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  • Inflation’ll drop to four per cent by 2015, says Sanusi

    Inflation’ll drop to four per cent by 2015, says Sanusi

    • MAN: no impact of low inflation on manufacturing

    The Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi has said inflation will ease further to between four and seven per cent by 2015.

    Speaking at the Chartered Institute of Bankers of Nigeria (CIBN) 50th Anniversary Awards Night held at the weekend, he said the apex bank has achieved a single digit inflation, which stood at 7.8 per cent by October.

    Inflation further declined from eight per cent in September to 7.8 per cent in October, the lowest since March 2008.

    The CBN lowered the inflation target band for next year from six to nine per cent, and expects low rates for the rest of the year.

    Sanusi said the naira, when compared with other African and global currencies, have been relatively stable, losing only 1.6 per cent of its value in the last one year.

    He said the CBN has also achieved its monetary policy objectives, based on the level of stability recorded in the financial services sector and economy.

    The CBN chief said the apex bank under his leadership has achieved exchange rate stability, banking sector stability and achieve single digit inflation target.

    He said the CBN has ensured that throughout the resolution of the banking crises, no depositor lost money. He said corporate governance and risk management issues that threatened the financial system had been addressed, adding that banks now understand and are aware that there are consequences for misdemeanour.

    Sanusi also said banks funded over 80 per cent of the power sector privatisation projects. The figure hits about N320 billion.

    However, President, Manufacturers Association of Nigeria (MAN), Kola Jamodu said there was need for the CBN to review interest rate downwards, adding that although inflation is declining, it has no impact on interest rate.

    He said inflation slide should be accompanied by a cut in interest rate. He added that borrowing at 25 per cent does not add value to any manufacturer or player in the real sector of the economy and that the manufacturing sector needs low interest rate to thrive.

    The Monetary Policy Rate (MPR), the benchmark rate by which the CBN determines interest rate, has been at 12 per cent in the past two years prompting manufacturers and other key players in the real sector to call for a review.

    Sanusi also said the biometric solution for banking would cost $50 million and would take off by next March. He said aside bank customers, capital market investors and pensioners will have their data captured through the biometric machine.

    He said the cost of the biometric would be borne by the industry and the CBN and that the new system, when it goes live, would promote the use of thumbprint as major means of identification in banks.

    Sanusi said the device would help in boosting Nigeria’s image internationally, deal with money laundering, tackle fraud, help extend credit to people without worrying about where to find them and who they are, that this would also help those who are not educated to use biometric to be part of the payment system.

  • CBN pegs weekly dollar sales in BDCs at $250,000

    CBN pegs weekly dollar sales in BDCs at $250,000

    Foreign exchange sales to bureaux de change (BDC) operators will remain at $250,000 per week per BDC, the Central Bank of Nigeria (CBN) has said.

    In a circular to authorised dealers and BDC operators, CBN Director, Trade and Exchange, Musa Batari, said the selling rate by the authorised dealers to BDCs shall be the prevailing interbank exchange rate plus a margin not exceeding one per cent.

    He said foreign exchange cash bought by BDCs from authorised dealers and the CBN shall be sold to foreign exchange end-users at a rate not exceeding two per cent margin above the buying rate.

    “For the avoidance of doubt, the margin shall be applicable to all funds to be retailed by BDCs regardless of sources of the fund,” he said.

    Batari explained that authorised dealers shall continue to render weekly returns on sales of BDCs while the BDCs shall render weekly returns on purchase from authorised dealers. He enjoined BDCs to keep adequate records of foreign exchange sale and purchases for purposes of monitoring by authorities.

    The CBN had earlier observed that some authorised dealers have continued to deal in ‘free funds’ without adequate documentation contrary to provisions of extant regulation.

    The regulator reminded the dealers that the circular is still in force and all dealings in foreign exchange must be supported with appropriate documentation and returns rendered to regulatory authorities irrespective of the source of the funds. It said dealers that violate the laws will be sanctioned.

    CBN in September, replaced Wholesale Dutch Auction System (WDAS) with Retail Dutch Auction System (RDAS) because of the ineffectiveness of the former in addressing hitches in the forex market.

    It also withdrew the licences of 20 bureau de change (BDCs) operators for violating forex rules, an indication that more licences withdrawal may be seen in future, should the violation continue.

    Under the RDAS, banks and other authorised dealers place bids on behalf of individual clients who qualify to buy forex at the official auction. The change from WDAS to RDAS allows the authorities to monitor more accurately various sources of forex demand and any potential duplication of forex demand in the system. Banks will remain responsible for all documentation requirements.

  • Success secrets for women in business

    Success secrets for women in business

    When it comes to the economy, you find women doing well in small and big businesses. From the market to the board rooms, you find them carving a niche for themselves. Unfortunately, however, a number of these businesses only thrive for a short period of time, leading to the death of great dreams and discouraging budding women entrepreneurs. Yetunde Oladeinde got some women in business to talk about the problems, prospects and how women can build successful business.

