in Abuja about the reason for this unprecedented, arbitrary and ill-advised action, we were surprisingly told that CBN had to slash our pensions because we were being overpaid since July 2011.

    “The truth is that there was no mistake in the calculation of the pension we have been receiving as from July 2011 to January 2014 (33 months). Rather, the slash was done in bad faith.

    “It was clearly a punitive, vindictive and illegal action calculated to intimidate and arm twist us into abandoning our legitimate right of seeking redress in court for the enforcement of court orders in respect of the long-lingering issue of an all-inclusive (for all the 5,000 CBN pensioners) and full harmonisation of pension for those pensioners whose pensions were slightly enhanced in July 2011, which we stoutly resist.”

  • Experts appraise CBN governor’s agenda

    Experts appraise CBN governor’s agenda

    • Optimistic about economic turnaround

    IF the well-articulated socio-economic strategy outlined by the new helmsman at the nation’s apex bank is anything to go by, then it is correct to say that the Central Bank of Nigeria may be poised to turn around the fortunes of the nation’s banking sub-sector and the economy at large.

    This was the verdict of a cross-section of experts who passed a vote of confidence in the new CBN boss, Mr. Godwin Emefiele.

    The event was at a public forum in Lagos, during an interface and discussion session organised by the Institute of Credit Administration (ICA) Fellows’ Business Networking Lunch.

    The guest speaker, Dr. Isaac Makilolo, an economist, while attempting a critique of the 10-point agenda canvassed by the Emefiele-led CBN, recalled that: “When the new CBN governor assumed office earlier in the month of June, the first statement he made was that he was here to build a CBN that is professional, apolitical and people-focused.  A CBN that would spend its energy on building a resilient financial system that can serve the growth and development needs of our beloved country.”

    According to him, “from all intent and purpose, it does appear that the strategies adopted by the new CBN boss are the right policies needed to turn around the economy at this point. Particularly, his proposal to pursue a gradual reduction in key interest rate to be able to bring about employment is remarkable because with that businesses would be able to access credit facility and there will be expansion in terms of production.”

    Expatiating, Makilolo said hitherto the banks were confronted with the problem of loan defaulters, most of who are partly to blame for the crisis which bedevilled the sector in the past, but was, however, optimistic that the plan by the CBN to establish the National Collateral Registry, will help to drive credit as well as stem the tide of bad loans.

    “In Nigeria today, I can say that we have different categories of debtors. There are those who have the means but are not willing to pay and others owe but don’t have the ability to pay. But with National Collateral Registry, there will now be responsible lending because anybody who desires to borrow from the bank would have to show proof that he is credit-worthy and that’s what the National Collateral Registry seeks to achieve,” he stressed.

    Makilolo also said that the proposed creation of commercial courts which seeks to speed up trials of loan defaulters is also well-intentioned.

    Echoing similar sentiments, Dr. Ifeanyi Duaka, Principal Consultant, Savvy Capire, said the policy initiative of the new CBN chief was spot-on.

    The National Collateral Registry, Duaka stressed, is a new innovation aimed at ensuring integrity of information supplied by prospective and old banks’ customers.

    Speaking earlier, Mr. Tunji Oyebanji, Managing Director/Chief Executive, who chaired the occasion, while lauding the ICA’s efforts towards creating awareness on credit management, observed that: “Issues surrounding credit administration are very critical to any economy and I think the institute is doing the right thing to expand the sphere of knowledge in this area.”

    Justifying the need for the forum, Dr. Chris Onalo, Registrar/Chief Executive, Institute of Credit Administration, said the institute was motivated to host the interface and discussion session to empower its members.

  • CBN sets 18-month timeline for finance houses to recapitalise

    CBN sets 18-month timeline for finance houses to recapitalise

    The Central Bank of Nigeria (CBN) has set 18-month timeline for Finance Houses (FCs) to meet the new N100 million capital base for the subsector.

    CBN Director, Other Financial Institutions Supervision Department, Ahmad Abdullahi who spoke in Lagos, said operators that fail to meet the deadline will be barred, or asked to move into new business with lower capital base.

