The Nation Newspaper

Tag: Nduka Chiejina

  • FG shuts down NERFUND

    FG shuts down NERFUND

    The federal government has shut down the Nigerian Economic Reconstruction Fund (NERFUND).

    This is contained in a letter to all staff and management of NERFUND signed by the Permanent Secretary, Mahmoud Isa-Dutse, Federal Ministry of Finance.

    The letter noted that “following the recent developments in your organization and the failure to reconcile the differences, but the Executive Management, Senior Management and staff and in spite of interventions by the Federal Ministry of Finance, the ministry has decided to close down the organization with immediate effect.

    The letter advised “all staff and management to proceed on compulsory leave.” When contacted, Festus Akanbi the Special Adviser to the minister of finance confirmed the development.

  • CBN unveils flexible forex market

    CBN unveils flexible forex market

    … Rolls out new forex products 

    The Central Bank of Nigeria (CBN) on Wednesday  released the much awaited guidelines and operational details of the flexible exchange rate regime promised by the Federal Government.
    Under the new flexible exchange rate market initiative, the CBN has pegged the minimum amount primary dealers are required to trade in at a minimum of $10 million.
    Addressing journalists in Abuja on Wednesday, the CBN Governor, Mr. Godwin Emefiele, said “there is one window and that is what it will be as long as there is one window. Whatever comes out at the end of the day as the marginal rate will be the rate that is recognized officially by the world about the rate for Nigeria Naira. I do not expect that another rate will be recognized in the market.”

    He gave the highlights of the framework and operational guidelines of the flexible exchange rate to include: The market shall operate as a single market structure through the inter-bank/ autonomous window; The Exchange Rate would be purely market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book; The CBN would participate in the Market through periodic interventions to either buy or sell FX as the need arises; To improve the dynamics of the market, we will introduce FX Primary Dealers (FXPD) who would be registered by the CBN to deal directly with the Bank for large trade sizes on a two-way quotes basis; These Primary Dealers shall operate with other dealers in the Inter-bank market, amongst other obligations that will be stipulated in the Foreign Exchange.

    Primary Dealers (FXPD) Guidelines, which would also be released immediately after this Press Briefing.

    Other features of the flexible exchange rate initiative Emefiele said include that :there shall be no predetermined spread on FX spot transactions executed through the CBN intervention with Primary Dealers, while all FX Spot purchased by Authorized Dealers are transferable in the inter-bank FX Market; The Forty-One (41) items classified as “Not Valid for Foreign Exchange” as detailed in a previous CBN Circular shall remain inadmissible in the Nigerian FX market; To enhance liquidity in the market, the CBN may also offer long-tenored FX Forwards of 6 to 12 months or any tenor to Authorized Dealers; Sale of FX Forwards by Authorized Dealers to end-users must be trade-backed, with no predetermined spreads.

    The CBN, he added: “Shall introduce non-deliverable over-the-counter (OTC) Naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. This is an entirely new product in the Nigerian Foreign Exchange Market, which would help moderate volatility in the exchange rate by moving non-urgent FX demand from the Spot to the Futures market; The OTC FX Futures shall be in non-standardized amounts and different fixed tenors, which may be sold on any dates thereby ensuring bespoke maturity dates; Proceeds of Foreign Investment Inflows and International Money Transfers shall be purchased by Authorized Dealers at the Daily Inter-Bank Rate; and Non-oil exporters are now allowed unfettered access to their FX proceeds, which shall be sold in the Inter-bank market.”

    In terms of timelines, the Management of the Central Bank, Emefiele said has agreed that: The detailed operational guidelines for the Flexible Foreign Exchange Market will be released immediately after this Press Briefing; The guidelines for the selection and operations of FX Primary Dealers would also be released immediately after this Press Briefing; Selected FX Primary Dealers would be notified by Friday 17th June 2016. All other non-Primary Dealers would remain valid and eligible to participate in the market; Inter-bank trading under the new guidelines will begin on Monday 20th June 2016; and the tenors and rates for the OTC Naira-settled FX Futures will be announced on Monday 27th June 2016.

    The Central Bank, the Governor said: “is strongly determined to make this market as transparent, liquid, and efficient as possible. Therefore, we would neither tolerate unscrupulous behaviour nor hesitate to bring serious sanctions on offenders.”

    He also warned that “the CBN will not allow the system to be undermined by speculators and rent-seeker, any attempt to breach any aspect of this new framework will be heavily sanctioned by the CBN and this may indeed result in the suspension or withdrawal of the FX dealing license of an offending Authorized dealer.”

    Speaking on the preparedness of the CBN to measure to forex demand pressures, the CBN Governor stated that the country’s “reserves, despite having fallen, is still robust and is able to cover about five months of Nigeria’s imports as against the international benchmark of three months. Furthermore, the domestic production of items restricted from the FX market is picking up nationwide, thereby creating more jobs for many more Nigerians.”