    TO be successful in all spheres of life requires hard work, dedication and understanding the rules. Many have achieved great heights in their businesses but there appears to be a number of odds facing female entrepreneurs in different parts of the country. The question on the lips of many is how they can they overcome the odds and what new skills needs to be learnt.

    Folakemi Fatope, Director, Risk Management of the Central Bank of Nigeria, CBN, believes that female entrepreneurs are dedicated but all that is required is support from necessary agencies locally and internationally. She also stressed that her boss, the Central Bank Governor, Sanusi Lamido, is very passionate about female entrepreneurs who have proved themselves. “Encouraging the advancement of women is something that he is passionate about. In our institution, seven women currently serve as directors as opposed to one when he joined. So as the first Risk Management Director, this department actually came up as a result of the challenges faced recently in the banking sector.”

    She recalled that it wasn’t quite easy stepping into a field that was considered a male area but she was determined to put in her best. “We also have other women as the director of branch operations, director in charge of medicals. During this period, we also established a Consumer Protection Department which takes care of literacy and complaints. In addition, we also have the Audit Department which is also new headed by another female director. “

    Fotope discloses that “We found that there was no female representative on the board and this was not acceptable. Apart from this the Central Bank under Sanusi has been advocating for gender-friendly banking facility. So we launched this in August considering the peculiarities of the economy and the challenges. We have therefore insisted that the procedures should be gender-friendly as well as ensure that women’s access to finance is increased to around the N220 billion set aside by the Central Bank. Of this figure, 60 per cent has been earmarked for women and this comes to about 132 billion naira.”

    On her part, Aisha Atta, Executive Director, Swan Elite, it is important to develop what she calls personal effectiveness skills. “This is needed to take responsibility for developing and managing yourself and the business. Here we are talking about your time, your relationships and support system. Other things you need to develop from time to time are your finance, your skills and other passions. This should be the concerns of the 21st century woman. Managing all this happily and hoping not to drop. You need to do a check list which would tell you how you are faring. You also need to ask yourself questions like how many appointments did you miss, do you spend time with your friend and if you spend quality time with your family.”

    Atta notes that women must know how to manage their time to get result: “Most times, we invest all the time in everything and not ourselves. The result is frustration and feeling that the family and people around us are ungrateful. We need to be self-full, proactive and not wait for others. Highly proactive people rise above the circumstance. When you are relaxed, you think properly. You also need to manage your time properly and focus on the important task. There are a number of things that are unique but not important. Sometimes, what you need to do is to delegate the chores and take a break. It is also important to know how to manage the people in our lives. You can even rate them as most tasking, most draining and most fulfilling.”

    Atta continues: “The people around you are your team. Find out what their skills and talent are, set effective goals and targets. Also, you need to find out what you need to do to get them to do what you want. You should also learn how to manage poor performance and not overload those who are performing. You also need to find out what motivates them because some people thrive on competition, or money and other incentives.”

    For Angela Ajala, the National President of Business and Professional Women in Nigeria, proper planning, networking and mentoring can make a difference. “Our organisation believes in supporting women to grow their businesses at all different levels as vital to their empowerment. BPW partners with the International Trade Centre (ITC), Commonwealth Business women, International Organisation of Employers (IOE) to increase the share of procurement secured by women vendors from 2011 to 2020 and bring greater economic benefit to women and their communities.

    “We encourage more women on boards and in senior decision-making roles. We are also part of the development of gender-based procurement programmes with the aim to increase participation on the ITC Global Platform for Action. Our core initiatives are the Women’s Empowerment Principles (WEPS) Equal Pay Day and Women Trade and Entrepreneurs. The WEPS is a joint initiative of The UN Women and the UN Global pact. We promote these principles through BPW’s large network of affiliates in more than 100 countries across the world. The WEPS provide a seven-point blueprint to empower women as well as offer a practical approach to advance women and point to a positive future for all.”

    Living a balanced life, keeping mind and body in good state, she advised, is also very important. “It is important to think about a good night’s sleep as more of an investment and not an expense. There is some research that says if you get a good night’s sleep that is what helps your brain encode and retain all the things you learn the day before. More work gets done with a solid night’s sleep.”

    Hajia Amina Ahmed, the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI) advises women to carve a niche for themselves and be credible in whatever area they find themselves. “NEITI is an agency enacted by law to ensure transparency in the oil and gas sector. We started operations in 2004 and in 2007 a law was established to make it legal. We strongly believe that the national resources from the sector should be used positively. At the moment, Nigeria is on the course to fight the resource cause and we need reforms in the oil and gas sector to ensure that the revenue accrued is used and not wasted. This way we can provide a better future for the younger generation.”

  • How CBN intervention will aid female entrepreneurs

    How CBN intervention will aid female entrepreneurs

    In the business sector women have indeed come a long way. However in spite of the achievements recorded, there are a number of setbacks which has been traced to lack of capital to fund their businesses. Bukola Afolabi takes a look at a fresh financial window for women entrepreneurs by the Central Bank of Nigeria.

    To make life better for female entrepreneurs, the apex bank recently announced a nine per cent interest rate on the N220 billion loans for Micro, Small and Medium Enterprises (MSMEs).

