The Nation Newspaper

Tag: cbn

  • Palliatives for motorcyclists

    Palliatives for motorcyclists

    Kaduna State Governor Ramalan Yero has said the government was taking steps to provide tricycles and other palliatives for motorcyclists, following the May 21 ban on commercial motorcycles.

    Receiving a Central Bank of Nigeria (CBN) delegation in his office, Yero said the government has concluded arrangements to buy additional tricycles and was ready to provide skill acquisition training for motorcyclists willing to change trade.

    The governor said his administration was committed to human capital development, noting that there was need for the apex bank to review its Trust Fund Model (TFM) aimed at assisting small scale farmers and businesses with funds.

    “I am ready and the state is ready to revive the TFM but the CBN needs to come up with a reviewed model. The present model needs to be looked into critically so that it can work for Nigerians.”

    The governor blamed commercial banks for the challenges being faced by the TFM, lamenting failure by beneficiaries to pay back loans.

    “You know we are in democratic period and people see government money as free money. The beneficiaries hardly pay back.”

    The governor suggested that the CBN should come up with a TFM that will take care of the peculiarities of each state

  • CBN urges policies to address inequality

    The Central Bank of Nigeria (CBN) has urged the federal Government to come up with policies to address the issue of inequality and unemployment to complement the success of its reforms.

    Represented by the Deputy Governor, Corporate Services, Mr Suleiman Barau, the CBN Acting Governor Mrs Sarah Alade appealed to the Federal Government to focus on diversifying the economy from oil dependence to agro and industrial based economy.

    “The successes achieved over the years could not have been possible without the right legal framework,” Mrs Alade said in Abuja while speaking at the first national seminar on Banking, Finance and Matters for Legislators.

    Sshe canvassed for the strengthening of the autonmy of the CBN to enable it enjoy full independence as currently obtains around the world.

    Senate President David  Mark who also spoke at the event said a situation where banks declare huge profits while the sectors they are supposed to finance are suffering under what he described as “harsh and unbearable terms” must be addressed.

    Represented by the Chairman, Senate Committee on Planning, Senator Barnabas Gemade, he said: “A lot has been said in financial sector reforms but much needed to be done to arrive at the desired destination.”

    He said the Senate president will help to bring about an all-inclusive growth for the benefit of all.

  • CBN seeks constitutional backing for Sovereign Wealth Fund

    CBN seeks constitutional backing for Sovereign Wealth Fund

    The Central Bank of Nigeria ( CBN) yesterday asked the National Conference to provide constitutional backing for the Sovereign Wealth Fund (SWF).

    The apex bank highlighted the necessity for the country to save for the rainy day.

    The bank also said there was need for the creation of the office of Accountant-General for Federal Government which would be separate from the existing office of the Accountant-General of the Federation (AGF).

    Acting Governor of the apex, Dr. Serah Alade, who made the demand while the National Conference Committee on Public Finance,  invited her for a chat, noted that it was necessary to invest for the future.

    Alade was represented at the briefing by the bank’s Deputy Governor, Corporate Services, Alhaji Suleiman Barau.

    Alade said: “Nigeria’s Sovereign Wealth Fund was intended to replace the Excess Crude Account (ECA) in order to provide long term savings for economic stabilisation, infrastructural development and generational equity.

    “The ECA has been criticised as a mere arrangement based on a memorandum of understanding among the three tiers of government, thus necessitating the need for a constitutional backing for the SWF to provide for a stable long term saving to address the country’s infrastructure challenges, provide stabilization fund against the volatilities in oil prices/revenues and ensure generational equity.

    “This has been the basis of continuous demand to draw to meet budget shortfalls in the form of argumentation. It is thus, imperative to give constitutional impetus to the SWF established by the Federal Government.

    “We can no longer afford to continue to live from hand to mouth. Public sector savings have become the norm for resource-rich, resource-dependent economies and Nigeria should not be an exception. We must save for today and for future generations.

    “The consequences of operating the federation account as zero account could be mitigated by creating savings for the future generation, enhancing macroeconomic management, and improving economic planning. “Therefore, it is necessary to entrench the excess crude account which can be managed and invested by the CBN. In addition, the SWF could be included in the constitution.”

