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  • CBN injects $122.67 million into FX market to boost liquidity

    CBN injects $122.67 million into FX market to boost liquidity

    The Central Bank of Nigeria (CBN) has injected a total of US$122.67 million into the foreign exchange (FX) market in a bid to enhance liquidity and stabilise the exchange rate.

    The intervention, conducted over two days, saw the apex bank sell the funds to 46 authorized dealers.

    According to a statement released by Dr. Omolara Duke, Director of Financial Markets at the CBN, the apex bank sold US$67.5 million to 27 authorized dealers on July 10, 2024, at an exchange rate ranging from N1,480.00 to N1,500.00 per dollar. Additionally, on July 11, 2024, the CBN sold US$55.17 million to 19 authorized dealers at a fixed rate of N1,540.00 per dollar.

    The CBN noted that the funds injected into the market are expected to be utilized exclusively for trade-related transactions, with authorized dealers required to report such transactions within 72 hours.

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    The apex bank reiterated its commitment to maintaining stability in the foreign exchange market through continuous interventions and monitoring of market activities.

    This latest intervention by the CBN is part of its ongoing efforts to manage the foreign exchange market and ensure adequate liquidity for importers and other authorized users. The bank has previously emphasized the importance of trade-based transactions in accessing foreign exchange and has taken steps to curb speculative activities in the market.

    While the intervention is expected to provide some relief to importers and other FX users, the long-term sustainability of the foreign exchange market will depend on factors such as government revenue, export earnings, and investor confidence.

    The CBN’s move comes amid ongoing efforts to address the challenges facing the Nigerian economy, including foreign exchange scarcity and inflationary pressures.

  • CBN Injects $122.67 million into FX market to boost liquidity

    CBN Injects $122.67 million into FX market to boost liquidity

    The Central Bank of Nigeria (CBN) has injected a total of US$122.67 million into the foreign exchange (FX) market to enhance liquidity and stabilize the exchange rate.

    The intervention, conducted over two days, saw the apex bank sell the funds to 46 authorized dealers.

    According to a statement released by Dr. Omolara Duke, director of financial markets at the CBN, the apex bank sold US$67.5 million to 27 authorized dealers on July 10, 2024, at an exchange rate ranging from N1,480.00 to N1,500.00 per dollar. Additionally, on July 11, 2024, the CBN sold US$55.17 million to 19 authorized dealers at a fixed rate of N1,540.00 per dollar.

    The CBN noted that the funds injected into the market are expected to be utilized exclusively for trade-related transactions, with authorized dealers required to report such transactions within 72 hours.

    Read Also: Emefiele, wife not signatories to accounts used to move cash from CBN, witness tells court

    The apex bank reiterated its commitment to maintaining stability in the foreign exchange market through continuous interventions and monitoring of market activities.

    This latest intervention by the CBN is part of its ongoing efforts to manage the foreign exchange market and ensure adequate liquidity for importers and other authorized users. The bank has previously emphasized the importance of trade-based transactions in accessing foreign exchange and has taken steps to curb speculative activities in the market.

    While the intervention is expected to relieve importers and other FX users, the long-term sustainability of the foreign exchange market will depend on factors such as government revenue, export earnings, and investor confidence.

    The CBN’s move comes amid ongoing efforts to address the Nigerian economy’s challenges, including foreign exchange scarcity and inflationary pressures.

  • CBN warns of fintech’s risk to financial stability

    CBN warns of fintech’s risk to financial stability

    The Central Bank of Nigeria (CBN) has raised the alarm over the increasing transaction volumes of Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs) which he said posed major financial system stability risk.

    CBN Governor, Mr Olayemi Cardoso, who was represented by Mr. Abayomi Arogundade, the Acting Director of the Other Financial Institutions Department at the CBN, gave the warning at the 10th Meeting of the College of Supervisors for Non-Bank Financial Institutions (CSNBFI) in Abuja yesterday.

    “We must continue to push forward the agenda of strengthening the anti-money laundering practices; deepening supervisory capacity on cybersecurity and fintech regulation; and the implementation of risk-based supervisory approach,” Cardoso warned the gathering of West African central bankers.

    The CBN governor noted the rapid growth in fintech lending as a particular area of concern, noting that while the overall size of these loans may still be small compared to traditional banking, some jurisdictions have observed a worrying trend of increasing volumes. “In many cases, fintech credit is provided via electronic platforms that connect lenders to borrowers – in which case the platform takes the role of a financial auxiliary,” Cardoso explained. “In some cases, however, loans are taken on the balance sheet of these platforms (even if it is short-term), in which case the platforms are akin to new types of financial intermediaries.”