    Speaking at the formal launch of the MSMEs N220 billion fund at the 7th Annual MSMEs Finance Conference and D-8 Workshop on Micro-finance for SMEs in Abuja, CBN Governor, Mallam Sanusi Lamido Sanusi, also urged the microfinance banks to disburse the funds to individual beneficiaries at a single digit interest rate as this will strengthen the link between entrepreneurship and access to financial services.

    Sanusi also announced an interest rebate component for women in the fund to the extent that women entrepreneurs who borrow from MFBs (Micro Finance Banks) are able to access these funds for interest rate subsidy which ensures that they do not pay more than nine per cent interest on loans.

    He explained that the CBN would not be lending directly to businesses, but that the loan would be disbursed through the MFBs.

    Sanusi stated: “The CBN will not be lending directly to farmers or businesses. What this fund does is a wholesale fund. It provides funding to the participating financial institutions. If you are a microfinance bank in Benin, you can come to this fund. We assess you; we give you the money at low rate of interest long term, and then you undertake that you will lend at low rate of interest. Today, commercial banks charge 21 per cent and MFBs charge 30 to 40 per cent interest rate. We are not going to get anywhere near there”.

    Sanusi informed that: “These are small businesses that are highly profitable, highly risky and MFBs tend to charge higher and the greatest challenge is not really the interest rate, but the tenor. If you give someone money for two, three months, how much can he really do in such a short time? The way we plan it is that you start with a small amount, relatively low rates of interest and relatively longer tenor. When the MFB repays and establishes a track record, it is entitled to move to another level where it can get a large amount, lower rate of interest and a longer tenor”.

    The fund, announced last year, had been delayed because of the need to accommodate inputs from stakeholders and address key regulatory framework to aid its successful implementation.

    Specifically, it targets 60 per cent intervention for women entrepreneurs including insurance, capacity building and interest draw back. The CBN had also unveiled plans to introduce financial literacy in schools curriculum.

    Loans and advances sought by Nigerian businesses are largely short term in nature. This, in addition to huge interest rates charged by banks, significantly reduces real economic growth, financial experts have noted.

    Based on statistics from the Central Bank of Nigeria (CBN), out of the N8.14 trillion the deposit money banks (DMB) have advanced to businesses and individuals in loans and advances, a huge 97.2 percent of the loans are one year tenor, leaving just 2.8 percent to long term facilities.

    Mr. Paul Nduka Eluhaiwe Director, Development Finance Department, CBN, disclosed this in Lagos at the special general meeting of the Nigerian Association of Small and Medium Enterprises (NASME).

    Represented at the meeting by Jeremiah Abba, of the Development Finance Department, CBN, the statistics is indeed troubling and something must be done urgently if Nigeria wants to experience real economic growth.

    “As at June 2013, total deposits in Nigeria’s deposit money banks stood at N10.3 trillion. The total banking and advances in the economy closed at N8.14 trillion. 97.2 percent of these loans and advances are one year tenor. Only 2.8 percent are long term loans,” he said.

    He also noted that there is a huge funding gap for Micro, Small & Medium Enterprises (MSMEs) and a targeted effort must be made to correct the trend as CBN recognises a positive correlation between strong MSMEs improved capacities and economic growth.

    As part of effort to encourage MSMEs to access credit, besides the single digit interest rate on most of its intervention funds, it is also lowering conditions on collateral.

    Thus, he said the CBN is targeting October 2014 to test-run the registry of movable collateral for credit access.

    When that occurs, MSMEs can access finance through the use of movable collateral items such as: jewelleries, collectibles,   stock of goods, plant/machinery.

    In his comments, the President, NASME, Alhaji Garba Ibrahim lamented that in spite the several financial windows opening up for MSMEs in Nigeria, the MSME operators hardly hear about them or benefit from them.

    He urged those opening up funding opportunities for the MSMEs to always carry NASME along so its members can benefit from the interventions.

    The Nation learnt that the apex bank will especially consider the financial health of the grassroots banks before they can serve as conduits for the new stimulus package being put together by the regulator to energise the economy through lending to small businesses.

    Investigations show that some operators are anxious over their eligibility for the scheme since it was launched by the CBN, and have commenced redeployment and realignments of resources and processes.

    Tunde Lemo, Deputy Governor, CBN, who could not admit that most of the banks were weak and likely to close shop, said the regulator “will look at the track record and financial health before we allow participation. They will only act as conduits as the funds will be channelled to the eligible micro small and medium enterprises (MSMEs).”

    Onoja Usman, managing director, Lovonus Microfinance Bank Limited, said “most MFBs would not be able to access the fund because of the stringent criteria the CBN is using for the loan. We understand that rating agencies are being used to determine those that merit accessing the fund.”

    According to Usman, the fund will only serve few MFBs, as MFBs that are units may not access the fund because of impaired shareholders funds, which is ditto for those already struggling to operate as result of lack of operational capital.

    Mathias Omeh, former president, National Association of Microfinance Banks (NAMB), expressed happiness that government had recognised them at last, saying “it is encouraging that government is remembering microfinance banks. We have been longing for it.”