    The CBN boss warned that the lack of appropriate constitutional mandate to create the SWF, poses operational challenges, which has been the basis for legal contests by the sub-national governments.

    She said: “Our position is that there are rational and emotional sides. Rational side is that everybody saves. “Life is an investment that you have to have. On the emotional side, government should provide the structures to help the private sector. Government cannot employ everybody. May be we need to downsize. May be, the issue is still debatable.”

    Chairman of the committee, Senator Adamu Aliero noted that though SWF policy was not yet in the constitution, it was still necessary to save.

    He said: “It is true that there is no constitutional provision for the SWF, but we have to save for the rainy day. We will recommend to the main body the importance of including it in the constitution. There is a suit now challenging the constitutionality of the SWF. We have to save for the rainy day. Your recommendations are in tandem with the recommendations we received from other revenue agencies.”

  • CBN’s monthly credit to banks hits N653.7b

    CBN’s monthly credit to banks hits N653.7b

    The Central Bank of Nigeria (CBN) credit to banks and discount houses has hit N653.7 billion, The Nation has learnt.

    There are 21 banks and five discount houses in the country.

    The fund, which came as Standing Lending Facilities (SLFs), attracted N1.8 billion interest.

    The fund was given at 14 per cent interest. The SLF is an overnight CBN credit available on banking days between 2 pm and 3.30 pm, with settlement done on same day value. Funds were sourced from savings and foreign currency deposits, as well as accretion to unclassified assets.

    The CBN said credit to the domestic economy rose by 2.2 per cent to N12.2 trillion above that of the preceding month. This was attributed to the 2.6 per cent increase in banks’ credit to the private sector, which  offset the 4.9 per cent fall in credit to the Federal Government during the period under review.

    Total specified liquid assets of the DMBs stood at N5.9 trillion. The liquidity ratio fell by 1.1 percentage point below that of the preceding month and was 15 percentage points above the stipulated minimum ratio of 30 per cent.

    The loans-to-deposit ratio, which stood at 55.5 per cent, was two percentage points higher than of the preceding month, but was 24.5 percentage point below the prescribed maximum ratio of 80 per cent.

    Total assets and liabilities of the discount houses stood at N177.9 billion, an increase of 48.7 per cent above that of January. The development was accounted for by the 59.6 and 67.4 per cent rise in cash and balances with banks and claims on the Federal Government. The increase in total liabilities was attributed to the 116.2 per cent growth in money-at-call.

    Also, discount houses’ investment in Federal Government securities of less than 91-day maturity rose to N86.35 billion and accounted for 60.2 per cent of their total deposit liabilities. Hence, investments in Federal Government Securities was 0.2 percentage point above the minimum level of 60 per cent.

    Discount houses’investments on treasury bills rose by 134.5 per cent over that of the preceding month. Total borrowings by the discount houses stood at N42.4 billion, while their capital and reserves was N23 billion.

    Data indicated mixed developments in banks’deposit and lending rates.

    With the exception of the average savings, seven-day and over 12 months deposit rates, which declined from 3.27 to 9.80 in January to 3.26 to 9.68 per cent, other deposit rates of various maturities rose from 8.21  per cent to 9.40 per cent in the previous month to a range of 8.41 to 9.60 per cent.

    At 8.49 per cent, the average term deposit rate rose by 0.06 percentage point above that of the previous month. Similarly, the average maximum lending rate rose by 0.31 percentage point to 25.83 per cent.

    However, the average prime lending rate fell by 0.02 percentage point to 16.93 per cent during the review.

    Also, the margin between the average savings deposit and maximum lending rates increased by 0.32 percentage point to 22.57 per cent.

    In the interbank call segment, the weighted average rate, which stood at 11.98 per cent in the previous month, fell to 10.50 per cent in February.

