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  • CBN plans real sector single digit borrowing

    • Bank retains MPR at 14 per cent

    To encourage banks to give credit to the real sector of the economy, at single digit rates, the Central Bank of Nigeria (CBN), has offered to complement the banks.

    Speaking yesterday after the end the Monetary Policy Committee (MPC) Meeting in Abuja, which saw the retention of all monetary rates, the CBN Governor, Godwin Emefiele said the mechanism was not designed to bring competition among Deposit Money Banks (DMBs), but to complement their efforts.

    He said: “The most important thing is that we want to see to it that we achieve a single digit rate. We believe this will work because rather than the banks keeping the money in the reserves, they can key into this and promote these transactions as long as they meet the terms and conditions.

    “A differentiated dynamic cash reserve requirement regime will be implemented to direct cheap long term bank credit at nine per cent and a minimum tenor of seven years and two years moratorium to the employment elastic sectors of the economy.”

    He said details of the mechanism are being worked out by the banking supervision and the monetary policy departments and will be released very soon.

    “MPC was concerned that credit to the economy was sliding and we looked at means to incentivise the DMBs to increase credit to the real sector,” Emefiele said.

    The MPC was of the opinion  that while it is difficult to encourage job creation in  a deficit infrastructure environment, the committee believes the bank should continue to encourage DMBs to increase the flow of credit to the real sector to consolidate economic recovery.

    To achieve this, Emefiele said two approaches were considered. The first, in order to achieve the objective of lowering interest rate particularly to those priority sectors- manufacturing sectors, agric sector, CBN will encourage large corporates to issue commercial papers/note to the market and there will be a memorandum that will detail explanations of what they are going to do with that money.

     

     

  • CBN begins forex trading in Chinese currency

    The Central Bank of Nigeria (CBN) yesterday kicked off its intervention in the sale of foreign exchange (forex) in Chinese Yuan (CNY). The exercise marked the consummation of the Bilateral Currency Swap Agreement (BCSA) the CBN signed with the People’s Bank of China (PBoC) in April 27.

    A statement issued by the CBN disclosed that the sales shall be through a combination of spot and short tenured forwards. It added that the exercise, which will be Special Secondary Market Intervention Sales (SMIS) retail, would be dedicated to the payment of Renminbi denominated Letters of Credit for raw materials, machinery and agriculture.

    Spokesman of CBN, Isaac Okoroafor, explained that the bank would receive bids from all authorized dealers. He added that due to the peculiarity of the exercise, the bank would not be applying the relevant provisions of its Revised Guidelines for the Operation of the Inter-bank Foreign Exchange Market, which directs all SMIS bids to be submitted to the CBN, through Forex Primary Dealers (FXPDs).

    According to Okoroafor, the CBN would also not be applying the relevant provisions of the Guidelines which equally provide that “Spot FX sold to any particular end-user shall not exceed 1% of the overall available funds on offer at each SMIS session”.

    Speaking on the bid period, he said authorised Dealers were requested to submit their customers’ bids from 9.00 am to 12.00 pm yesterday; adding that bids received after this time would be disqualified.

    On funding, he disclosed that authorized dealers were to debit the customers’ accounts for the Naira equivalent of their bids, stressing that the CBN would debit authorized dealers’ current account on the day of intervention to the tune of the naira equivalent of their bid request.

    Okoroafor further explained that there would be no predetermined spread on the sale of FX Forwards by authorised dealers to end-users under the Special SMIS-Retail, adding that authorised dealers would be allowed to earn 50 kobo on customers’ bids.

    While also explaining that the bids were on Spot FX basis as the authorised dealers’ accounts with the CBN would be debited in full for the Naira equivalent of the USD bid amount, he advised customers that were not willing to accept the settlement terms not to participate in this Special SMIS – Retail.

    Similarly, he disclosed that forward bids would be settled through a multiple-price book building process and would cut-off at a marginal rate to be disclosed after the conclusion of the Special SMIS – Retail process. He also urged customers not willing to accept the terms of the forward rate not to participate in this Special Chinese Yuan SMIS Intervention.

    Okoroafor emphasized that the CBN reserved the right not to make a sale if it had the impression that the exercise did not provide an effective price for the determination of the CNY/NGN exchange rate.