    The implication, according to investigations, is that the banks, which are currently undergoing routine examinations by the CBN and NDIC, may have to face the challenge of being certified fit to participate by scaling through the routine examination.

    The guidelines for participation by the banks and finance companies include compliance with regulatory capital, prevailing prudential ratios, average deposit growth rate of 20 percent per annum (for institutions operating for over two years), and average clientele base growth rate of 20 percent per annum (for institutions operating for over two years).

    The guidelines also include risk management framework and corporate governance culture acceptable to the regulators, degree of separation of ownership from control/management, and number of non-performing insider related facilities, among others.

    According to details released by the CBN, the participating financial institutions (PFIs) will include non-governmental organisations (NGOs) and micro-finance institutions, which will be able to access funding at an interest rate of 9 percent per annum, and lend it to other entities with a spread of up to six percentage points per annum.

    The scheme is expected to provide liquidity to PFIs on a maximum three-year tenor, with most institutions limited to N5 million or N10 million, but national microfinance institutions will be able to access N1 billion.

    There will also be a credit guarantee scheme, covering up to 80 percent of any default under the scheme, which will also be available to other ‘deposit money banks.’ The guarantee will also have a maximum tenor of three years, and attracts a fee of 1 percent of the guarantee’s face value, payable back to the CBN administered fund.

    The CBN shall appoint managing agent to manage the MSMEs fund and its day-to-day operations. It shall have a steering committee constituted in line with its approved shareholding structure and chaired by the governor of the CBN.

    The bank further said that a combination of the following collaterals shall be accepted by the managing agent as security for the exposure to PFIs; legal mortgage over acceptable and appropriately valued assets including undeveloped land, guarantees from promoters of PFIs and their partners that is acceptable to the managing agent, and any other collateral acceptable by the managing agent from time to time. 32 of such microfinance banks have already been selected.

    Sanusi said CBN had also established six Entrepreneurial Development Centers (EDCs) across the country to encourage and build capacity for business minded youths.

    He said: “Through the EDCs, we equipped them with requisite entrepreneurial skills to develop their concepts into businesses and effectively manage such businesses. Our financial inclusion strategy also provided for youth empowerment and access to financial services.”

    “This is because we see the link between entrepreneurship accesses to financial services. Towards this the bank launched its MSMEs Fund on Aug. 15, 2013.”

    The guidelines published on the apex bank’s website defines micro enterprise as sole proprietorships with less than 10 employees and total assets of N5 million excluding land and buildings; while SMEs are those with asset base of between N5 and N500 million and 11 and 200 employees. It also defines women-owned enterprises as those belonging to Nigerian women groups or individuals, or enterprises that are at least 75 per cent owned or operated by female Nigerians.

    Another N22 billion or 10 per cent of the fund is earmarked for social and developmental objectives, with N11 billion to be used as grants to develop the MSME sub-sector; another N6.6 billion as interest drawback programme (to settle rebates to customers of participating financial institutions who repay their loans as and when due); and N4.4 billion or 2 per cent for the managing agent’s operations (take-off) expenses.

    Afterwards, the CBN expects the managing agent to “to generate income from its operational activities to fund its future expenses on a sustainable basis.”The remaining N198 billion or 90 per cent of the fund, according to the CBN, will be used for the provision of direct on-lending facilities to participating financial institutions (PFIs).While N118.2 billion is earmarked for women entrepreneurs, the remaining N79.2 billion is for others.

    A further breakdown shows that N106.92 billion of the fund is allocated to women entrepreneurs; and the remaining N71.28 billion to ‘others;’ while another N19.8 billion is for refinancing guarantee, with N11.88 billion for women and N7.9 billion for others.

    Speaking with a cross-section of prospective beneficiaries, they confided in The Nation that the intervention fund was a right step in the right direction.

    Firing the first salvo, Mrs Lucy Kanu, the Chief Executive Officer, Lucy Initiative, Lagos, said the low interest rate would enable women to have access to loan facilities to grow their businesses.

    Echoing similar sentiments, Adaeze Victor of Global Women Venture, expressed optimism over the development but however noted that the modalities should be streamlined to encourage equal participation by the targeted group.

     

  • Dud cheques: Culprits beware!

    Dud cheques: Culprits beware!

    The Central Bank of Nigeria has raised the alarm over the rising incidence of dud cheques with estimates for the numbers processed in the last 12 months totaling N166billion alone, a development, the apex bank considers unhealthy for the nation’s financial system and feels very strongly that a review of the Dishonoured Cheque Offences Decree of 1977 would curb the excesses, reports Ibrahim Apekhade Yusuf.

    Of all the extant laws operating in the country, the Dishonoured Cheque Offences Decree of 1977 is one of the laws being criminally observed in the breach.

    The Nation can authoritatively report that 36 years after the legal framework for ensuring strict eradication of dud cheques took effect, rather than abate most Deposit Money Banks in the country have had the misfortune of processing high volumes of dud cheques in their daily transactions, in recent times.

    A worrisome trend

    To analysts who have studied the trend, they can hardly understand the steadily but alarmingly high degree of non compliance judging by the upsurge in the crime.