     

  • CBN seeks backing for SWF

    CBN seeks backing for SWF

    The Central Bank of Nigeria on Tuesday asked the National Conference to provide constitutional backing for the Sovereign Wealth Fund (SWF).
    The apex bank highlighted the necessity for the country to save for the rainy day.
    The bank also said that there was need for the creation of the office of Accountant-General for Federal Government which would be separate from the existing office of the Accountant-General of the Federation (AGF).
    The Acting Governor of CBN, Dr. Serah Alade, who made the demands while the National Conference Committee on Public Finance invited her for a chat noted that it was necessary to invest for the future.
    Alade was represented at the briefing by the bank’s Deputy Governor, Corporate Services, Alhaji Suleiman Barau.
    Alade said: “Nigeria’s Sovereign Wealth Fund was intended to replace the Excess Crude Account (ECA) in order to provide long term savings for economic stabilization, infrastructural development and generational equity.
    The ECA has been criticized as a mere arrangement based on a memorandum of understanding among the three tiers of government, thus necessitating the need for a constitutional backing for the SWF to provide for a stable long term saving to address the country’s infrastructural challenges, provide stabilization fund against the volatilities in oil prices/revenues and ensure generational equity.
    “This has been the basis of continuous demand to draw to meet budget shortfalls in the form of argumentation. It is thus, imperative to give constitutional impetus to the SWF established by the Federal Government.
    “We can no longer afford to continue to live from hand to mouth. Public sector savings have become the norm for resource-rich, resource-dependent economies and Nigeria should not be an exception. We must save for today and for future generations.”

     

  • CBN, NDIC to inspect microfinance banks quarterly

    CBN, NDIC to inspect microfinance banks quarterly

    The Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) will, henceforth, look into the books of microfinance banks (MfBs) to ascertain their state of health.
    It is to check the lenders’ stress level, clean up of delinquent loans and reorganise their balance sheets to forestall unwholesome practices that resulted in the liquidation of many MfBs in the past.
    Last February, the CBN announced the revocation of licences of 83 MfBs. The closure of the institutions, according to the apex bank, took effect from December 20, last year. In view of the closure, the NDIC was appointed the provisional liquidator for their winding up.
    The NDIC has begun the process of winding up of the affairs of the affected MfBs. Findings showed that the inability of the firms to recapitalise was responsible for their closure.
    The apex bank gave MfBs up to December 31, last year, to recapitalise or be liquidated. Its Director, Other Financial Institutions, O.A. Fabamwo, said it was exigent to remind directors and shareholders of all MfBs that the deadline is sacrosanct.
    He, however, advised the banks to conduct due diligence and seek professional legal and financial advice. He also reminded directors and shareholders of all MfBs on the deadline to ensure compliance with the Revised Microfinance Policy Framework, particularly in respect of the capital requirements for each category of MfB and existing branches/cash centres, among others.
    Already, the CBN and other stakeholders have been carrying out intensive sensitisation of the subsector, educating operators on risk management and corporate governance principles.
    The CBN, which several months ago asked the MFBs to recapitalise, had categorised them under different amounts of capital base requirement. A unit MfB bank is authorised to operate in one location without branches/cash centres, and is required to have a minimum paid up capital of N20 million, while that of a state is expected to have a minimum paid up capital of N100 million. It is equally allowed to open branches within the same state or the Federal Capital Territory (FCT).
    But the national MfB is authorised to operate in more than one state, including the Federal Capital Territory (FCT). It is required to have a minimum paid up capital of N2 billion and is allowed to open branches in all states of the federation and the FCT, although subject to prior written approval by the CBN.
    Many of the MfBs being liquidated by the NDIC ran into trouble when many of their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of the MfBs were taking excessive risks, and branching out too quickly without considering resources at their disposal and whether utilised funds were short or long term obligations.

  • CBN issues Nov. 30 deadline to banks, others to be PCIDSS certified

    The CBN has urged commercial banks, switches and processors to be Payment Card Industry Data Security Standards (PCIDSS) certified by Nov. 30.

    This is contained in a circular issued by the CBN Banking and Payments System Department at the weekend in Lagos.

    The circular is entitled: “Timeline for PCIDSS certification by all deposit money banks, switches and processors.”

    The News Agency of Nigeria (NAN) reports that the PCIDSS is a framework used to prevent, detect and appropriate security incidents in payment operations among banks.

    The framework helps banks to ensure safe handling of cardholder’s information at every step.

    The bank said that it would sanction any bank that did not key into the PCIDSS before the date.

    The CBN added that from the pre-certification assessment it carried out, some banks were yet to comply with the mode.