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    These fintech firms, which offer a range of applications, software, and other technologies to streamline mobile and online banking, are often regulated either as banking entities or as fintech payment service providers, depending on the jurisdiction.

    Cardoso also highlighted the emergence of innovations linked to crypto or stablecoin assets as another area of concern that supervisors must closely monitor.

    The concerns raised by the CBN governor came at a time when the non-bank financial sector is playing an increasingly pivotal role in enhancing access to credit, offering cost-effective and reliable payment services, and supporting economic growth across the WAMZ region.

    the Director General of the West African Monetary Institute (WAMI), Dr. Olorunsola Olowofeso, echoed the need to strengthen the resilience of the financial sector, particularly in the face of emerging risks such as climate-related issues, internet disruption, cyber threats, and social media-driven instability.

    “To strengthen the resilience of the financial sector, Member States should develop an adequate national cybersecurity strategy and appropriate regulatory and supervisory frameworks,” Olowofeso said.

    The technical sessions of the CSNBFI meeting this week are expected to focus on climate risk regulation, underscoring the importance of addressing these emerging threats to the stability of the financial system.

    As the NBFI sector continues to grow in influence and importance, the central bank governors of the WAMZ region have a critical responsibility to ensure that regulatory requirements are tailored to foster compliance with international standards and mitigate the risks posed by the rapid digitalization of financial services.

  • CBN and IMTOs

    CBN and IMTOs

    •The apex bank’s directive ought to have come a long time ago

    If anything, the directive by the apex bank allowing eligible International Money Transfer Operators (IMTOs) to sell foreign exchange (forex) on official window with immediate effect, has been long overdue. The measure, principally, seeks to widen access by the IMTOs to local currency liquidity for the timely settlement of diaspora remittances.

    Under the guidelines, eligible IMTO operators could access the CBN window directly or through their banks, to execute their forex transactions and on such prices to be based on prevailing Nigerian Autonomous Foreign Exchange Market (NAFEM) rates, to ensure transparency and adherence to a market benchmark.

    The new measure, according to the Central Bank of Nigeria (CBN), is expected to enhance the supply of foreign exchange in the official market, reduce pressure on the parallel market and, in the course of time, help stabilise exchange rates.

    To ensure smooth and seamless operations, the IMTOs are expected to confirm their partner banks and to advise on settlement instructions.

    The measure, to be sure, goes beyond a mere signalling of the CBN’s resolve to leave no stone unturned in its ongoing efforts to boost diaspora remittances and stabilise the naira. What it does is address a major lacuna that has remained a recurring feature of the forex management system – the problem of foreign remittances – a problem so destructive and malignant that Nigerians cannot but wonder is

    why those players have literally been handed free licence to commit murder.

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    Although the problem has been with us for a while, it took a reminder in January by the chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, to see the rape for what it is. 

    Here is how he put it: “The World Bank said for 2023, our diaspora remittance was about $20 billion. We estimate that more than 90 percent of that did not get to Nigeria, they are being externalised. We have spoken to loads of Nigerians almost everywhere, in the US, UK, etc. They told us how they send remittance. They use Apps, and we have tried some of those Apps, they use parallel market rates. So, you take $1,000 in New York, and tap on your phone that you are sending $1,000 to someone, a Fintech, they pay the Naira equivalent in Nigeria without bringing the dollars, unless of course if the source of the money is illicit.”

    Yes, the process was that seamless and easy: all that is required for a Diaspora Nigerian to transfer funds is a mere touch of buttons on an App, for the recipient to receive instant credit in the specified account. And, with the CBN at a time routinely printing notes like one would do as in office stationery, there was more than sufficient naira to keep the inequitable system running!

    Howbeit; if it seems tragic that the quantum of hard currency that could have helped to boost our foreign reserves and perhaps stabilise the economy never left the source; perhaps the only thing worse is that the past CBN leadership either saw nothing wrong with the arrangement or pretended that the problem did not exist. Little wonder that it soon became a case of the savvy Fintech carts dragging the CBN horse, while the rest of the world gaped in wonder.

    The directive by the CBN is only the starting point. Next is to see that every operator is made to comply as directed by the apex bank. As much as we expect its capacity as regulator will be sorely tested on this; Nigerians expect nothing short of performance in the onerous task.