    From a paltry volume of N9billion in 2005, statistics obtained from the CBN shows that in the last 12 months alone, banks have processed over and above N166billion dud cheques.

    This value, according to the CBN, indicates an enormous volume of dishonoured cheques in the financial sector.

    Apparently miffed by this development, CBN Deputy Governor, Corporate Services, Alhaji Suleiman Barau, said that the issuance of dud cheques needed to be discouraged as it could erode the confidence in the banking sector.

    He spoke in Abuja last Wednesday through the Director, Legal Services, CBN, Mr. Simon Onoketu, at a two-day national stakeholders’ workshop on dishonoured cheques in Nigeria.

    The deputy governor admitted that enforcing the law on dud cheques was still a big challenge to the banking sector.

    He said the menace of bounced cheques had the potential of eroding confidence in the banking sector as well as discouraging Foreign Direct Investment (FDI), adding that the CBN intends to create a system where dud cheques are discouraged.

    He, however, said that the apex bank had begun to use the apparatus in the banking sector to discourage the issuance of dud cheques.

    Barau said, “Generally, enforcement is a big challenge for us as a country. But what the regulatory authority has done is to ensure that we use the apparatus of the banking system to say if on three occasions, you issued a dud cheque, you should not be allowed to have anything to do with the banking system.

    “Now, what that does is that you are marked as somebody who has the propensity to run down the banking system and so what we are trying to enthrone is a situation where you are reported formally to the Economic and Financial Crimes Commission, for instance, and what that does is that you will be prosecuted.

    “So, we expect that once the arrangement that we have put in place works, we will get to a point where people will know that if you issue dud cheques, you are likely to end up in prison.”

    Echoing similar sentiments, a Commissioner with the Law Reform Commission, Prof. Osaremen Osunbor, in a keynote lecture said a situation where culprits of dud cheques were allowed an option to pay a fine of the sum of N5,000 as stipulated by the existing Act was counter-productive and ineffective in the present economic reality because the value of the Naira had since depreciated as a result of inflation.

    He also argued that the current definition of dud cheques needed to be clarified and expanded to go beyond the notion of having insufficient funds in the issuer’s bank account.

    According to him, those who issue such cheques could deliberately append irregular signatures including other conscious errors to cause their cheques to bounce.

    Osunbor said there was need to revisit the two-year imprisonment term, which had the option of fine as stipulated by the Act.

    He, therefore, challenged the CBN to do more to reduce the menace to the barest minimum by mandating banks and victims to report all incidences of bounced cheques.

    Also speaking at the occasion, the Chairman, Independent Corrupt Practices and Other Related Offences (ICPC), Mr. Ekpo Nta, said there had been increased cases of dishonoured cheques in the commission in recent times. This, according to him, could affect the image of the country as well as the atmosphere for doing business in the country if allowed to continue.

    Not a question of the law

    In the view of the CBN and other experts, the law in its current form can not effectively discourage the issuance of dud cheques.

    But not many people share CBN’s sentiments.

    Speaking with The Nation over the weekend, Mazi Okechukwu Unegbu, Chairman/Chief Executive, Maxifund Investment Securities Plc, said there was virtually nothing wrong with the law.

    “Any law is as good as those who operate it. If a law has been made the onus lies on the people to obey it. It is as simple as that. My take is that if you are given a bounced cheque, simply go to court. Even if you amend the law one million times, those who will flout it will do so with impunity,” he argued.

    Sharing a personal experience, Unegbu, a lawyer, and erstwhile President of the Chartered Institute of Bankers of Nigeria (CIBN) recalled that he once made legal representation for a client who got a bounced cheque and got reprieve from the court.

    “A client of mine was once issued a dud cheque by someone. As soon as I was notified, I wasted no time in going to court. What we did was to file a civil and criminal proceeding against him and as you would expect, he begged us to settle out of court and had to pay up the money in contention because he knew he risked two years jail term if we pressed for prosecution,” he recalled.

    Pressed further, he said: “Of course, I’m very sure that particular individual would be the last person to issue another dud cheque in the future to someone else. He would say never again.”

    Mr. Adetola Adekoya, a human capital development expert with over three decade’s cognate experience in the banking and financial services sector, is also on the same page with Unegbu.

    As far as Adekoya is concerned, “it is not the issue of whether the law is weak but its applicability. The Dishonoured Cheque Offences Decree, to all intent and purpose, is adequate enough. It has always been there but the problem really is with the enforcement of the law. That is what I think is the real issue here.”

    Psychology of dud cheques’ culprits

    For most crime investigators, one better way to unravel the motive for a crime is to first of all understand the psyche of the perpetrator of such a crime.

    Adekoya, who is also Project Consultant and Chief Operating Officer, School of Banking Honours, Lagos, one of the acclaimed innovative enterprise institutions in the country, offers a plausible explanation on the psyche of dud cheques culprits.

    According to him, “You really have to go into the minds of those who issue fake cheques to know how it works because individuals would always find justification for any crime they commit.”