    He said the deadline for compliance with the provisions of the Revised Guidelines shall be September 30, next year, 18 months from last April.

    Abdullahi said the subsector also operates on a ratio of non-performing loans to total loans pegged at maximum of 10 per cent. He said FCs shall consult at least two licensed credit bureaux to obtain credit information on borrowers.

    The CBN director said the finance firms sub-sector was envisioned to operate at the middle tier of the financial system, largely to cater for the financial needs of the Micro, Small and Medium Enterprises (MSMEs). They are also expected to leverage on the resources from the banking system among other sources of funding.

    He explained that the CBN had in a bid to sanitise the sub-sector, revoked the licences of 208 finance companies and cancelled the approvals-in-principle of 462 others due to the distress in the sub-sector.

    By 2012, there were 116 FCs in the records of the CBN; 51 licences were revoked by the CBN in September, same year thus leaving a balance of 65 FCs with valid licences.

    “The idea is to have finance companies that are strong and virile to perform the functions they were set up to per form. The objective of shareholders in the operation of finance companies is to make profit, but for the CBN, it is to have stable and strong finance companies,” he said.

    Abdullahi said the CBN will continue to sanction finance companies that do not have the licences but are in operation as such would ensure that the subsector is run efficiently to the benefit of the economy.

    He advised finance companies to maintain a database of their customers and generate quarterly risk management reports to be submitted to the CBN.

    “Finance companies shall be permitted to participate in accessing and disbursing funds to SMEs via relevant vehicles/intervention funds set up by the CBN, the Federal/State Governments and other relevant bodies. The CBN shall continue to provide support towards capacity building in the Finance Company sub-sector,” he added.

  • CBN slashes dollar sales to BDCs to $15,000 weekly

    CBN slashes dollar sales to BDCs to $15,000 weekly

    The Central Bank of Nigeria (CBN) has cut dollar sales to Bureau De Change (BDCs) by 70 per cent from $50,000 per week to $15,000, The Nation has learnt.

    This is coming ahead of December 31 deadline for BDC operators to comply with new CBN requirements for their operation which meeting the N35 million minimum capital requirement, representing a 250 per cent increase from pervious N10 million.

    The BDCs are also to make a mandatory cautionary deposit of N35 million from previous $20,000 representing a 1000 per cent hike among other conditions set by the apex bank in its June 24 guidelines for the subsector.

    Managing Director Kayewd Bureau De Change (BDC) Limited Rotimi Dada, who confirmed the new dollar sales to BDCs, said the practice has cut down dollar supply to the market, and reduced profit margins for operators while the overhead costs remain the same.

    Speaking on the sideline of the Association of Bureau De Change (ABCON) public hearing in Lagos, he said operators have rent to pay. He said operators are not able to meet market demands for the dollar which is bad for the market. He said there is a multiplier effect of the policy, which makes it difficult for operators to buy dollar from commercial banks.

    Dada said the CBN is acting a bit hasty by cutting the dollar sales  to BDCs adding that the regulator should consult with stakeholders on what needs to be done. He said the CBN should see the operation of BDCs as a macroeconomic factor that favour the economy.

    ABCON Acting President Alhaji Aminu Gwadabe said the CBN regulation should be in line with standard practice. “For instance, during the time of recapitalisation of banks and microfinance banks, deadline of 102 days were extended to them. I was surprised that only 21 working days were extended to the BDCs. If this is allowed to go, it will be vindictive and will be seen as if the policy was designed to favour a kind of selected few,” he said.

    The ABCON chief said there is need for categorisation of BDC operators and also promote constructive engagement with the regulator. He said ABCON has met with the CBN Governor, Godwin Emefiele to make its position known to him.

    “Some of our recommendations is extension of time. Also, N35 million should be a percentage of funding. During Prof Charles Soludo’s tenure as CBN Governor, he told us to put $200,000 in cautionary deposit, I will give you $1 million weekly. If Godwin Emefiele is saying, give us N35 million caution deposit, we expect the money to be a 20 per cent of the dollar he is going to sale to us,” he said.