  • Banks set tough rules for interbank dollar transfers

    Banks set tough rules for interbank dollar transfers

    • Demand invoice for all dollar transactions

    Deposit Money Banks (DMBs) are setting tough rules for domiciliary account holders that want to transfer funds to other local banks within the country.

    The banks now demand an invoice for such transfers to be effected, unless the transfer is within same bank.

    At one of the Tier-1 banks’ branch in Ajose Adeogun, Victoria Island Lagos, a bank teller advised a domiciliary account holder who wanted to transfer $1,000 to another bank customer within the country to bring invoice stating reasons why the funds should be moved.

    When the customer enquired why the bank requested for the invoice, the bank teller said: “Before now, it was easy to carry out interbank transfers on domiciliary accounts. But all that stopped after the process recorded significant level of fraud. We now require an invoice to effect the transfer unless, its intrabank,” the bank teller said.

    Investigations also showed that before now, bank customers could effect dollar transfers directly from their internet banking Apps, but not any more.

    Although banks’ internet banking applications come with interbank transfer features, but banks have restricted the functions.

    The Central Bank of Nigeria (CBN) has also issued fresh guidelines to Deposit Money Banks (DMBs) on the deposit of foreign currency notes with the apex bank.

    This directive was contained in a circular issued by the Director of Currency Operators, Mohammed Solaja and posted on the bank’s website.

    CBN disclosed that each bank would be allowed a maximum deposit of $10 million threshold for $100 notes and $50 notes daily, saying such foreign currency deposits can only be made at the CBN branches in Abuja and Lagos.

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     “In order to deepen the foreign exchange market, boost liquidity and attain convergence in the exchange rates of the parallel and official markets, the Central Bank of Nigeria (CBN) has approved that DMBs may deposit their excess foreign currency notes with Lagos and Abuja branches of the bank,” the circular read.

     “The approval is a response to the increasing demand by DMBs to deposit their forex cash with CBN for onward credit to their off-shore accounts with the correspondent banks.”

    In the circular with reference number, COD/DIR/INT/CIR/001/016, the apex bank directed DMBs must notify the apex in writing of its intention to make such deposits, at least three working days before such a deposit is made.

    According to the apex bank, smaller denominations of $20 notes and below would be at a maximum of $1 million daily.

  • CBN ends Form M verification

    CBN ends Form M verification

    The Central Bank of Nigeria (CBN) yesterday suspended its FX Price Verification System (PVS) portal, effective July 1.

    The discontinuation came 10 months after the portal’s launch in August last year.

    The PVS portal was designed to curb over-invoicing and under-invoicing in international trade transactions.

    Importers were required to submit a Price Verification Report generated by the portal as part of their Form M application, a declaration for importing physical goods.

    Read Also: CBN insists on enforcement of stringent criteria for bank recapitalisation

    In a circular, the CBN attributed the PVS’s discontinuation to “recent developments in the Nigerian Foreign Exchange Market.”

    The circular did not elaborate on the specific market conditions that necessitated this decision.

    The circular reads: “Given recent developments in the Nigerian Foreign Exchange Market, the CBN hereby discontinues the Price Verification System. Consequently, with effect from July 01, 2024, all applications for Form ‘M’ shall be validated without the Price Verification Report generated from the Price Verification Portal.”

  • CBN insists on enforcement of stringent criteria for bank recapitalisation

    CBN insists on enforcement of stringent criteria for bank recapitalisation

    The Central Bank of Nigeria (CBN) has informed it will enforce stringent criteria for its ongoing bank recapitalisation programme.

    It said the strict criteria will be applied for new investors to enhance financial system stability.

    In a speech delivered at the UK-Nigeria Chamber of Commerce in London, CBN Governor Olayemi Cardoso (represented by Deputy Governor, Financial Systems Stability, Mr. Phillip Ikeazor), said the CBN “will rigorously enforce our “fit and proper criteria” for prospective new shareholders, senior management, and board members of banks”.

    Cardoso also pledged to proactively monitor the integrity of financial statements to ensure the accuracy and transparency of financial reporting, verify the banks have sufficient capital to meet their operational needs and manage risks effectively as well as scrutinise the financial health of merged entities to ensure a realistic assessment of their financial position.

    Cardoso reiterated the recapitalisation programme’s core objective which is “to trigger the emergence of stronger, healthier and more resilient banks.”

    This, he said, aims to create a more robust banking sector capable of withstanding economic shocks and supporting the government’s ambitious goal of achieving a $1 trillion GDP by 2030.