    He however, said matter-of-factly that: “Those who issue dud cheques fall into two categories. Category A are those who deliberately and fraudulently issue cheques with the intent to deceive the recipients while category B are those who are forced by circumstances to issue same when there is an uncertainty surrounding their revenue profile.”

    Expatiating, he said: “For instance, if you get lease from a bank to buy a car they normally would ask you to present to them a postdated cheque as part of the repayment plan. So if your income projection for a particular month is not met, automatically, your cheque for that month, would bounce so it doesn’t mean that you set out from the outset to deceive your bank. You just have problem of cashflow. Naturally, you fall into category B, whereby your revenue profile is not certain.

    “We have more of category B now compared to category A because of the advent of the EFCC. But it never used to be like that in the recent past when we had high incidence of dishonoured cheques issued by criminally-minded and fraudulent individuals.

    “Category A used to be in higher proportion before but it is coming down now but we now have more of those who are not certain about their revenue status and such can’t redeem their financial obligations as and when due. It is not that they deliberately set out to issue those cheques.”

    Best practice

    While sharing best practices abroad, Adekoya said: “In the developed countries, in order to avoid falling into category B, you can do insurance in an instrument, in which case if it fails, you’re protected or indemnified as the case may be. Everything is insurable in the developed countries. You can buy a ring now, and the next minute you are asked to insure it. You buy a phone, you insure it. It is as simple as that. We don’t do such here because insurance has still not attained its full market potential as we have abroad.”

    Onus of whistleblower

    Between the bank and the recipient, opinions are that the latter is mandated by law to blow the whistle on the party who issued the dud cheque in the first place.

    “The beneficiary naturally should blow the whistle on the issuer because it is he who is not able to get the value of his money on the basis of maturity of the cheque. But I know also that the law provides that if he is not able to claim this money for upward of three months, that’s when it becomes a full crime and then the recipient, can go to court and press for charges,” informed Adekoya.

    Unegbu and a cross-section of analysts and experts all concur that the recipient of a dud cheque has the right to take the issuer to task because he has been so wronged.

    “I know that if a cheque bounces, the issuer must make payment within three months, failing which he goes to jail and pays a fine. The original cheque can suffice without necessarily reissuing another one,” deadpans Umar Lukman, a credit analyst in Lagos.

    Awareness is okay and everybody knows it is a crime to so issue a dud cheque even the banks have posters pasted in the banking hall warning about it. What needs to be done is ensuring that those who still flout this law are made to answer for it. Simple.”

    Renewed vigour on awr against dud cheques

    The banks have also been directed to intensify their campaign against the practice by placing posters on the sanction for offenders in their banking halls.

    A CBN staff who asked not to be named disclosed that as part of a new impetus against dud cheques, the apex bank has endorsed the special website in which offenders’ names are sent to would be made available to the EFCC for necessary action. The implication, he said, is that very soon, operatives of EFCC would start picking up defaulters in connection with the offence. To create the necessary awareness among Nigerians, he said that banks had been mandated to put up posters in their banking halls, warning people of the consequences of issuing dud cheques.

    Further checks by The Nation revealed that many banks have pasted the posters in their halls. The posters, with dominant red background, read: “Be warned! Issuance of dud cheques is a serious financial crime. Two years jail term awaits offenders.”

    The posters were said to have been sponsored by the Bankers Committee, an organisation of chief executives of the nation’s banks, CBN and the Chartered Institute of Bankers (CIBN), among others.

    It was learnt that the management of the banks had handed the task over to an elite group in top management to supply information to the dud cheques website set up by the CBN.

    The password to this website is in the exclusive possession of the group. The CBN’s game-plan is besides making the names available to relevant government agencies, to avail banks of such names in order to effectively monitor their activities.

    The scheme will also be used as a credit-rating system for individuals. The rating technique obtains in Brazil as issued cheques are rated up to five stars depending on the credibility of the issuers. An issuer with impeccable record of financial dealings usually has his cheques marked with five stars at the back of any cheque issued by him. The rating ranges from one star to five stars.

     

  • How CBN threatens N2trn revenue, 300, 000 jobs

    How CBN threatens N2trn revenue, 300, 000 jobs

    The Central Bank of Nigeria (CBN) through its actions and inactions may be directly responsible for the non realisation of a projected N2trillion annual revenue window for the Federal Government as well as jeopardising the creation of over 300, 000 jobs, The Nation has learnt.

    At issue is that the apex bank is delaying the roll-out of the planned implementation of the September 14th Master Services Agreement signed on Friday, September 14th, 2012, between the Nigerian Postal Services and the School of Banking Honours, in which the latter was appointed as an agent by NIPOST to engage all banks and other financial institutions operating in the country to comply with the Stamp Duty Act requirement of affixing postage stamp of N50 to any transaction receipts that is worth N1, 000 and above.

    Briefing newsmen on the development, at the corporate headquarters of the School of Banking Honours, in Lagos, recently, Mr. Adetola Adekoya, Project Consultant/Chief Operating Officer of SBH, revealed that all efforts to get the apex bank to issue the compliance circular to the banks and other financial institutions in aid of the stamp duty collection has proved abortive.

