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  • Why CBN Act (2007) should be amended

    Why CBN Act (2007) should be amended

    Therefore, any law that purports to take away from the National Assembly the power to appropriate expenditure arising from public fund is void to the extent of its inconsistency. Where are the checks and balances if the CBN Board that makes the budget is the same one that approves it? This is not how to exercise autonomy.

    Two: The CBN Governor is reported to have argued that the NA has, by the provision contained in section 6 (3) of the CBN Act, “donated” its power of appropriation to the CBN Board. One need not be a Senior Advocate of Nigeria to know that the legislature in a democracy cannot wholly donate a power donated exclusively to it by the Constitution, which is the suprema lex. It is a well-founded legal maxim that delegatus non potest delegare (that is, one cannot delegate a delegated authority) but even where partial delegation has been permitted in cases of this nature, the power of the delegator to retrieve the delegated power cannot be questioned. It is trite that he who has power to give also have power to take back. Can the CBN Board argue that the power to appropriate has been donated to it ad infinitum? This argument of the CBN is, therefore, grossly misplaced and without substance.

    Three: The Act should be amended to promote accountability and transparency. The CBN Act authorises the CBN to audit itself contrary to section 85 of the 1999 Constitution which authorises the Auditor-General of the Federation to carry out such function. Section 85 (2) of the Constitution states that “The public accounts of the Federation shall be audited and reported on by the Auditor-General who shall submit his reports to the National Assembly….”

    I refer readers to subsections (3) and (4) of section 85 of the said Constitution,  which provides as follows:

    (3) Nothing in sub (2) of this section shall be construed as authorising the Auditor-General to audit the accounts of or appoint auditors for government statutory corporations, commissions, authorities, agencies, including all persons and bodies established by an Act of the National Assembly, but the Auditor-General shall –

    (a) provide such bodies with –

    (i)   a list of auditors qualified to be appointed by them as external auditors and from which the bodies shall appoint their external auditors, and

    (ii) guidelines on the level of fees to be paid to external auditors; and

    (b) comment on their annual accounts and auditor’s report thereon.

    (4) The Auditor-General shall have power to conduct periodic checks of all government statutory corporations, commissions, authorities, agencies, including all persons and bodies established by an Act of the National Assembly.

    Notwithstanding the clear provisions of the Constitution on matters of audit, section 6 (3) (b) and (d) of the CBN Act provides that the CBN Board shall be responsible for:

    (b) the approval of the audited and management accounts and the  consideration of the management letter from the external auditors;

    (d) making recommendation to the President for the appointment of auditors in accordance with section 49 of this Act, the provision of the necessary facilities and the rates of remuneration.

    A juxtaposition of the constitutional stipulation on audit and that of the role of CBN on audit clearly shows that of CBN as unconstitutional in view of the conflict. In fact, under the CBN Act, the same Board that expends the public fund is responsible for the approval of the audited and management accounts and the consideration of management letter from the external auditors, and making recommendation to the president for the appointment of auditors. Certainly, the Auditor-General has not been given any role to play in the CBN Act thereby destroying the system of checks and balances required in a democracy.

    Four: The NA has argued that the Fiscal Responsibility Act of July 2007 is later in time and as such takes precedence over and above the CBN Act of May 2007 placing reliance on the legal maxim of lex posterior derogat priori. The CBN, on its part, seem to rely on the interpretation of generalia specialibus non derogant, which means that a general thing does not derogate from a special thing.

    In this context, the Fiscal Responsibility Act is the general thing while the CBN Act is the special thing. This implies that a general law like the Fiscal Responsibility Act cannot derogate from a specific law like the CBN Act. I tend to agree that the Fiscal Responsibility Act overshadows the CBN Act hence the CBN Act contains subordinate provisions to those of the Fiscal Responsibility Act and this is the intendment of the draftsman.

    Five: Not amending the CBN Act will amount to flagrant and express breach of section 21 of the Fiscal Responsibility Act, 2007. That section provides: Preparation of estimates of revenue and expenditures by corporations, etc.

    1.   The Government corporations and agencies and government owned companies listed in the schedule to this Act (in this Act referred of as “the corporations”) shall, not later than 6 months from the commencement of this Act and every three financial years thereafter and not later than the end of the second quarter of every year, cause to be prepared and submitted to the Minister their Schedule estimates of revenue and expenditure for the next three financial years.

    2.   Each of the bodies referred to in subsection(1) of this section shall submit to the Minister not later than the end of August in each financial year:

    a.   An annual budget derived from the estimates submitted in pursuance of subsection(1) of this section; and

    b.   Projected operating surplus which shall be prepared in line with acceptable accounting practices.