    Answering questions from journalists on the development, the CBN Governor noted that “the CBN will deal primarily with foreign exchange primary dealers, there will be primary and non-primary dealers, the guidelines for qualification for being foreign exchange primary dealer will be on our website but there will be a number of qualifications either the size of the bank, the size of foreign exchange transaction it has handled before, the level of liquidity, the extent to which those banks have complied with central bank guidelines and regulations, the level of preparedness in terms of being able to deploy the software needed in a very transparent manner that will hand-shake with the Thomas Reuters and FMDQ software, those will be the bases.”

    With regards to the number of primary dealers, Emefiele revealed that “we do not think from what we see, that there will be maximally eight or ten primary dealers. What that means is that we have what we call grade A dealers and grade B dealers.”

    “By being a grade A dealer, primary dealer does not confer on you any special preference other than the fact that the size of the trade the CBN will be willing to deal with you will be larger than those of non-primary dealers. Foreign exchange dealers and banks know what we mean by trade we are talking of an open, transparent, two way quote system, I can close or they can close on themselves and their capacity to deliver at any time within the trading period is very important here that is why we are trying to separate them into two parts,” he said.

    From what will be published, Emefiele stated that “the level of trade for a primary dealer will be a minimum of $10 million so what that means is that to do that you have to have a the capacity, must have prepared yourself, you have to be ready to play at the highest level of transparency and nobody is ready to take any nonsense from you if you decide to breach the regulations.”

    These new sets of forex dealers he said “will be people who can deliver on their words and they must be people who can face the implications of whatever they do regarding the size, volume and exchange rate they decide to quote, we have decided to ensure that we don’t have speculators, we don’t have rent seekers who just want to come to primary market to just auction and stacking of prices against each other.”

    The OTC/FX Futures market he explained: “is an innovation which we have introduced to moderate volatility in the foreign exchange market, it is a situation where we make it easy for you as a businessman to plan your business, and the rate at which you want to do your business. You do not have to fear about what happened to the price of crude oil today that you are afraid that you will not be able to source your dollar in the next three to seven months anymore.”

    According to the CBN Governor, “once you have locked yourself onto a price you go and do your business if the rate you locked your deal in the futures market is N260 and in three months time the market is doing say N270 at that time, that N10 gap, the CBN will give you the Naira equivalent of that gap such that you are not seen to be losing money by waiting for the next two to three months to procure your foreign exchange.”

    What that does, he said, is that the CBN wants to “see how that shifts your demand from the spot to the time you need it not that you need dollar in the next three, six to nine months you begin to ask you dollar on the spot thereby putting pressure on the demand for dollar.”

    The CBN, he said: “will be engaging more and more with the banks and those primary and non-primary forex dealers on how this will work, but we are determined to ensure that this works and I am very optimistic that this will work. I know a couple of people, particularly those with matured Letters of Credit who expect that they want to buy their foreign exchange what happens is that all backlog transactions will be taken to the market for clearance, the CBN today has the foreign reserve of close to about $26.5 billion to $26.7 billion, this is certainly substantially higher than any pent-up demand that is in the market and we are making efforts to improve on the supply of foreign exchange in the market.”

    Emefiele expressed optimism “that the steps we have taken today will further deepen the market and also help get foreign exchange into the market. We are very hopeful this will work, the CBN is working to improve the level of supply on its own into the market so those demands will be met at the market so there is no need for anybody to rush into the market because you may find yourself losing money, if you rush into the market and take some emergency decisions, that will hurt you, your profit, hurt your balance sheet and ultimately if you have taken a bank loan your interest targets on your bank loans.”

    He urged operators “to be careful that is the reason we have provided opportunities for you to go to the futures, don’t worry just take it easy if your not too sure, go to the futures you will find a deal, all the banks will provide you with futures rate for two to nine months or even one year, they will provide it, so with that you are able to go about your business without necessarily bothering and we have committed ourselves to a level of guaranteeing you. It’s like a debt, if the rate that you get eventually on the day of your futures maturing higher than the deal day, we will pay you the difference but if the rate on that day is lower than the rate on the deal day, then you will pay us. We are just trying to say be calm don’t worry everything is well.”

  • FGPL Shareholders sack Kashim Imam as Chairman

     

     

    After five years of internal wrangling and squabbles, the shareholders of First Guarantee Pension Limited (FGPL) have sacked their chairman and a director and appointed new ones in their place.

     

    At a requisition induced Extra-Ordinary General Meeting (EGM) held in Abuja on Tuesday, shareholders of the Pension Fund Administration entity voted by 24 votes to sack Dr. Ahmed Salik as director in the company and by the same number of votes appointed former Minister of Information Mr Frank Nweke Jr., Samuel Oboh and Ogboogwu Okooha as new directors.