  • CBN recovers N65b illegal bank charges

    The Central Bank of Nigeria (CBN)  said it has recovered over N65 billion  wrongfully deducted and illegal charges from customers’ deposits and other transactions within the banking system.

    The cash, it said, was recovered from commercial banks and had since been refunded to the affected customers.

    Acting Director of Corporate Communications at the CBN, Mr. Isaac Okorafor disclosed this in Asaba  yesterday on the sidelines of a two-day fair with the theme: Promoting Financial Stability and Economic Development for stakeholders in Delta State.

    He said: “We have recovered and refunded to customers over N65 billion out of complaints by people over acts of treatments on customers, wrong charges, wrong deductions and others since about 2012/2013 when we started.”

    Okorafor said hawking of various denominations of the naira is an offence punishable under the CBN Act of 2007, and specifically warned staff of the apex bank involved in the act to desist from it as they will be dismissed if caught.

    He, however, blamed the police for the lack of prosecution of offenders  caught hawking naira during various raids in Lagos, Port Harcourt, Onitsha, Ibadan and other cities.

    Okorafor said: “The CBN is  committed to making sure that people do not hawk the naira, because it is an offence punishable under the CBN Act of 2007. We have made it clear to any of our staff involved in the practice that they will be dismissed. We have also made it clear to banks that any of them caught doing it will be severely punished. We are regulators and not law enforcement agencies. It is the duty of the Nigerian police to enforce the law. We have collaborated with them at different times.

  • CBN injects $210m into forex market-2

    The Central Bank of Nigeria (CBN) yesterday injected the sum of $210 million into the inter-bank foreign exchange (forex) market.

    The bank offered $100 million to authorised dealers in the wholesale segment of the market, while the Small and Medium Enterprises (SMEs) segment got the sum of $55 million, just as $55 million was also allocated for invisibles such as tuition fees, medical payments and Basic Travel allowance (BTA).

    In a statement, the bank’s Acting Director of Corporate Communications Department, Isaac Okorafor confirmed the figures and restated the apex bank resolve to continue to intervene in the interbank foreign exchange market, in line with its pledge to sustain liquidity in the market and maintain stability.

    Okorafor maintained that the continued forex intervention is to ensure that the Bank meets genuine customers’ requests in various segments of the market.

  • CBN to Nigerians: destroy, spray banknotes, go to jail

    THE Central Bank of Nigeria (CBN)  has issued warning against spraying, selling and mutilation of naira notes, a criminal offence, which  the bank said attracts five years imprisonment.

    Expressing worry over the act, which it said is becoming common practice among Nigerians, the apex bank said anyone caught would henceforth be made to face the full wrath of the law .

    It  assured marketers, merchants, shopping malls and supermarkets of the bank’s continuous injection of huge volumes of banknotes into the circulation.

    The development, according to the Acting Director, Currency Operations Department, CBN, Mrs. Priscilla Eleje, was to preserve the pride of the country and  ease difficulties being encountered by the traders and customers occasioned by the inadequate circulation of the lower denomination banknotes like N200, N100, N50, N20, N10 and N5.

    Mrs. Eleje, who was represented at the public sensitsation and enlightenment campaign at Alesinloye market by a Deputy Director of the bank, Mrs. Olufolake Ogundero, added that the bank recognises the important role markets play in economic transaction, hence the need for ease accessibility of the lower denominations to carry out economic transactions.

    She said: “It is a criminal offence punishable by six months imprisonment or a fine of N50,000 or both to sell, spray or mutilate the banknotes. It is also a criminal offence which attracts five years imprisonment without an option of fine for anybody to counterfeit the naira. Naira is our pride as a country. So, respect it.”

    The leader of the market women, Mrs. Labake Lawal, assured the CBN of the cooperation of her members, stressing that “we will comply strictly with the agreed guidelines and utilise the banknotes for the intended purpose”.

     

     

     

  • CBN survey shows 12-month interest rates rise

    The Central Bank of Nigeria (CBN) has released the second quarter 2018 Inflation Attitudes Survey, which showed that interest rates had risen in the last 12 months by 0.8 points to 32.4 points. The first quarter figure stood at 31.6 points.