    3.   The Minister shall cause the estimates submitted in pursuance of subsection (2) of this section to be attached as part of the Appropriation Bill to be submitted to the National Assembly.”

    The schedule referred to in this section and attached to the Fiscal Responsibility Act listed 31 government corporations, agencies and companies affected by this section. In fact, CBN is the 31st and last corporation named in the said list. Other corporations named such as NNPC, NPA, NDIC, etc. have complied with the law while only CBN has successfully resisted compliance relying on the CBN Act. The CBN Act is not sacrosanct as power without control is vanity. Liberty (some call it “autonomy”) of the CBN must conform to the law. It was Charles Montesquieu, French historian (1689-1755), who said that “Liberty is the right to do everything which law allows.” What CBN wants is, in fact, absolute liberty. It is trite that the fact that the law has granted a person freedom of expression has not guaranteed him the right to shout “fire” in an amphitheatre where no fire is burning. Lord Acton (1834 to 1902) has said it that power tends to corrupt and absolute power corrupts absolutely. Leaving CBN Governor with absolute power, as it currently obtains in the CBN Act, is illogical and harmful to the society itself.

    Six: CBN is the only government corporation that fixes the salaries of its board and staff; makes and approves its budget; accounts to and audits itself. For instance, section 8 (3) of the CBN Act provides that salaries, fees, wages or other remuneration or allowances including pension and other allowances payable to the Governor and the deputy governors shall be as stipulated from time to time by the Board subject to the approval of the President.

    In practice, the President is too busy to scrutinize any sum fixed as salaries and wages by the Board. As it is today, the annual take-home pay of the Nigerian President is known but that of the CBN Governor is not known. The National Assembly wants to amend this provision so that the Revenue Mobilisation, Allocation and Fiscal Commission would bear the responsibility of fixing these salaries and wages.

    Can it be said that CBN does not have confidence in any other government institution except itself? How does this amount to loss of autonomy? In contrast to the CBN Act, section 9 of the Fiscal Responsibility Act, which created the Fiscal Responsibility Commission to regulate government corporations including the CBN, provides that emoluments, salaries, allowances and benefits payable to the Chairman and members of the Commission shall be such as the Revenue Mobilisation, Allocation and Fiscal Commission may from time to time approve. The envisaged amendment will only bring the CBN at par with international practices and cannot negatively affect its autonomy/independence as it is being bandied by some people.

    Seven: To reduce impunity on the part of the CBN, its Act should be amended. The Board of CBN is comprised of 12 members. Section 6 (2) of the CBN Act provides as follows: The Board shall consist of –

    (a) a Governor who shall be the Chairman;

    (b) four Deputy Governors;

    (c)  the Permanent Secretary, Federal Ministry of Finance;

    (d) five Directors; and

    (e) Accountant-General of the Federation.

    From this list, the four deputy governors and five directors are answerable to the CBN Governor, who is their boss. They kowtow and grovel to him on any issue, more so where under section 7 (1) of the CBN Act the CBN Governor determines who, among the deputy governors, acts for him in his absence. The tendency is that none of these subordinates will toe a different line on any position adopted by the Governor.

    The Permanent Secretary, Federal Ministry of Finance and the Accountant-General of the Federation, who are also members of the Board, are of no consequence even if they are opposed to a subject under consideration. From this scenario, the CBN Governor is the alter ego of the CBN Board. He is the Alpha and Omega of CBN. Tinkering with the composition of this Board in a fair manner will democratise the activities of the Board and save it from continuing as one-man show.

    The level of impunity being perpetrated by the CBN can never be allowed by any democracy marked by rule of law and adherence to order and good governance. What CBN calls “autonomy” is euphemism for “impunity.” In Sanusi’s comparative fallacy, he claims that 40 countries in his list of analogy covet autonomy. Well taken! What he did not tell Nigerians is whether the central bank of these 40 countries operate without any input from their parliaments.

    We are not told that these 40 countries have provisions in their laws which make their boards wholly subservient to their heads. The voices of Alhaji Ciroma, Joseph Sanusi, Green Nwankwo, NLC and others supporting the status quo will dim if and when they decide to look at this amendment in relation to the Constitution and the Fiscal Responsibility Act. It is only then they will understand that a part should not be greater than a whole and a subset should not be larger than the parent set. Since the CBN Act is an Act of the National Assembly, the same National Assembly that represents the voice of the electorate, has deemed it necessary to effect a change. Let us not resist this change. According to Blair J. Kolasa, in Behavioural Science, cited in Vanguard Book of Quotations, Compiled by Dr. Bamidele A. Sobowale, p. 26,

    We may not recognise it or otherwise be cognizant of it, we may oppose it, or even try to accelerate it. No matter what our position may be, change makes its course in the evolution of human effort. Change may take place so slowly that it is no perception in one rapidity that we are left somewhat breathless in the wake of the waves.