     

    The reason for sacking the former chairman Alhaji Kashim Ibrahim Imam and Dr Ahmed Salik was that in five years the company had not paid dividends to investors, the company had lost market share and had remained under an interim management imposed on it by the National Pension Commission (PENCOM).

     

    The shareholders at the EGM also accused the duo of Kashim Imam and Ahmed Salik of posing a stumbling block to the amicable resolution of the issues that had brought the company to its current sorry state.

     

    After the motion was moved for the removal of Kashim Imam and Ahmed Salik both men were called to come forward and put up a defense before votes were cast but both men were conspicuously absent thus paving the way for their eventual removal as chairman and director in FGPL.

     

    At the end of the appointment of directors, they huddled together and selected amongst themselves Mr George Ozodinobi as the new Chairman of FGPL.

     

    Speaking after his election as the new chairman of FGPL, Mr George Ozodinobi pledged to reposition the company and carry shareholders along, and vowed to call for an Annual General Meeting of the company to look at the audited books of the company and set it on a part of profitability.

     

    Ozodinobi said the board will approach PENCOM to withdraw its interim management imposed on the FGPL and promised to recruit competent hands to manage the affairs of the company and also vowed never to interfere in the activities of the management team as the board of the company as constituted will serve as an advisory body to the management team that will be engaged.

     

    Ozodinobi also dismissed the absence of the PENCOM officials at the EGM stressing that their absence will not negate the outcome of the EGM but he offered to communicate the resolutions at the EGM to the PENCOM to help expedite action towards to removal of the interim management team imposed on the company by PENCOM.

     

    According to Ozodinibi when he spoke with journalists at the end of the meeting, “we will go forward to meet with PENCOM and present the stand of shareholders that this is now the unified decision of shareholders and the board. We are looking forward to the nearest possible time, two to three weeks to handle and dissolve the interim management and hand over our business to us and then we will scout out new managers from the industry to head the management team and with this present board there will be no interference in the management of the company by this board. We have learnt the mistake of the past and wouldn’t want to lead a board that will repeat such a situation.”

  • $40bn drained from external reserve in 10 years, says CBN

    $40bn drained from external reserve in 10 years, says CBN

    The Central Bank of Nigeria (CBN) has cried out that about $40 billion had been depleted from the nation’s external reserves in 10 years due to the taste for imported goods by Nigerians.

    To stem the hemorrhaging of the external reserve the CBN has strongly advocated for Nigerians to begin to process raw materials so as to get more value and earn more foreign exchange.

    According to the CBN governor Mr Godwin Emefiele, “exported raw materials such as crude, wood, cocoa amongst others whose end products are later imported, are being sold cheaply and bought back at more expensive rates” He said the level of the external reserve will be significantly beefed up if fuel which takes up 20 per cent of Nigeria’s import bill is locally produced.

    Defending the decision of the CBN to support the real sector, Emefiele said the apex bank “is convinced that the sector has sufficient employment capabilities, high growth potentials, contributes significantly in accretion to foreign reserves, expands the industrial base and diversify the growth potentials of the economy.”

    Emefiele noted that Nigerians “must, by now have been tired of hearing people talk about the potentials of Nigeria, now is the time to live that dream, we can achieve our goals and give Nigerians the chance to live longer, better and more fulfilled lives.”

    To make this possible, the CBN governor appealed “to Nigerians to patronize locally made products to encourage the manufacturers to remain in business, interventions by the bank are centered around agriculture, Micro, Small and Medium Enterprises (MSMEs) and Infrastructure intervention.”

    The CBN governor also disclosed that in order to make the real sector attractive to the banking industry, the apex bank has injected over N1.3 trillion into the sector.

    Speaking at the annual finance corespondent sand business editors seminar in Ibadan yesterday, the CBN Governor Mr Godwin Emefiele said the desire to revive and stimulate credit to the real sector was what informed the bank’s efforts to pump such huge amount of financial resources into the real sector.

    Represented by the by deputy governor, Corporate Services, Adebayo Adelabu Godwin Emefiele noted that by injecting funds and subsidizing rates, and through relevant policies, the CBN has assisted in growing the economy and promoting the growth of the different sectors of their economies.

    According to Emefiele, the interventions that culminated in the over N1.3 trillion support for the real sector include “the Agricultural Credit Guarantee Scheme Fund (ACGSF),the Commercial Agricultural Credit Scheme (CACS), the Agricultural Credit Support Scheme (ACSS), the N300 billion Real Sector Support Facility (RSSF), the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF), the Small and Medium Enterprises Refinancing and Restructuring Facility (SMERRF), the N75 billion Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL), the N213 billion Nigeria Electricity Market Stabilization Fund and only recently, the Anchor Borrowers’ Programme launched by President Muhammadu Buhari.”