    The survey, conducted from May 19 to June 7, 2018 through a sample size of 2070 households randomly selected from 207 Enumeration Areas (EAs) across the country,  had a response rate of 80.4 per cent.

    On the other hand, 7.4 per cent of respondents believed that interest rates had fallen, 17 per cent of the respondents were of the opinion that the rates stayed about the same in the last 12 months, while 43.2 per cent of the households had no idea. The result revealed that more households perceived that interest on bank loans and savings rose over the past 12 months.

    On the expected change in interest rates on bank loans and savings over the next 12 months, more respondents (26.6 per cent) were of the view that the rates will rise, while 15.6 per cent believed that they will rates fall.

    According to the survey, a net rise value of 10.9 per cent was recorded compared to 9.4 per cent attained in the previous quarter. About 57.8 per cent of the respondents either expected no change or had no idea.

    Similarly,  the  respondents  were  asked whether it would be best for the Nigerian economy for interest rates to rise or fall. The results showed that 37.2 per cent indicated that  it  would  be  best  for  the  economy if interest rates fell, while 12.8 per cent  opted  for  higher  interest  rates.  The results further revealed that 13.2 per cent would make no difference, while 35 per cent had  no  idea . Also, these responses  revealed  that  most  of  the respondents favored lower interest rates for the Nigerian economy.

    Responses  on  what the impact a  rise  in interest rates in the short and medium terms would have on prices 40 per cent agreed that a rise in interest rates would make prices in the street rise slowly in the short term, as against 14.0 per cent that disagreed. While in the medium term, 39.2 per cent agreed that a rise in interest rates would make prices in  the  street rise  slowly,  13.5 per  cent disagreed .

    Similarly, respondents were asked to choose between raising  interest  rates  in  order  to  keep inflation down, and keeping interest rates down to allow prices to rise. Responding, 26.3 per cent prefer red interest rates to rise in order to keep inflation down compared to 28.0 per cent who said they would prefer prices to rise faster, while 45.6 per cent had no idea.

    The survey showed that these responses suggest that given a trade-off, more of the respondents would prefer higher  interest  rates  to  higher  inflation, which  is  suggestive  of  the  respondent households’  support  for  the  bank’s  price stability objective.

    To assess whether people are aware of the way monetary policy works in Nigeria, respondents were asked if they knew which group of people met to set Nigeria’s monetary policy rate.

    Responding, 27.6 per cent felt it was the Monetary Policy Committee, 10 per cent felt it was the Federal Ministry of Finance, 17.0 per cent believed it was the government, 4.7 per cent felt it was the National Assembly, while 2.3 and 38.3 per cent answered ‘others’ and ‘do not know’, respectively.

    More so, when asked to identify which group mostly influenced the direction of interest rates, the result indicated that majority of the respondents (40.6 per cent) were aware that the Central Bank of Nigeria influences the direction of interest rates.

    About 8.7 per cent mentioned the ministers, 4.3 and 10.8 per cent was of the opinion that civil servants and Banks influence the rates, respectively, while 35.4 per cent had no idea. On what best described the Monetary Policy Committee, 20.6 per cent felt it was influenced by the government, 12.6 per cent felt it was the Federal  Ministry of Finance, and 8.1 per cent believed that it was the national assembly, while 10.7 per cent thought it was not influenced by any arm of government and 47.4 per cent had no idea.

    Respondents were  asked  if  they were satisfied or dissatisfied with  the  CBN’s management of interest rates in Nigeria.

    They were “asked what would become of the Nigerian economy if prices started to rise faster than they do now”. “The survey result showed that 49.7 per cent of the respondents believed that the economy would end up weaker, 11.0 per cent stated that it would be stronger, 17.7 per cent of the respondents believed it would make a little difference, while 21.5 per cent did not,” the survey said.

  • Bank customers expect more access to loans, says CBN

    Bank customers are getting more confident of getting  access to credit in the coming months, the Monthly Business Expectation Survey for June has shown.

    The report, released by the Central Bank of Nigeria (CBN) captured respondents’ optimism  on access to credit in  the  review  month, with an index of 4.4 points.

    It also noted that the outlook on volume of total order and business activity was more optimistic, as the index stood at  16.4 and 16.1 points, respectively when  compared  to 15.1 and 16.1 points, recorded in May.