    If this change occurs, Sanusi may remember the words of Richard Cheney, American Secretary of Defence, in 1992 (cited in Vanguard Book of Quotations) to wit, “It is easy to take liberty for granted when you have never had it taken from you.”

     

    • Eze is a Lagos-based attorney and Principal Counsel of the law firm of Eze & Associates

  • Arik Air urges CBN to review ban on loans

    Arik Air urges CBN to review ban on loans

    Arik Air has called on the the Central Bank of Nigeria (CBN) to review its policy which banned airlines from accessing loans from any bank . It said the airline business needs huge capital to survive .

    The CBN, two months, ago barred two of the country’s top airlines from receiving any additional loans on their outstanding debts.

    Chris Ndulue, Arik Air’s Managing Director, made this call at a press conference to mark the sixth anniversary of the airline in Lagos. He said the decision by the apex bank to bar the airline from accessing loans was not the best, adding that it should be reviewed to allow it (the airline) have access to money for expansion of its operations in the interest of Nigerians.

    “We hope that the CBN will review the directive. Is not appropriate to take such stand with a big airline like ours? We have even done more than the loans we get from the banks. We have acquired a lot of aircraft and state-of the art facility. There is nothing we can do. We still need to borrow to buy aircraft. The banking system should understand this.

    “We have come a long way. We have done our beat; we will continue to borrow for the sake of expansion. We expect that the CBN will review it”, he said.

    In the wake of the ban, Ndulue had said he was surprised that the carrier was owing a ‘little’, considering the number of aircraft in its fleet.

    Also speaking, Johnson-Arumemi Ikhide, chairman of the airline, had also said: “Apart of the money the carrier owed is for guarantees, adding that the business involves a lot of capital which many are yet to understand.

    “There is a lot of ignorance in the matter; we only got N10 billion at seven per cent from the intervention fund. In the banking system alone, we have taken N8.7 billion as interest to banks in Nigeria this year. The system banking has not been fair to us.

    Aero is going through a restructuring under the Asset Management Corporation of Nigeria (AMCON), pending the final approval by its board, which is expected very soon.”

    Meanwhile, Arik Air, Nigeria’s major carrier, is partnering Lufthansa Technik to establish an international Maintenance, Repair and Overhaul (MRO) facility in the country that would attract businesses from different parts of the world.

    Nigerian airlines lose billions of naira every year ferrying their aircraft overseas for repairs and sometimes when such MRO facilities are saturated with demands and work, the airlines will have to keep their aircraft waiting for space.

    Arumemi-Ikhide, disclosed this in Lagos.

    He said the facility would be built to meet international standards, including that of the International Aviation Safety Assessment Program (IASA) and the Federal Aviation Administration (FAA) of the United States.

    The facility when completed would be one of Lufthansa’s major MRO located outside Hamburg, Germany, the headquarters of Lufthansa Technik and it is targeted to carry out overall maintenance of New Generation aircraft; that is, modern aircraft.

     

  • Currency in circulation down by N19.3b

    Currency in circulation down by N19.3b

    Currency in circulation has fallen by 1.4 per cent from N1.368trillion in August to N1.348 trillion by September this year, data obtained by The Nation has shown. The latest money and statistics obtained from the Central Bank of Nigeria (CBN) indicated that currency in circulation fell by N19.3billion.

    Also, currency outside banks dropped from N1.076trillion in August to N1.070 trillion in September, showing a difference of N6.4billion. This represents a reduction of 0.6 per cent.

    Analysts have attributed the fall in money in circulation to the persistent mopping of funds from circulation by the CBN. They said CBN’s decision to reduce the money in circulation by way of issuing Treasury Bills (TBs) at its Open market Operation (OMO) accounted for this development.

    A Senior lecturer, Lagos Business School, Dr Austin Nweze, said the development is part of the deliberate attempt to contain inflation to the barest minimum level. Nweze said the apex bank is desirous of containing inflation, hence the continuous review of the monetary policies.

    He said: “The Monetary Policy Rate has been adjusted several times, until recently it hovers around 12 per cent. Now, interest rate is a little above 12 per cent. What this implies is that banks lending would be curtailed. When this happens, individuals and corporate organizations would have less to spend on.