    The CBN is also supporting the Nigeria Export Import Bank (NEXIM) with N50 billion export refinancing and restructuring facility as well as N500 billion as non-oil export stimulation facility. “If you add all these it is in excess of N1 trillion that have been deliberately injected into the system to ensure that they are fully resuscitated and they become attractive for commercial banks” Emefiele said.

    The CBN governor however stated that credit injection to the real sector was not intended “to crowd out the financial institutions in the space of credit delivery but to provide incentives that will stimulate lending at reasonable rates by banks to the real sector.” In addition, the reduction of the CRR of DMBs he noted “has freed almost all the resources that the banks can lend to finance projects under the real sector.”

    Reacting to recent criticisms that the CBN has gone beyond its mandate, the CBN Governor responded that “many central banks in emerging economies, in carrying out their primary mandate, go a step further in directly supporting different sectors of the economies of their respective countries.”

  • Bank Debtors Not Blacklisted from Banking System, Says CBN

    Bank Debtors Not Blacklisted from Banking System, Says CBN

    Debtors whose names were published by banks as delinquent debtors still have a window of opportunity to clear their names by paying back what they the banks.

    Speaking to The Nation yesterday in Abuja, the Director Corporate Communications of the Central Bank of Nigeria (CBN) Mr. Ibrahim Muazu said the recent exercise was “just an effort to get them (debtors) pay back what they owe” or for the banks to recovery their facilities. Muazu described the exercise as simply a recovery exercise and not a measure to remove the listed debtors from the banking system.

    Muazu noted that ordinarily the banks “would have been blacklisted the debtors if they’re so desired but that the essence of publishing the list of debtors is to shame these delinquent debtors into paying up. According to him, “the idea is not to blacklist them from paying but to shame them into paying.”

    However, the Credit Bureau Muazu said would have seen these delinquent debtors and this might affect their (debtors) ability to access credit facilities in the future. Muazu noted that those whose names were published “were given 3 months to make good on paying back what they owed” but they did not.

    In the past, members of the Federation of Construction Industry (FOCI) had expressed serious concern over the threat by the CBN to publish names of chronic debtors to banks in the country.

    President of FOCI, Mr. Solomon Ogunbusola, at a press conference had expressed displeasure over the CBN’s threat. He said that the inability of his members to pay back bank loans was due to governments’ indebtedness to them.

    Ogunbusola had lamented that his members had spent the loans they obtained from banks on projects such as roads and building construction with the hope that governments would pay them as at when due, but the governments had failed to live up to their own end of the contracts.

    Members of FOCI are made up of big construction companies, including Julius Berger Plc, C&C Construction, Costain West Africa, Hitech, Brunelli Construction, Jagal Nigeria, G. Cappa Plc, PW Nigeria Limited, Dantata and Sawoe and RCC, among others. According to Ogunbusola, the Federal Ministry of Works alone presently owes its members over N500 billion, while one of the firms is being owed N70 billion by the Federal Government.

    The FOCI President urged the CBN to equally publish names of government ministries, departments and agencies indebted to FOCI members if it must implement the threat.

    He said: “We are indebted to banks and CBN is threatening our members, saying that it will publish their names as chronic debtors. How can you explain it that someone borrowed money from the bank for two to three years and government refuses to pay for the contract done with the money? What will CBN do to government that refuses to pay the contractor? The names of such governments must be published too.”

    The FOCI boss raised the alarm that construction companies in Nigeria are currently working below 30 per cent capacity, as many contractors were handicapped due to lack of payment for jobs already executed.

    As expected, shareholders are on the side of the CBN and the banks to publish the names of bad debtors. Alhaji Gbadebo Olatokunbo urged the CBN and the banks to go ahead and publish the list of names of bad debtors and their companies. According to him, “the last time, those big wigs said they will go to court for CBN to have published their names because they don’t have business with it. All they eventually did was to negotiate with the banks and began gradual repayment to AMCON.”

    The National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie had earlier argued that Non Performing Loans (NPL) in Nigerian banks have adverse effects on Shareholders and urged the CBN to go the extra mile in publishing the names of the loan defaulters.

    Okezie noted that shareholders always suffer and bear the brunt of the chronic debtors in the banking industry because it affects their returns on investment. According to him, “if the names of the chronic debtors are published today heaven will not fall because they are the people wrecking havoc on banks. The fact is that names should be made known so that they could run to pay. They shouldn’t stop them from doing business with those banks.”

    However, a senior banker said that publishing the names of bad debtors would definitely have adverse effect on most banks because “the names, when eventually published, would definitely include big names in the country who may likely withdraw their saving with the banks which might not be too good for banking industry.”

    In the list published on Monday by some banks, contained the names of some politically exposed individuals and retired senior military personnel thus corroborating the fears of the banker that some of these individuals with strong “connections” might want to take their pound of flesh from the banks that published their names.