    According to him. “We have been urging CBN through various meetings and consultations, to hasten release of its compliance circular that will guide banks and other financial institutions on the effective implementation of Approval Letters given by CBN to School of Banking Honours (appointed Agent of NIPOST). We became worried when private sector banks actually commenced their own charges on cashless transactions since 1st October, 2013, while NIPOST Statutory stamping, was being delayed.

    “We therefore sought to draw the attention of President Goodluck Jonathan to our plight, particularly as 300, 000 jobs are being targeted on the NIPOST assignment and the government is losing about N2trillion revenue annually.”

    The Stamp Duty Act 2004, was amended in 2010, with amount chargeable per transaction receipts increased from N40-N50, irrespective of amount involved with N1, 000 as baseline.

    The law also covers loan agreements, deposit agreements, staff employment contracts, staff promotion letters, purchase order agreements and any other agreement covered by the law.

    Exceptions to this rule are bank tellers or “receiving” cheques, drafts and any other negotiable instruments that are already duly stamped.

    In a telephone interview with the CBN spokesman, Mr. Ugochukwu Okoroafor, he confided in The Nation that he was not aware that the CBN was supposed to issue a compliance letter but pleaded for more time to investigate the matter.

    Further checks by The Nation revealed that the CBN had in two separate letters dated November 5th 2012 and December 3rd, 2012, acknowledged receipt of a letter written by the School of Banking Honours and dated September 27th, 2012, where the apex bank declared matter-of-factly that it had no objection, whatsoever of plans by the NIPOST appointed agent to collect stamp duty on behalf of the Federal Government.

  • Cash-less banking for states in June

    Cash-less banking for states in June

    Cash-less banking, which began in Lagos last year, will go nationwide before the end of June, next year, according to Central Bank of Nigeria (CBN) Deputy Governor, Operations Mr Tunde Lemo.

    Anambra, Ogun, Rivers, Kano, Abia and the Federal Capital Territory (FCT) adopted the policy last June.

    Speaking during the Nigeria Inter-bank Settlement System (NIBSS) 20th anniversary in Lagos, Lemo said the use of mobile phones and Point of Sale (PoS) terminals in implementing the policy remained critical.

    “That is a challenge that we are also working on. If mobile phones can serve as a touch point, our transactions would go up rapidly. So, these are some of the things we are looking at, hoping that by next year, as we roll out more PoS machines, we have to see how we integrate the mobile phones into the network because in the hinterlands, the challenges would be more. We hope to roll-out to all the state capitals by the second quarter of next year,” he said.

    Lemo said an effective payment system was going to be an effective anchor for the transformation of the economy even as the nation strives to be one of the 20 biggest economies in the world by 2020.

    CBN Director of Communications Ugochukwu Okoroafor said the policy was meant to reduce the amount of physical cash circulating in the economy and encouraging more electronic-based solutions for payments for goods and services, transfers among others.

    Since the project was introduced in 2002 in Lagos, many commercial banks have, through emails, text messages and formal letters been sensitising their customers on the need to embrace alternative payment options.

    In an emailed statement to its customers, GTBank said the policy will drive the development and modernisation of Nigeria’s payments system within the Abuja and selected states. It said all individuals and corporates will be encouraged to adopt electronic payment and other banking options.

    The policy, which before now was only operational in Lagos State in terms of charges, is aimed at promoting the use of electronic-based transactions instead of cash for payments for goods, services, transfers among other services.

    The implementation of the ‘Cash-less Lagos’, as it is known, began eary last year and has recorded improvements is the use of PoS, Automated Teller Machines (ATMs) and other e-payment tools.

    The service charges/fees did not apply until March last year, in order to give people time to migrate to electronic channels and experience the infrastructure that has been put in place.

    The policy framework stipulates that cash-in-transit lodgment and cash evacuation services will no longer be available to customers or merchants. For individual account holders, charges on cash transactions will apply when daily withdrawals and deposits are in excess of N500,000 while for corporate account holders, charges will apply when daily withdrawals and deposits are in excess of N3 million. It is the account to which withdrawal and lodgment is made that bears the processing charges and not the individual that receives or deposits the cash.

    However, the CBN granted exemptions on lodgments and withdrawals for accounts operated by embassies, diplomatic missions, multilateral agencies, aid donor agencies, Ministries, Departments and Agencies (MDAs), Microfinance Banks (MfBs) and Primary Mortgage Institutions (PMIs).

     

  • Banks get N5.7tr CBN loan to boost liquidity

    Banks get N5.7tr CBN loan to boost liquidity

    The Central Bank of Nigeria (CBN) has lent banks and discount houses N5.74 trillion to boost liquidity. The figure is an increase of 124.4 per cent compared to the N2.56 trillion in the preceding quarter.

    The fund, which came as Standing Lending Facility (SLF), was granted in the third quarter, which ended in September, at 14 per cent. The SLF is an overnight credit available on banking days between 2 pm and 3.30 pm, with settlement on the same day value.

    Also, the total Standing Deposit Facility (SDF) was N14.3 trillion during the third quarter, representing an increase of 135.1 per cent over the level in the preceding quarter.