    BDCs all over the world is a small shop, Nigerians need to have easy access to their foreign currency requirement, not for them to be seen as a bank. Gwadabe pleaded with the CBN to allow BDCs source dollar somewhere else. “Allow the BDCs to source their dollars either from oil companies or autonomous sources. We can survive without CBN dollars because there are other windows we can source the dollars,” he said adding that BDCs can also survive without dollar sales from CBN.

    The ABCON boss also called for the categorisation of the BDCs with different scope of business rather than outright revocation of licences that some were issued licences since 22 years ago.

     

  • Killing BDCs?

    Killing BDCs?

    Expectedly, the new leadership of Central Bank of Nigeria (CBN) is leaving no one in doubt about its intention to make indelible imprints on the nation’s financial system. And its newly unfurled guidelines on the operations of the Foreign Exchange Market (FOREX) seem to be a pointer in that regard. But the guidelines are generating serious systemic hullabaloo because of some of the provisions, seen as stern in some quarters.

    These include the stipulation of a minimum capital requirement of N35million for Bureau de Change (BDC) operation in the country. Hitherto, the minimum capital was N10 million. Also, under the new regime, the mandatory cautionary deposit which was N3million has been increased to N35million for each BDC and this is expected to be deposited in a non-interest-yielding account in the CBN, upon the grant of an approval-in-principle.

    This development is a strict departure from the past when anyone with just $20,000 deposit with the CBN could operate a BDC. The new rules, among others, further require payment of a BDC licence application fee of N100, 000; another licensing fee of N1million and an annual renewal fee of N250, 000. The guidelines frown at ownership of multiple BDCs and also at the avalanche of rent-seeking operators in the forex market that are merely motivated by profit margin, regardless of prevailing official and inter-bank rates. The guidelines become operational from July15.

    We do hope that the guidelines, ostensibly meant to sanitise the parallel market, would go a long way in ridding it of crooked elements as there is need to check its current inefficiency and sharp practices. There have been several reports of some BDC operators who deployed purchased foreign exchange to fund unauthorised transactions, depleting the nation’s foreign reserves in the process.

    For instance, we are aware that the CBN recently revoked the licences of 101 BDC companies because of their inability to provide satisfactory evidence of the purchase and utilisation of autonomous foreign exchange.  About 17 others were fined N2 million each for alleged infractions of the BDC guidelines, even though they allegedly adduced satisfactory evidence of their utilisation of the autonomous foreign exchange allocated to them. Also, last year, the CBN reportedly revoked the licences of 20 BDCs over foreign exchange malpractices.

    No doubt the market in its present state is rowdy and the need to streamline it is long overdue. The CBN record, for example, reportedly shows that there are about 3,208 officially registered BDCs by the apex bank, with an additional 1,417 awaiting approval. If the last batch of approval seekers scales the hurdle, the total number of BDCs would eventually rise to 4,625. This is without prejudice to the fact that more applications might still be filed. Each of these BDCs is entitled to $50, 000 from the CBN every week, which translates to about $12billion forex per annum. However we may look at it, this is still a vast drain on the nation’s foreign reserves; hence, the new regime seeks to reduce each BDC’s entitlement to $15,000 per week.

    Without doubt, an effective management of the guidelines might, over time, avail the country the opportunity of combating awkward financial outflows. All said, we call on the CBN to have another look at the apprehensions of the public as exemplified through members of the House of Representatives over the issue because of its implications on employment generation drive that is at its lowest ebb at the moment, and institutional building process of that sector. By the new policy, most BDCs would simply close shop, with a sizeable number of people, sadly, joining the unemployment market.

    The CBN definitely needs to strengthen foreign exchange transactions. But in  achieving this, we expect it to concentrate more on institutional development rather than pecuniary and punitive sanctions. The apex bank should, henceforth, saddle its competent professionals with the task of coming up with better ways of ridding the market of unscrupulous elements .