  • CBN curtails surging liquidity with N129b TBs

    CBN curtails surging liquidity with N129b TBs

    The Central Bank of Nigeria (CBN) will on Thursday, mop N129.8 billion from the financial sector by selling treasury bills (TBs) with maturities ranging from three months to one year. The exercise is part of monetary control measures to help banks manage their liquidity. It will involve issue of N32.05 billion in 91-day paper, N50 billion in 182-day bills and N47.78 billion in the 364-day paper. TBs are also issued to reduce money supply and curb inflation.

    “We are anticipating a situation where the central bank would intensify its effort to mop-up idle funds from the system this week (last week) and this should see rates inching up,” one dealer told Reuters.

    The naira traded flat against the dollar on the interbank as expectations of dollar inflows from energy companies and offshore investors buying local debt provided forex liquidity. The naira closed at N155.74 to the dollar early last Friday.

    Analysts at Afrinvest West Africa projected marginal gains for the naira across markets last week. They said that compared with a year ago, the naira is stronger and more resilient, owing to a more robust external sector and higher reserves. “We believe the strong naira will help to subdue imported inflation, and thereby mute the effect of the floods on food prices and distribution costs,” they said in an emailed report.

    Other traders said the naira is seen trading within the present band for the rest of the week because of anticipated dollar inflows from offshore investors buying local debt and from the Nigeria National Petroleum Corporation (NNPC).

    The foreign exchange reserves climbed 30 per cent year-on-year to hit a more than 32 month high of $42.56 billion by October 29, data from the CBN website showed. The reserves stood at $32.72 billion last year and rose 3.4 per cent from September 28 to October 29 and have not been this high since February 11, 2010 when they stood at $42.74 billion.

     

    Banks’ assets

    Banks’ total assets and liabilities for the first time this year hit N20 trillion, data from the CBN Economic Report for August released recently showed. The data is an increase of 0.8 per cent when compared with the level at July ending 2012. It said the funds were sourced mainly from mobilisation of time, savings and foreign currency deposits and disposal of Federal Government securities.

    The report said that N12.5 trillion banks’ credit to the domestic economy fell by two per cent, when compared with the level in the preceding month. On a month-on-month basis, banks’ credit to the private sector rose by 0.4, while credit to the government fell by 14.5 per cent relative to the level in the preceding month.

     

    Third party cheques

    The apex bank said last week that implementation of its N150, 000 restrictions on third party cheques now in Lagos State would be extended to other states of the federation from January 2013,

    Deputy Director, Banking and Payment System Department, CBN, Mr. Emmanuel Obaigbhona explained at the end of a retreat of Committee of E-Banking Industry Heads (CeBIH) that under the cashless policy, third party cheques with values above N150, 000 cannot be cashed across the counter but through bank accounts. This restriction, he said, was however, implemented only in Lagos State as part of the Cashless Lagos Initiative. “The N150,000 maximum limit imposed on third party cheques for across the counter withdrawals will be implemented nationwide from January next year”, he said.

     

    Concession rate for pilgrims

    Pilgrims travelling for this year’s pilgrimage will obtain a concessionary rate of N145 to a dollar exchange rate, the CBN said.

    In a statement to all designated banks and stakeholders, CBN Director, Trade and Exchange, Musa Batari said the Federal Government approved the commencement of the 2012 Christian Pilgrimage operations from October 25 and has approved a concessionary exchange rate of N145 to the dollar for purchase of pilgrims travelling allowance (PTA) of $750 and $1,000.

    The pilgrims that will benefit from the first batch of the exercise are Cross River, Ekiti, Kebbi, Kogi, Lagos, and Nasarawa states. Others are Niger, Ogun, Ondo, Osun, Taraba and Kwara states.

     

    InterSwitch

    The Group Chief Risk and Compliance Officer, Interswitch Ltd, Osioke Ojior, said the process and technologies used to uniquely identify a person and what their affiliations are, remain critical for the implementation of the electronic banking policy of the CBN.

    In a statement titled: ‘Challenges of Identity Management on E-Payment Systems in Nigeria’, he said such technology, should have capacity to maintain the attributes for each person and provide a unique identifier to each person that can be used for authentication and authorisation.

    Mr Ojior said that in doing this, regulation to establish an Identity Management System and Implementation should be separated, adding that successful Identity Management System should be accessible to users who need the information.

     

    Autonomy

    The Chartered Institute of Bankers of Nigeria (CIBN) said that the proposed amendment of the CBN Act would jeopardise the membership composition of the Board.