    “Similarly, respondents’  outlook  on financial conditions (working  capital) and average  capacity utilisation  improved, as  the  indices  stood  at 11.7 and  23.4 index   points, when compared  with  the 14.1 and  22.7 points,  recorded  in May 2018,” it said.

    According to the report, the improvement in the average capacity utilisation (CUI) index can be attributed to  the  positive  outlook  on financial conditions.

    “The positive outlook in the volume of business activities (66.7 index points) and  employment (27.0 index  points) indicated  a  favourable  outlook this month. The employment outlook index by  sector  showed  that  the services  sector  (28.7 points) indicates the highest prospects for creating jobs, followed  by industrial  (26.4 points), wholesale/retail trade (25.0 points) and construction (16.7 points) sectors,” it said.

    The surveyed firms identified insufficient power supply (63.6 points), high interest rate (59.9 points), unfavourable economic climate (52.7 points), financial problems (50.4 points), unclear economic laws (49.5 points), insufficient demand (47.9 points) and unfavourable political climate (46.0 points) as the major factors constraining business activity during the review period.

    “Majority of the respondent firms expect the naira to appreciate in the current and next months as the confidence indices stood at 29.5 and 44.6 points, respectively. Respondent firms expect inflation rate to fall in both the current and next months, with confidence indices of -7.8 and -13.2 points for the current and next months, respectively,” it said.

    Similarly, respondent firms expect borrowing rates to rise in both the current and next months, as the confidence indices stood at 1.6 and 3.1 points, respectively.

  • Why lower naira notes are scarce, by CBN

    The Central Bank of Nigeria (CBN) yesterday blamed the scarcity of lower naira denominations on hoarding and sale by unscrupulous people. It said it has mapped out strategies to address the menace.

    Its Acting Director, Currency Operations Department, Mrs. Precillia Eleje, who spoke at a public sensitisation and enlightenment campaign on CBN direct intervention on lower denominations in Kurmi Market,  Kano, expressed disgust at the activities of middle men who hoard, sell and buy such currencies at the detriment of the public.

    Eleje said: “The CBN has observed inadequacy in the circulation of lower denominations bank notes and difficulties encountered by economic agents such as marketers, merchants, shopping malls, super markets among others, despite the huge volume of bank notes injected into circulation on annual basis.

    She said the apex bank recognises the important role markets play in economic transaction, stressing that that was the reason CBN approved direct disbursement of N200, N100, N50, N20, N10 and N5 denominations to market associations, merchants, shopping malls, stores, toll-gates among others in exchange for higher bills. “The disbursement would be made through the commercial banks of the identified markets associations and other identified beneficiaries and the account must be funded before any withdrawal could be made which will be delivered to them at no extra cost”.

    “In order to guide against possible abuse or diversion of these bank notes, the bank has developed a monitoring framework to provide the basis for accessing and judicious utilisation of funds disbursed,” she said.

     

  • CBN injects $210m into foreign exchange market

    The Central Bank of Nigeria (CBN), on Tuesday injected 210 million dollars into the inter-bank Foreign Exchange market to meet customers’ requests in various segments of the market.

    The CBN acting Director, Corporate Communications, Mr Isaac Okoroafor said that the CBN offered 100 million dollars to authorised dealers in the wholesale segment of the market.

    Okoroafor said also that the Small and Medium Enterprises (SMEs) segment got 55 million dollars while another 55 million dollars was allocated for tuition fees, medical payments and Basic Travel Allowance (BTA).

    Read Also: CBN sustains forex intervention with $210m injection

    He said that the apex bank would continue to intervene in the interbank foreign exchange market, in line with its pledge to sustain liquidity in the market and maintain stability.

    According to him, the CBN will not renege on its promise to manage the foreign exchange market with a view to reducing the country’s import bills and halt the depletion of its foreign reserves.

    It will be recalled that on July 03, the CBN intervened to the tune of 210 million dollars to cater for requests in the wholesale segment of the market.

    Meanwhile, the naira continued its stability in the foreign exchange market, exchanging at an average of N360 to a dollar in the Bureau De Change segment of the market.