     

  • CBN urges bank customers to enroll in BVN initiative

    CBN urges bank customers to enroll in BVN initiative

    The Central Bank of Nigeria (CBN) in collaboration with all Nigerian banks has introduced the Bank Verification Number (BVN) as a unique identification number for all bank customers. CBN has advised  customers in Lagos to enroll and obtain their BVN. This exercise has gone live in selected bank branches in Lagos. This is the first phase of the countrywide roll out. In view of this, all lenders have their headquarter servers configured, deployed and tested, and their workers trained in preparation for the enrolment and verification of end users who are all Bank customers.

    BVN gives each customer a unique identity across the banking industry which can be used for easy identification and verification of customers. The BVN initiative is part of the overall policy of the financial inclusion policy of the Financial Sector Strategy (FSS) agenda of ensuring Nigeria becomes one of the top 20 largest economies in the world by 2020.

    Speaking on the enrollment process, Managing Director of Nigeria Interbank Settlement System (NIBSS), who doubles as Head, BVN Project Management team, Mr. Ade Shonubi said: “The enrolment process is simple and easy. A bank customer will be required to walk into any of the selected bank branches; fill and submit the BVN enrolment form; present self for data capturing (such as fingerprint, facial image, and others). Thereafter, an acknowledgment slip with the transaction identity (ID) will be issued to the individual.  Within 24hours the system confirms the enrollment and a unique BVN is generated. The customer will immediately receive a short message service (SMS) notification with the BVN.”

    He further explained that in order to ensure an efficient implementation, a phased rollout approach is being adopted beginning in Lagos. Biometric data capture machines have been deployed to about 1000 bank branches in Lagos, while over 16,000 BVNs have been issued. At full roll out, 10,000 enrolment sets will be deployed across 5,000 bank branches nation-wide

    This enrollment process is done only once and your BVN will be linked to all your Bank accounts across Nigeria Banks.

    He said:“The BVN solution is to ensure accountability, protect Bank customers’ account from unauthorized access, reduce exposure to fraud, check identity theft, enhance credit advancement to Bank customers, and also encourage financial inclusion.”

    This initiative addresses issues of identity theft and ensures that bank accounts are protected from unauthorised access, thus reducing  the customers’ exposure to fraud. “This solution will promote a safe and sound financial system in Nigeria, especially as it will keep records of suspected fraudulent individuals in the banking system. It will make life and banking operations easy for bank customers as BVN is accepted as a means of identification across all banks in Nigeria. This will improve speed of service and reduce queues in banking halls,” he added.

    According to him, at the point of enrolment individuals shall be required to submit an acceptable means of identification, and update their information at the bank branch physically.

    Customers of banks will be required to enroll within a fixed period after which they shall no longer be able to operate their bank accounts.

  • Nihilent backs banks’ drive for improved IT Standards

    Nihilent backs banks’ drive for improved IT Standards

    Nihilent Nigeria, a global consulting and solutions Integration Company has expressed its commitment in assisting banks to improve their Information Technology (IT) infrastructure.

    Its Chairman, Oti Ikomi told participants during a forum on optimising IT standards implementation about Nihilent’s operations and services offerings.

    He said the event which took place in Lagos was to support firms’ compliance to Central Bank of Nigeria’s (CBN’s) IT requirements for banks and other operators in the economy.

    A statement from the firm said the event witnessed participation from most of the leading banks in Nigeria as well as non-banking financial institutions, payments, insurance and IT companies, and few conglomerates.

    “Banks and financial institutions are looking for a solution that not only addresses regulatory compliance but also improve operational efficiency, install a robust regulatory information management system, and follow effective risk management practices.

    “The seminar focused on providing a brief on mandatory frameworks, commonalities and differences, and the adoption of an integrated approach to optimise efforts, reduce cost and meet CBN timelines,” it said.

    Also, Vice President, Quality and Processes at Nihilent, Ashok Sontakke said adopting the standards would involve massive change of management affecting people, processes and technology. He also said that many of the prescribed standards have commonality and overlapping requirements.

    “So it is essential to identify the same at the beginning of this improvement journey and build optimised Quality Management System. This can result in significant effort and cost saving and also help in meeting CBN timeline,” he added.

    CBN Principal Manager, Shared Services, Aaron Yaduma, commended the Nihilent for organising the event to educate the industry.