    “In view of the above, all deposit money banks, switches and processors are required to be PCIDSS certified, on or before Nov. 30.

    “Please note that the CBN will invoke appropriate sanctions for non-compliance with the provision of the circular,” it said.

  • Finance Houses’ reforms await CBN governor

    Finance Houses’ reforms await CBN governor

    Operators of finance houses are awaiting the resumption of the Central Bank of Nigeria (CBN) Governor designate, Godwin Emefiele, for the conclusion of the subsector’s stalled reforms.

    Sources said the suspended CBN Governor, Sanusi Lamido Sanusi, sent a draft guideline to operators for review. The document, the source said, had been returned to the CBN and was awaiting Sanusi’s consent, before he was suspended.

    A source said the deployment of Deputy Governor, Financial System Stability, Dr. Kingsley Moghalu, to operations, also contributed to the delay.

    The source said the appointment of Adebayo Adelabu as Deputy Governor, Financial System Stability, will speed up the reform process.

    Part of the guidelines obtained by The Nation showed that the apex bank had given the operators 18 months to shore up their capitals to N100 million from N20 million.

    The minimum capital base for the subsector has been under debate between the CBN and operators.

    The sources said there are variousl investors who have carried out due diligence on the strengths and weaknesses of some of the finance houses but could not move in funds because the regulation in the sub-sector remains unclear.

    He said the issue on a new capital base for the subsector remains a critical factor that investors want to be acquainted with before staking their funds. This, he said, would ensure that only seriously minded operators are allowed to carry on the businesses of finance houses in the country.

    The ongoing reform in the subsector is expected to look at regulatory framework that will govern finance lease practice; institutionalise a funding pool to stimulate lending activities; structured programme to address the reputation and poor visibility challenges among other issues.

    The CBN in March 2012 gave a 30-day notice to 47 finance houses closed or inactive to submit evidence of their existence and/or operations, or lose their operating licences. The order had expired on Tuesday, April 18, 2012 and the banking watchdog is yet to conclude decision on the matter. The CBN said the affected finance companies had closed shop, ceased to operate, or abandoned finance company business.

    Some of the affected finance houses include Asset Management Group, Cal Finance Investment Limited, Capri Martins Finance Limited, Corporate Finance Group , Equator Capital Assets Management Limited, Eston Funds Limited, First Bond Finance Limited, First Spring Finance and Investment Limited, among others.

  • CBN pegs subsidiaries’ directors in HoldCos’ boards at 30%

    CBN pegs subsidiaries’ directors in HoldCos’ boards at 30%

    The Central Bank of Nigeria (CBN) has listed fresh conditions for holding companies (HoldCos) and their subsidiaries.

    According to CBN, the directors and top management of the subsidiaries, should, henceforth, not constitute more than 30 per cent of the HoldCos’ boards.

    FirstBank of Nigeria, Stanbic IBTC Bank and First City Monument Bank (FCMB) operate the HoldCo structure.

    CBN repealed the universal banking guidelines and introduced a new model in 2010 as part of efforts to reposition the industry. The new model allowed banks to retain non-core banking businesses by evolving into a non-operating HoldCo structure.

    Under the new rule, a HoldCo is expected to hold equity investment in banks and non-core banking businesses in a subsidiary arrangement. This arrangement seeks to ring-fence depositors’ funds from risks inherent in non-core banking businesses.

    The CBN said the appointment of such individuals into the board of HoldCos must also be approved by it, adding that where such an appointment is approved, the aggregate number of directors from the subsidiaries and associates at any point, shall not exceed 30 per cent of the membership of the board of the HoldCo.

    This position was contained in the CBN guidelines for licensing and regulation of financial HoldCo. Also, a financial HoldCo must have a minimum paid-up capital, which should exceed the sum of the minimum paid up capital of all its subsidiaries, as may be prescribed by the various sector-regulators from time to time.

    The HoldCos were also directed not to pay dividends on their shares, except all its preliminary expenses; organisational expenses; share selling commission; brokerage; losses incurred and other capitalised expenses not represented by tangible assets (excluding goodwill) have been completely written off.

    Also, adequate provisions would have been made to the satisfaction of the CBN for actual and contingent losses.