    NAN

  • CBN seeks buffers to strengthen banks’ capacity

    The finance sector needs regulatory buffers to strengthen banks’ capacity to withstand shocks, Central Bank of Nigeria (CBN) Deputy Governor Edward Lamtek Adamu, has said.

    In his personal statement contained in the CBN Communique of the last Monetary Policy Committee (MPC) meeting released yesterday, the bank chief said the apex bank also needed to   build   buffers   on   both   fiscal   and   monetary   sides   in preparation  for  a  possible  downturn.

    He explained that  from  a  financial  stability  standpoint,  inflation  threats  or  risks  to  the naira exchange rate stability are to be mitigated upfront in order to sustain and deepen the resilience of the industry.

    “In my view, the expected surge in liquidity and  likely  retrenchment  in  inflows  on  account  of  some  external  developments appear  to  be  the  most  potent  threats  to  domestic  economic  and  financial stability   in   the   short-to   medium-term.   In   addressing   these   risks,   policy coordination is key. While public spending is needed to re-invigorate economic growth,  care  must  be  taken  to  ensure  that  its  essence  is  not  defeated  by unintended consequences. Proper coordination of monetary and fiscal policies reduces uncertainty, thereby allowing for optimal deployment of instruments,” he noted.

    He noted that “although  current  global  economic  conditions  appear  to  portend  a  favourable short-term outlook for oil prices, we have learned from experience that upswings in  crude  prices  unwind,  most times,  sooner  than  forecasts  suggest.  There  is  no doubt,  the  recent  rally  in  prices  has  had a  positive  impact  on  external  reserves accretion  and  boosted  the  economy’s  resilience  and  investor  confidence,” Adamu said.

    He also stated that the nature of portfolio  investment means they are susceptible  to  sudden  reversals, hence the reality  needs  to  be  factored  into  policy  considerations  and  actions  today.

    He said the  naira  exchange  rate  continues  to  be  an  important  influence  on  consumer prices  and  output  recovery.

    “Stability  in  the  naira  exchange  rate  has  been sustained  through  appropriate  policies  and  reforms  of  the  exchange  rate market  aimed  at  improving  the  supply  of  foreign  exchange  and  reduction  of speculative  and  frivolous demands.  Consequently,  Nigeria’s  stock  of  external reserves   continues   to   grow   on   account   of   reduced   imports,   increased petrodollar  inflows owing to more favorable oil prices and uninterrupted crude production,  and  increased  autonomous  inflows  through  the  Investors’  and Exporters’ foreign exchange (I&E) window,” he said.

    He explained that though measured, there have been some improvements in the banking system,  deteriorations  in  financial  soundness  indicators  have  been  halted,  and  in  some cases  reversed.

    “For  example,  industry  return  on  asset  (ROA)  and  return  on earnings (ROE) rose quite significantly to 21.57 and 2.14 per cent, respectively, in April,  from  11.78  and  1.28  in  February  2018.  Likewise,  the  non-performing  loans (NPLs) ratio moderated slightly in April. These positive developments are broadly connected  to  the  improvement  in  the  macroeconomic  conditions  including stable  exchange  rate  and  declining  inflation,” he noted.

    “Interestingly,  banking  system stability  is  required  for  proper  financial  intermediation  (including  credit  flow  to the  real  sector)  which  is  needed  to  support  recovery  in  output.  The  feedback causation  between  the  banking  system  and  the  real  economy  has  to  be carefully managed always and especially so during this (recovery) phase of the economy’s business cycle,” he noted.

    Adamu said the economic outlook appears  stronger,  on  the  assumption  that  inflation  continues  to trend downwards, the exchange rate of the naira remains stable and supply of foreign exchange for needed imports remain unconstrained. “We equally cannot discount  the  role  of  the  CBN’s  interventions  in  the  growth  poles  as  well  as government’s investments in infrastructure. Headline  inflation  continued  to  decelerate  in  April  2018,” he said.

    “Year-on-year,  the headline  inflation  index  rose  by  12.48  per  cent  compared  to  13.34  per  cent  in March.  Food  and  core  indices  similarly  rose  by  14.80  and  10.92  per  cent, respectively in April 2018, compared with 16.08 and 11.18 per cent, respectively in March. However, on month-on-month basis, both food and core inflation rose in April. In fact core inflation rose consistently from January to April.