     

  • CBN stops AMCON debtors from taking loans

    CBN stops AMCON debtors from taking loans

    The Central Bank of Nigeria (CBN) yesterday banned debtors with delinquent facility taken over by the Asset Management Corporation of Nigeria (AMCON) from taking fresh loans.

    CBN Director, Banking Supervision, Mrs Tokunbo Martins, said in a letter to banks, Development Finance Institutions and AMCON, that any fresh loans to bad debtors must be approved by the apex bank.

    She said, the CBN has ordered that no institution, shall without its prior written approval, grant a facility to a potential borrower who is in default of any existing facility to the tune of N500 million and above in the case of deposit money banks; and N250 million in the case of development banks and banks in liquidation.

    She said the prohibition threshold may be reviewed by the CBN from time to time with the aim of inculcating responsible and appropriate credit culture in borrowers.

    The policy, which takes immediate effect, applies, in case of defaulting corporate obligors, to their directors and or related interests.

    The CBN director said that any institution that contravenes the directive shall be slammed with the existing regulatory sanctions that may apply.

    Martins said the regulator had also noted with concern, the impunity with which some borrowers default on their loans in some institutions and yet are availed further credit facilities by other institutions under the same, or sometimes different identity.

    She said such practice could have the effect of triggering serial defaults and a buildup of non-performing loans which could negatively impact liquidity in the financial sector and ultimately hamper its stability.

    She explained that henceforth,  all institutions shall ensure that all returns on credit facilities granted, together with their performance status are rendered on Credit Risk Management System (CRMS) and reported to two credit bureaux.

    Martins advised lenders to always perform credit checks on a potential borrower on CRMS and from at least two credit bureaux, as part of credit appraisal process.

     

     

    She explained that where an institution fails to report a facility and or its status on the CRMS or to at least two credit bureaux, as required, it shall be considered as concealment and misrepresentation of a material fact and the institution shall be penalised in accordance with the relevant provisions of the Banks and Other Financial Institutions Act (BOFIA). Also, the Chief Financial Officer, Chief Financial Officer, Chief Compliance Officer or their equivalents shall be liable to sanctions in line with the relevant provisions of the BOFIA.

     

  • Customers file 4,142 fraud petitions against banks

    Customers file 4,142 fraud petitions against banks

    • CBN: depositors’ right to fair treatment breached

    Depositors filed 4,142 fraud related petitions against banks between March 2010 and last May, the Central Bank of Nigeria (CBN) has said.

    Director, Consumer Protection Department (CPD), CBN, Umma Dutse, said the petitions bordered on excess charges, unauthorised deductions, dishonoured cheques, cheque conversion, foreign remittances andAutomated Teller Machine (ATM) frauds.

    He was delivering a paper on “Banker/customer relationship: Expectations and Realities,” at a summit organised by the Banks Customers’ Association of Nigeria (BCAN) in Lagos.
    The theme was Value based banking: Banks and their customers.

    Dutse said the petitions were received from inception of the office when it was known as the Financial Policy and Regulation Department in March 2010 to May, this year.

    He said excess charges constituted over 50 per cent of cumulative petitions it received last month.
    Greed, poor service delivery and failure to adhere to the provisions of extant guidelines and agreements, he noted, were some of the factors that led to the petititons.

    Dutse said: “We have received many petitions where banks charged Commission on Turnover in excess of the provisions of the CBN guidelines, or where banks introduced fees that were not initially in the agreement between them and their customers. In these, and similar cases, the banks involved invariably breached the customer’s right to fair treatment.”

    BCAN President Uju Ogbunika said there was the need for banking to be conducted based on values and best practices. He explained that banking should go beyond promoting products and services, to taking steps that will boost the economy.

    Head, Consumer Protection Council, Lagos Office Tam Tamunokonbia regretted that customers often became victims of excess charges because they could not read the conditions attached to contracts. He advised lenders to respect customer’s rights to disclosure, provide written terms and conditions in simple language and legible words, adding that charges and fees should be made known to customers before opening their accounts.