    The CBN Governor stated the anticipated benefits of the recapitalisation programme to include strong banks expected to lend more money to businesses and individuals, stimulating economic growth, more stable and secure banking system capable of attracting greater foreign investment as well as improved financial health which will lead to a more stable foreign exchange market.

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    Others are stronger capital buffers that will allow banks to manage risks more effectively, improved financial health, leading to better credit ratings for Nigerian banks, making it cheaper for them to borrow money, diversified ownership base as the programme is expected to encourage broader participation in bank ownership, stronger oversight and stricter criteria that could lead to improved decision-making within banks and increased market volume and value that will give rise to a healthier banking sector and ultimately lead to a more vibrant stock market.

    The CBN clarified that the exclusion of retained earnings from the minimum capital requirement was to simplify calculations and enhance transparency. This Cardoso said aligns with international standards like Basel III, which emphasize core capital elements to promote financial stability.

    Cardoso pointed to the successful 2004/5 banking sector reforms as a model for the current initiative. Those reforms, he pointed out, consolidated the industry, increased capital bases, and enhanced resilience during the global financial crisis.

  • Afenifere urges CBN to reverse revocation of Heritage Bank license

    Afenifere urges CBN to reverse revocation of Heritage Bank license

    Pan-Yoruba socio-political organization, Afenifere, has called on the Central Bank of Nigeria (CBN) to reverse the revocation of the operational license of the defunct Heritage Bank.

    It urged the apex bank to return it to Ondo state, the original owner of the bank.

    The Afenifere said the Heritage Bank was one of the many legacies of former governor of Ondo state, Adekunle Ajasin.

    It asked Governor Lucky Aiyedatiwa to liaise with the federal government to revive all the economic legacies floated by the Ajasin administration as well as take necessary action towards the acquisition of Heritage Bank.

    The spokesman for the Ondo chapter of Afenifere, Eric Oluwole, who read a communique issued at the end of its meeting, appealed to Aiyedatiwa to continue to fund the Amotekun Corps for effective and efficient operation.

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    According to the communique, “The Ondo State Chapter of Afenifere held a meeting today and resolved that the Ondo State Government should liaise with the Federal Government to revive all the economic legacies floated by the Adekunle Ajasin administration.

    “The state should take the necessary action towards the acquisition of heritage banks. The legacies include the license of the Heritage Bank, and we advise the federal government to reverse it to its original founding father, which is the Ondo State Government. Other legacies include Oluwa Glass, Ifon Ceramic, Akunu Cattle Ranch, and Owena Motels, among others.

    “Afenifere commended the state government for not relenting on its effort on security, especially the Amotekun outfit floated by the former Governor of Ondo State, Arakunrin Oluwarotimi Akeredolu.

    “Afenifere also urges the state government to continue the funding of Amotekun and other security agencies in the state.”

  • CBN governor Cardoso sees end to excessive FX volatility

    CBN governor Cardoso sees end to excessive FX volatility

    The Central Bank of Nigeria (CBN) has disclosed that the worst is over for the Naira’s fluctuations.

    CBN governor, Olayemi Cardoso, struck an optimistic tone regarding the naira’s stability in a recent interview with Bloomberg TV.

    He expressed satisfaction with the progress made in curbing volatility and suggested the worst may be over for the Nigerian currency.

    “We do believe that we have more or less seen the worst in terms of volatility,” Cardoso stated, underscoring his confidence in the measures implemented by the CBN.

    He attributed this stabilization to several decisive actions taken by the central bank. He emphasized the Monetary Policy Committee’s (MPC) commitment to deploying all necessary measures to curb inflation and maintain currency stability.

    The CBN governor also noted the importance of continuous monitoring and intervention in the market to ensure optimal performance.

    “We are also very alive to observing the way and manner in which that market operates and ensuring that it gives the best value that can be accomplished using certain tools,” he added.

    Cardoso’s optimism stems from the CBN’s multi-pronged approach to stabilizing the naira prior to the recent interventions, speculation and manipulation in the FX forward contract market were contributing to naira volatility.

    The CBN took steps to address this by tightening regulations, increasing transparency, and potentially even intervening directly to smooth out imbalances by releasing FX belonging to foreign companies initially withheld.

    Another significant move was the CBN’s decision to allow the naira to trade more freely, reflecting market forces.