    CIBN President, Segun Aina said the proposed bill will reduce the impact of the CBN’s management on the board’s decisions, as it will create situations where only one member of its management, the Governor, sits on the CBN’s seven man  board.

    He said that currently, five members of the management of CBN, that is, the Governor and Deputy Governors, sit on a 12 -man board.  This, he said, does not augur well for good governance and management succession.

    The board composition proposed by the Bill increases the number of direct government officials on the CBN Board from two to five despite the almost 50 per cent reduction in the board’s size. “Consequently, the new composition would create the perception of a government majority on the Board.  This is capable of undermining the “independence”of the Central Bank of Nigeria and may lead to unintended consequences,” he said.

     

    Prepaid cards

    The CBN last week also reviewed its policy for prepaid cards issuance and operations. The exercise was meant to address hitches being experienced in the implementation of initial guidelines issued in 2010.

    CBN Director, Banking and Payments Systems, ‘Dipo Fatokun, disclosed this in a circular to all deposit money banks titled: ‘Revised Guidelines on Stored Value/Prepaid Cards Issuance and Operations’. He said there was need to recognise cards issued to meet the needs of corporate organisations as distinct from retail individuals.

    Mr Fatokun said that banks must comply with the new laws to achieve improved payment system in the country. He said the guidelines have been developed to provide minimum standards and requirements for the operation of stored value/prepaid card issuance and operations.

    The new law stipulates that only deposit-taking banks or financial institutions licensed by the CBN with clearing capacity would issue stored value/prepaid cards while those without clearing capacity can issue in conjunction with lenders with clearing capacity. He said that only one stored value or prepaid card would be issued per person per currency and per product by an issuer at any anytime.

     

    NeFF

    The Nigeria Electronic Fraud Forum (NeFF) has said there is urgent need enact a law that will check identity crisis in the Nigerian banking sector.

    Speaking at the NeFF October briefing held in Lagos, the Chairman of the Forum, Emmanuel Obaigbena, said enacting such laws will be a first step towards checking duplication of identities that has become common occurrence among bank customers.

    He said such practice has become a major hindrance to the fight against fraud in the sector, adding that where a recognised law that spells out how individuals can present their identities in public, it would become much easier to fight fraud.

    “We have seen many cases where a particular bank customer will have more than 10 bank accounts with different names. These accounts will be opened and running concurrently without interference. Such practice has not favoured the renewed fight against frauds and money laundering,” he said.

     

    External debt

    Nigeria’s external debt rose to $6.04 billion in September from $5.99 billion in March 2012, a CBN report on the external development in the economy released last week has shown.

    According to the apex bank, external debt sustainability index computed as the ratio of external debt to nominal Gross Domestic Product (GDP) remained unchanged at 0.1 as in the preceding quarter and corresponding quarter of 2011.

    It said the private sector external debt stood at $0.22 billion in the review period compared with $0.27 billion in the first quarter of 2012 and $0.32 billion in second quarter of 2011. It also showed that public sector debt service payments stood at $0.06 billion in the second quarter of 2012, indicating a downward trend in comparison with $0.09 billion in first quarter.

     

    IFC/World Bank

    The new report by the International Finance Corporation (IFC) and the World Bank indicates that of the 50 economies making the most improvement in business regulation for domestic firms since 2005, 17 are in Sub-Saharan Africa.

    In an emailed statement, the World Bank said this year’s report marks the 10th edition of the global ‘Doing Business’ report series and over the life of the report, Africa has consistently recorded a high number of reforms. It said Rwanda stands out as having consistently improved since 2005.

    “A case study in this year’s report features Rwanda, which since 2005 has implemented 26 regulatory reforms as recorded by Doing Business,” it said.

     

    Bank to bank report

    First Bank of Nigeria Plc said it will pursue an “aggressive” expansion strategy into next year as it seeks to tap into the growing consumer market in Africa’s most populous country.

    Managing Director of the bank, Bisi Onasanya told a conference call with analysts that the lender will focus on an organic growth plan by opening new branches to mop cheap retail deposits and drive profitability into 2013. It had a total of 721 branches in September 2012.

    Sterling Bank Plc rewarded five winners in its ongoing Facebook Campaign meant to promote patriotism for the country among Nigerians. The winners were: Breezy Jumbo, Akinyere Uko, Timothy China, Ajayi Olabambo and Abanbola Olaniposi.

    Group Head, Corporate Development, Shina Atilola, explained that the bank had through Facebook, requested from members of the public to write under the topic:  ‘1,000 things I can do  for my country’, and post their answers in the social network. He said that participants in the exercise sent comments on what they can do as individuals to improve the image and perception of the country both locally and internationally.