    According to the CBN, banks’ deposits at the apex bank increased by 14.8 per cent to N7 trillion in contrast to the decline of 10.2 per cent at the end of the preceding quarter. The development reflected largely, the 75.4 per cent rise in banks deposit, which more than offset the 32.5 and eight per cent decline in the deposits of others’ and Federal Government, respectively.

    The CBN attributed the significant increase in activities in the standing facilities window mainly to the banks’ preference for depositing their overnight balances at the discount window rather than placing them at the interbank.

    It explained that money market rates were influenced by the liquidity condition in the banking system arising from the introduction of the 50 per cent Cash Reserve Ratio (CRR) on all public sector deposits, coupled with the delay in the release of fiscal allocation.

    The CBN had on November 19 Monetary Policy Committee (MPC) meeting maintained the Monetary Policy Rate (MPR) at 12 per cent, and kept the symmetric corridor of plus two per cent around the MPR for SLF. However, the SLFs are available only to banks and discount houses that have executed the Nigerian Master Repurchase Agreement (NMRA) with the regulator. The NMRA covers the operations of the SLF and addresses issues relating to pricing, duration, custodian as well as default resolution in lending.

    The Liquidity Ratio Cash Reserve Ratio (CRR) and the Net Open Position were also retained at their preceding quarter’s levels of 30, 12 and one per cent.

    It said discount window also remained open to authorised dealers to access both the standing deposit facility (SDF) and standing lending facility (SLF). Overall, developments in money market indicators were mixed in the review quarter.

    The CBN said that the value of money market assets outstanding at the end of the third quarter stood at N6.5 trillion, showing an increase of 0.34 per cent, compared with the increase of 5.96 per cent at the end of the preceding quarter.

    The development was attributed, to the 94.13 and 53.15 per cent increase in banks investments in Commercial Paper and Bankers Acceptances outstanding during the period under review.

    There were also mixed developments in banks’ deposit and lending rates during the third quarter. The average savings deposit rate, which rose to 2.44 per cent from 2.04 per cent in the second quarter, all other rates on deposits of various maturities fell from a range of 5.69 per cent to 7.72 per cent to a range of 4.92 to 7.55 per cent in the third quarter.

    The weighted average inter-bank call rate, which stood at 11.69 per cent at the end of the second quarter of 2013, rose by 2.34 percentage points to 14.03 per cent in the third quarter of 2013, reflecting the liquidity condition in the banking system.

    Similarly, the weighted average rate at the Open Buy Back (OBB) segment rose to 14.14 per cent at the end of the review quarter from 11.27 per cent in the preceding quarter. The Nigeria Inter-bank Offered Rate (NIBOR) for the seven-day and 30-day tenors rose to 13.79 and 13.95 per cent from 12.19 and 12.46 per cent, in the preceding quarter.

     

     

     

     

  • NIBSS honours Lemo, others

    The Nigerian Inter-Bank Settlement System (NIBSS) has honoured a Deputy Governor of the Central Bank of Nigeria (CBN) and NIBSS Chairman Mr. Tunde Lemo, for his contributions to the organisation and banking.

    The frontline banker got the award at the weekend in Lagos during NIBSS’ 20th anniversary.

    Other dignitaries that got honours were two former NIBSS chairmen – G. Obasanha and Vincent Omoike – and ex-NIBSS Managing Director Owolabi Paul.

    Lemo praised the directors and the former chairmen of the organisation for supporting the NIBSS.

    He said: “Today, we are celebrating a successful institution by all standards and, by extension, we are also celebrating the entire workforce of NIBSS.

    “When we decided to celebrate the 20th anniversary, it was not just a number. I think it is the landmark achievement of the NIBSS that we are celebrating. We couldn’t have been here today but for the foundation that these men have laid.”

  • ‘CBN targets single digit inflation in 2014’

    ‘CBN targets single digit inflation in 2014’

    The thrust of the Central Bank of Nigeria’s (CBN’s) monetary policy in retaining the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) 12 per cent is to achieve a lower rate of inflation on a more sustained basis, Head of Research Africa, Standard Chartered Bank, Razia Khan, has said.

    In an emailed report obtained by The Nation, she said there was a suggestion that the CBN will not rest on what it has already achieved as it concerns inflation, adding that merely getting to a single digit inflation is not good enough, she argued.

    “Although not a hard inflation target in the strict sense of the term, this does send a clear signal to markets to continue to anticipate a tightening bias to policy, especially if pressures increase,” she said, adding that the outcome of the last Monetary Policy Committee (MPC) meeting was largely as anticipated, with the MPR and CRR on public sector deposits, and the CRR on private sector deposits all kept on hold.

    However, the analyst said there was a distinct hawkish tone to the commentary, as a means perhaps of preparing the market for further tightening next year, with the talk of six-nine per cent inflation rate throughout 2014,

    “The CBN is not complacent on the inflation outlook. While everyone has been looking at the deceleration in headline inflation in October, the CBN rightly points out the pressures on core inflation in fact, both the year to year and month to month October headline print were slightly higher than we had anticipated, notwithstanding the best headline inflation data in Nigeria since March 2008,” she said.