    “A financial HoldCo must ensure that its subsidiaries comply with the Capital Adequacy Ratio (CAR) prescribed by their respective sector regulators. A director or an insider-related individual shall not borrow more than 0.1 per cent of the financial HoldCo’s shareholders’ funds from the subsidiaries within the group, except with the prior approval of the CBN. The maximum loan to all insiders shall not exceed one per cent of the financial HoldCo’s shareholders’ funds,” the guidelines indicated.

    The guidelines also said a financial HoldCo shall be a source of financial and managerial strength to the subsidiaries. “In serving as a financial and managerial strength to its subsidiaries, a financial HoldCo shall maintain financial flexibility and capital-raising capabilities for supporting its subsidiaries.

    “It shall also stand ready to use available resources to augment capital funds of its subsidiaries in periods of financial stress or adversity,” it said.

    This guidelines, issued in exercise of the powers conferred on the CBN under the Central Bank of Nigeria Act, 2007(CBN Act) and the Banks and Other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria, 2004(BOFIA), complements CBN Regulation on the Scope of Banking Activities and Ancillary Matters, No 3, 2010 and is intended to facilitate understanding of the requirements for the adoption and operations of a financial HoldCo in the country.

    It said a financial HoldCo may acquire any permissible financial institution, subject to prior approval of the CBN. Where the target company is outside the supervisory purview of CBN, the prior approval of the relevant regulator will also be required.

    Also, a financial (HoldCo) that elects to change to mono-line commercial or merchant banking shall seek the prior approval of the CBN. “The promoters of financial HoldCo shall be required to submit a formal application for the grant of a financial HoldCo licence addressed to the CBN Governor,” it said.

    The CBN also said no financial HoldCo shall engage in any transaction or maintain any business relationship with any of its subsidiaries, except such transaction is conducted at arms-length; borrow from the Nigerian banking system for the purpose of capitalising itself or any of its subsidiaries; obtain a loan based on the guarantee of its banking subsidiary/associate, except where the loan is secured by dividend income or Service Level Agreements by the financial HoldCo for services to its banking subsidiaries.

    Besides, credit by a banking subsidiary to its HoldCo would be regarded as a return of capital and deducted from the capital of the bank in computing the bank’s capital adequacy ratio; Any bank lending to subsidiaries within its financial HoldCo group would attract 100 per cent risk weight (if it is fully secured) otherwise it would be removed from the capital of the bank when computing capital adequacy ratio.

  • CBN plans special clearing session for defaulters

    CBN plans special clearing session for defaulters

    The Central Bank of Nigeria (CBN) said a spe-cial clearing session would be introduced to cater for exigencies that fail to meet first clearing session timeline of 8am daily.

    The CBN said some deposit money banks (DMBs) appealed for the extension of between five and six minutes before 8.00 a.m. with reasons associated with data transmission.

    It said the Nigeria Interbank Settlement System (NIBSS) often obliged these request because turning down such requests would mean that the bank(s) would not be able to present cheques for clearing on that day, as fresh cheques are allowed only in the first session.

    However, such time extension, the CBN said, always put pressure on all other banks that have completed data transmission well before the 8am deadline, and such banks would not have access to their respective clearing report until noon.

    Explaining further, CBN Director, Banking and Payment System, ‘Dipo Fatokun said in a circular to banks that the practice puts the lenders under much pressure to return unpaid cheques by the third clearing session of 4.00 to 6.00 pm.

    “There is, therefore, an urgent need to minimise the risk of wrongful return of financial instruments. Consequently, the Nigeria Inter-Bank Settlement System (NIBSS) is hereby directed to close the first session at 8.00 am prompt daily, and open the 9.00 to 10.00 am special session for late transmissions of clearing instruments,” he said.

    Fatokun said bank(s) that transmits cheque instruments in special session will be charged a late transmission fee of N100,000 to prevent abuse. However, National Electronic Funds Transfer (NEFT) instruments would be permitted in this special session without any additional charge. This is to further promote electronic payments.

    The CBN director also said the use of presentation stamps on papers-based instruments shall be optional. Presentation stamp, which hitherto was mandatory, is no more relevant in the present dispensation, and is hereby made optional. However, usage of crossing stamp is compulsory.