    Read Also: Inflation to slow down incoming quarters, says Cardoso

    This moves away from a fixed exchange rate system aimed to improve transparency and attract foreign investment.

    The CBN also employed various monetary policy tools to influence the exchange rate.

    This includes raising interest rates to make naira-denominated assets more attractive and curb inflation, which actually weakened the currency.

    Though Cardoso did not explicitly mention it, the CBN also resorted to strategic interventions in the foreign exchange market by buying or selling naira to influence its value.

    While acknowledging progress on the exchange rate, Governor Cardoso emphasized the CBN’s unwavering commitment to tackling inflation.

    Nigeria’s high inflation rate of 33.95% (as of May 2024) continues to be a major concern.

    The Monetary Policy Committee (MPC) will likely continue to use interest rate adjustments and other measures to bring inflation under control.

    Governor Cardoso’s comments offer hope, but challenges remain.

    The CBN will need to maintain a watchful eye on the foreign exchange market and inflation, potentially making further adjustments as needed.

    External factors and domestic economic developments can always introduce new challenges.

    The CBN’s continued efforts to maintain a stable exchange rate and control inflation will be crucial for a more prosperous future for the Nigerian economy.

  • Civil societies back banks’ recapitalisation by CBN

    Civil societies back banks’ recapitalisation by CBN

    The Coalition of Civil Society Organisations yesterday backed the plan by the Central Bank of Nigeria (CBN) to recapitalize the commercial banks

    It described the move is good for the economy, adding that it would make the banks stronger and attract investors to the country.

    The coalition, comprising the Constitutional Rights Advocate Initiative (CRAI), Movement for Nigeria Restructuring (MfNR), Centre for Social and Economic Rights (CSER), Committee for the Protection of People’s Mandates (CPPM), and Cadrell Advocacy Centre, hailed the decision at a press conference in Lagos.

    The leader of the coalition, Alesta Wilcox, who is also the past chairman of the Institute of Chartered Accountants of Nigeria (ICAN), Lagos Branch, said banks in Nigeria are now weak, thereby discouraging investors from investing in the country.

    He said thd5 recapitalization would make the banks healthy, stonger and recruit more staff.

    Wilco said recapitalisation will halt the plot by vested interests benefiting from the weakness  banking sector to sabotage it.

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    He added: “We are a coalition of civil society organisations. Our role is to act as watchdogs for the government in the interest of the Nigerian people.

    “We want to alert the Federal Government, the Central Bank of Nigeria, the Economic and Financial Crimes Commission (EFCC), the Department of State Services (DSS), the Bankers Committee, and the Nigerian media to an organised plot by some vested interest within the Nigerian Banking System to begin to orchestrate a diversionary gas-lighting campaign to stop the proposed banking sector reforms using some faceless civil society organisations who will begin to make preposterous claims and allegations against some Nigerians who are critical to the success of the planned banking recapitalization programme.

    “We also have credible intelligence that they intend to make some unsubstantiated allegations against the current CBN Governor, Mr Olayemi Cardoso, and Mr Olawale Edun, the Finance Minister and Coordinating,” Wilcox alleged.

    Wilcox the goal of the vested interests is to either delay or force the CBN to drop the ongoing reforms of the banking sector so as to elongate the stay of their Pay Masters at the helm of affairs at some of the sick banks that require the most recapitalization.

    Wilcox said recapitalization programmes required a forensic audit of the loan books, stressing that what these vested interests wanted to be unveiled but would rather have the banks left “in their sick state so as to prevent the truth from being unearthed.

    He said: “It is germane to say that some of the banks that require recapitalization are the very ones in need of the injection of capital off the back of the recapitalization programme. But these vested interests would rather leave the banks in their sick state so as to prevent the truth from being unearthed.

    “Recapitalization programmes, as you well know, require a forensic audit of the loan books. This is what they do not want,” he said.

    “In the case of one of the banks, the ages of some of the non-performing loans (NPLs) will shock the Nigerian public. They date back to the 1970s, with interest capitalised running into decades.

    “But thankfully, there has been a successful sale of the debt to a company, as it is done the world over. This has received a ‘No Objection’ verdict from AMCON and has been approved by the CBN.

    “But the vested interests do not want the fresh injection of capital into the bank. Why? They will lose their ravenous positions to new executives who will be appointed by the investors.

    “If indeed they care about the interest of the bank in question, why don’t they want new capital injected to save the bank? It is like the parent of an anaemic child rejecting a blood donation even when the doctors have certified the blood to be clean,” he added.