    Staff of United Bank for Africa (UBA) Plc have provided relief materials and other items to flood displaced persons in Delta State. In a statement, the bank said it was moved by the plight of victims of the recent flood in parts of Delta State and decided to support them.

    Specifically, UBA staff at Ughelli in Delta State recently mobilised funds through voluntary contributions and bought relief materials for displaced persons at the Oharisi Primary School camp caused by the recent floods in the state.

    As part of activities to mark the World Customer Service Week, Unity Bank PLC restated its commitment to its customers and meeting the yearnings of its entire stakeholders through value creation. The bank, which is presently at a N45 billion capital base, is working towards raising a tier one capital from the Nigerian Stock Exchange (NSE) in the next few months

  • Forex reserves hit $42.56bn – CBN

    Forex reserves hit $42.56bn – CBN

    The Central Bank of Nigeria said the nation’s external reserves had risen to 42.56 billion dollars on October 29, up from 42.31 billion dollars on October 24.

    The apex bank posted the figure on its Website on Wednesday, stating that the figure represented 3.7 per cent increase over the previous figure.

    The News Agency of Nigeria reports that the nation’s external reserves had continued to grow since the beginning of 2012.

    NAN also reports that this development means that CBN has less than eight billion dollars to achieve its 50 billion dollars target for 2012.

    The Finance Minister, Dr. Ngozi Okonjo-Iweala, had in July said that there was need to build up the reserves to 50 billion dollars before December.

    Okonjo-Iweala, also the coordinating minister for the economy, said this at a meeting with the organised private sector in Lagos.

    She said this would help the country to be stable in the event of any global economic recession.

     

  • Telcos fault bank-led mobile money operations

    Telcos fault bank-led mobile money operations

    Telecommunication companies (telcos) have kicked against the bank-led mobile money option adopted by the Central Bank of Nigeria (CBN).

    Globacom’s Director, Telebanking Unit, Tunde Kuponiyi, said the regime of mobile money regulation, is not friendly to telecoms’ firms that provide the mobile payment platform.

    He said though there is a lot that telecoms companies could contribute in a cashless economy, their mandate is not being fully utilised.

    Kuponiyi argued that since the mobile payment business is 90 per cent dependent on the mobile industry, it is unfair that the mobile networks are prevented from advertising their mobile payment products which are the foundation on which the bank products operate.

    “From the customer’s mobile phone, to the mobile payments system and the feedback to the mobile phone, mobile payment transaction utilises mostly mobile resources, makes use of mobile time and supported largely by mobile engineers, but unfortunately, the CBN has restricted telecoms companies from advertising in the mobile payments space,” Kuponiyi said.

    He said telecoms firms should be allowed to speak about the capabilities of their networks, the quality of user experience and the choice of mobile payment services available on their networks, lamenting that the passive role to which the telecos have been compelled to play, has led to the slow growth of the mobile payment sub sector.

    “It is roughly a year since the first mobile money went live and approaching a year since cashless economy came into operation. Meanwhile, none of the individual players can boast of having more than 10,000 active subscribers”, he stated.

    The apex bank chose the bank-led model whereby, a bank deploys mobile payment applications or devices to customers and ensures merchants have the required point-of-sale (PoS) acceptance capability to carry out the transaction.

    Here, mobile network operators’ networks merely serve as vehicle through which transactions take place. This is based on the regulatory framework for mobile payment services issued by the apex bank in 2009, which prevented telcos from operating mobile money except through strategic partnerships with licensed operators.

    CBN Deputy Governor, Operations, Tunde Lemo, said over the next few years, the focus of the regulator will be to strengthen the institutional and regulatory frameworks to achieve improved financial inclusion.

    “The application of mobile technology for financial services especially in rural areas will ensure that a large percentage of the population outside the formal banking system would have access to financial services using one of the three models of card-based, account-based and virtual account,” Lemo said.

    “CBN statistics showed that only 22 million Nigerians own a bank account out of a population of 167 million population. With telecoms subscriber base put at 105 million by the Nigerian Communications Commission (NCC), there are indeed limitless opportunities for the country to achieve financial inclusion by bringing the large numbers of the unbanked to the banking sector through mobile money,” he said.

    Analysts said telcos companies are licensed to offer telecoms services and not banking services. Therefore, the decision was made because the CBN does not regulate telcos and if the telcos are allowed to lead mobile money, two critical segments of Nigeria’s economy will be put in the hands of a few companies, a practice that constitutes great risk for the economy.

    Driven by the development of mobile money systems in emerging markets, experts estimate that $16 billion worth of international money transfers will be received with mobile phones in 2015.

    In Nigeria, the scheme is, however, confronted with many problems but the CBN said the draft National Payments System Bill, which is undergoing legislative passage, is expected to address the legal barriers to electronic payments such as the admissibility of electronic evidence in the law courts.

    Despite the inherent challenges, banks have been launching mobile money products to support their operations. FirstBank of Nigeria launched FirstMonie, its mobile money service positioned to assist the lender’s commitment to financial inclusion.

    “With the launch of this service, the stage is now set for the bank’s customers and anyone in Nigeria with a mobile phone to enjoy financial services, using their mobile phones to send money, pay bills, top up their phone airtime, do shopping, deposit and withdraw cash, without the need to visit a bank branch,” the First Bank Managing Director, Bisi Onasnaya said.

    He said the product is a game changer in Nigeria’s banking sector and will leverage on the bank’s transaction integrity to enhance local money transfer services.

    Stanbic IBTC Bank also, has partnered Star Times, one of the digital terrestrial transmission operators in the country to assist subscribers pay for their subscription fees using mobile money tool provided by the bank.

    Head, e-Business, Stanbic IBTC, Thabo Makoko, said by partnering with the company, the bank is making it easier for subscribers to make their payments electronically. According to him, the lender is committed to ensuring that users of the Mobile Money get the best in terms of service and security of their transactions.

    Analysts said the African mobile money market has the potential to grow to a money-making market, but operators, banks and regulators need to work toward developing an enabling environment for business models that meet service providers’ revenue demands.

    Mobile money allows mobile phones to be used to send and receive money, buy recharge cards, pay subscription fees for DStv, pay electricity bills, use of Point of Sale (PoS) terminals to pay for goods and services among others. The operator-led model, collaboration model and peer-to-peer model which are usually adopted in other countries was jettisoned by the regulator.

  • CBN tasks banks on Customers’ due diligence

    The Central Bank of Nigeria (CBN) has advised banks to conduct thorough customers’ due diligence during transactions that are above regulatory designated threshold.

    It urged the banks to ensure due diligence when information about customers have expired to avoid unwholesome practices.

    The Acting Director, and Regulation Department, CBN, Mr Chris Chukwu, said the measure is necessary to protect depositors’ fund.

    At a stakeholders’ forum in Lagos, Chukwu said CBN had made the safety of the industry a priority through certain regulatory frameworks. The apex bank, he said, was concerned about the status of the ownership of the banks because the issue is critical to the wellbeing of the industry.

    He said CBN conducted investigations on who is buying into the banks to ensure that they are not of dubious characters.

    Chukwu said: “Banks are required to maintain all records of transactions (local or international) or ( on-going or terminated) for at least a minimum of five years, following the completion of the transactions. Also, they should carry out thorough investigations on their customers, irrespective of their status. The aim is to put the industry on a sound footing, and make it competitive with others globally”.

    He said any bank that failed to apply customers’ due dillgence measures would not be permitted to open accounts, enter into business relationship or perform transactions with customers.

    Banks, he said must conduct due diligence on non-resident customers, arguing that the issue would help in knowing a lot about customers who are hardly seen.

    He said CBN is insisting that the banks must adopt a staff training policy, adding that the idea would help the workers to know the importance of customers’ due diligence.

  • Lawyer flays proposed composition of CBN Board

    Lagos-based lawyer, Chukwuemeka Eze, has opposed the proposed amendment of the Central Bank of Nigeria (CBN) Act.

    In a statement, Eze, said the business of the CBN is too serious to be handed over to a Director in the Ministry of National Planning, Director of Federal Inland Revenue Service, among other nominees as proposed in the amendment.

    He said appointing a former CBN Governor as chairman of the Board may create problems that would polarise the Board. “A former CBN Governor may have ‘analogue’ ideas while the sitting CBN Governor may have ‘digital’ ideas. The latter may be hampered by the former who may refuse to acknowledge the rapid changes manifesting in global economic trends,” he said.

    He said the power of the National Assembly to appropriate public fund of the Federation is derivable from the Constitution of the Federal Republic of Nigeria, 1999 as amended. Various sections of the Constitution confirm this position. For instance, section 80 (3) of the Constitution provides that: No moneys shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorised by an Act of the National Assembly.

    He said that Section 81 (1) and (2) of the Constitution makes it mandatory for the president to lay before the National Assembly budget estimates through an Appropriation Bill before money could be expended from the Consolidated Revenue Fund of the Federation.

    He, however, said the Act can be amended, if need be, to promote accountability and transparency.

  • ‘Dollar accounts for 82.1% of forex holdings’

    The currency composition of foreign reserves showed that the holdings in United States dollar are $29.09 billion, constituting 82.1 per cent of the total during the first quarter, according to data from the Central Bank of Nigeria (CBN).

    Other currencies listed in the basket include Euro which accounted for 6.9 per cent; Pounds, 2.2 per cent, Chinese Yuan, 1.4 per cent and Saudi Riyal, 7.2 per cent.

    The apex bank said composition of Euro at 6.9 per cent is still high considering the prevailing economic conditions in the Euro-Zone area and should be diversified to other relatively stable currencies. The Japanese yen accounted for 0.05 per cent while holdings in Swiss franc (CHF) were 0.004 per cent.

    The aggregate demand for foreign exchange by the authorised dealers consisting of Wholesale Dutch Auction System (WDAS) and Bureau De Change (BDCs) operators during the period under review stood at $7.18 billion, indicating a decline of 0.74 and 28.26 per cent when compared with the levels recorded in the preceding quarter and corresponding quarter of 2011.

    This development was traced to the on-going reform in the oil sector, which is aimed at ensuring efficient allocation of resources through the liberalisation of the downstream oil sector. It said a total amount of $7.05 billion was supplied in the review period consisting of $5.38 billion and $1.67 billion to the WDAS and BDC operators.

    This indicated a decline of 18.21 per cent and an increase of 3.37 per cent when compared with the corresponding quarter of 2011 and preceding quarter.

    The data showed total of $12.14 billion was utilised during the review period consisting of $7.74 billion and $4.39 billion for visible and invisible trade. This represented 63.80 and 36.20 per cent. This pattern of domination by visible trade was evident during the three quarters analysed.

    Analysis of foreign exchange utilisation by sectors revealed that $7.74 billion or 63.8 per cent was spent on importation of various items into the country during the quarter. The importation of oil, industrial, food and manufactured products gulped 30.0, 25.0, 21.0 and 15.0 per cent of the total amount utilized for visible imports.

    The importation of food items at 21.0 per cent is exceptionally high and should be discouraged through huge investment in the agricultural sector by the government, private sector or through public-private partnership.

  • NIMC, banks disagree over biometric data

    NIMC, banks disagree over biometric data

    THE National Identity Management Commission (NIMC) is not happy with banks’ decision to continue to provide their biometric data base.

    The decision would cause waste of funds, duplication of efforts and financial exclusion, NIMC said.

    It said banks would increase their cost of operations, if they insisted on providing the database themselves.

    NIMC spoke against the backdrop of arrangement for getting the biometric data of all Nigerians.

    It’s Chief Executive Officer, Chris Onyemenan, said it would amount to waste of funds for banks to embark on the exercise since the Federal Government has budgeted money for it.

    He said: “Already, banks have a lot of costs on their neck. So, if they go ahead with decisions to provide biometric database for their operations, the development would stretch their cost of operations further. This amounts to a waste of funds because the Federal Government had committed huge amount of money for the production of biometric data of Nigerians vis-a-vis the management of the NIMC.”

    Besides, it would amount to duplication of efforts since NIMC is charged with the responsibility of integrating the databases of the private and public sectors, asking: Why should banks provide their own biometric database since the government has already made arrangement for one?

    He added: “If banks should go ahead and have the biometric database of all their customers with them, it will lead to financial exclusion. This implies that non-account holders are going to be excluded from data capturing nets.”

    Onyemenan said banks do not have a strong database in place, hence their decision to direct customers to bring all sorts of documents to ascertain their identities and further achieve the objectives behind the introduction of Know Your Customer(KYC) initiative of the Central Bank of Nigeria (CBN).

    He said banking core functions include keeping accounts of their customers, and ensuring judicious use of depositors’ funds, arguing that banks need to link up with a centralised and biometric database system to achieve growth.

    However, banks have taken a different position by supporting the idea of having their own biometric database.

    Sources close to the Committee of Chief Compliance Officers of Nigeria said the use of a separate biometric data capturing is non-negotiable as banks are to achieve their objectives of reducing frauds in the industry. According to a member of the association, who spoke on condition of anonymity, banks’ decision on the matter is line with the Central Bank of Nigeria’s (CBN) goals of tightening loopholes that could lead to fraud in the industry.

    He said the position of the banks was reinforced by the need to prevent untoward development in the area of transactions management.

    “No bank is ready to leave anything to chance, having gone through the CBN’s stress test in 2009. Now, banks are tightening all loopholes as relate to cash and credit management. To achieve this, there must a biometric data capturing system in place in the banks,” the sources added.