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Banks Becoming Less Resilient- CBN

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Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) yesterday said that the adverse macroeconomic environment, which had led to massive job losses and declining profitability, was making the banking sector less resilient.

Godwin Emefiele, CBN governor, who read the communique issued at the end of the two-day MPC meeting in Abuja, said the committee specifically expressed concern about the rising non-performing loan portfolio and declining asset quality in the banking sector.

He said the committee called on the CBN to work with Deposit Money Banks to quickly address the rising NPLs, declining asset quality, credit concentration and high foreign exchange exposures.

Out of the N18.53tn total loan portfolio of the DMBs operating in the country as of the end of last year, about N1.85tn or 10 per cent of the amount had become non-performing loans based on statistics released by the Nigerian Deposit Insurance Corporation last month.

This is above the five per cent regulatory threshold for the sector as stipulated by the CBN.

The CBN governor said, “On the outlook for financial stability, the committee noted that the banking sector was becoming less resilient as a result of the adverse macroeconomic environment. Nevertheless, the MPC reiterated its resolve to continue to pursue financial system stability.

“To this end, the committee enjoined the management of the bank (CBN) to work with the DMBs to promptly address the rising NPLs, declining asset quality, credit concentration and high foreign exchange exposures.”

Emefiele stated that the MPC also agreed to retain the Monetary Policy Rate at 14 per cent, noting that out of the 10 members who attended the meeting, nine voted to retain the rate, while one voted for an increase in the MPR.

He also said the committee retained other monetary policy parameters such as the Cash Reserves Ratio at 22.5 per cent; Liquidity Ratio at 30 per cent; and the Asymmetric Corridor at 200 basis points.

In arriving at these decisions, Emefiele explained that the committee considered the arguments of whether to further tighten, retain or loosen the rates.

From the standpoint of monetary tightening, the governor said the argument in support of this was strong and persuasive.

For instance, he said those in favour of tightening based their arguments on the conviction that the real interest rate remained negative, the upper reference band for inflation remained substantially breached and there was elevated demand pressure in the foreign exchange market.

The apex bank boss said, “The reality of sustained pressures on prices (consumer prices and the naira exchange rate) cannot be ignored, given the bank’s (CBN) primary mandate of price stability.

“However, tightening at this time would portray the bank as being insensitive to growth. Also, the Deposit Money Banks may easily reprice their assets, which would undermine financial stability.

“Besides, the committee noted the need to create binding restrictions on growth in narrow money and structural liquidity, and the imperative of macroeconomic stability to achieving price stability conducive to growth.”

On the argument for loosening, Emefiele noted that while the benefits of this would be in tandem with the needs of fiscal policy to restart growth, the MPC, however, noted that loosening would exacerbate inflationary pressures, worsen the exchange rate and further pull the real interest rate into negative territory.

He stated, “The counterfactual arguments against loosening was anchored on the upward trending month-on-month inflation and its impact on the exchange rate. Loosening would thus worsen the already negative real interest rate, widen the interest rate spread and reverse the positive outlook for the current account.

“Since interest rates are sticky downwards, loosening may not necessarily transmit into lower retail lending rates.”

The governor added that the CBN was optimistic that with the recent interventions in the foreign exchange market, where over $1.5bn had been released in the last three weeks, the difference between the official and parallel market rates would be further narrowed.

When asked if the CBN could sustain the recent interventions, Emefiele said that those who doubted the ability of the bank to take decisions and implement them were taking a great risk.

He noted that with the nations’ foreign reserves increasing to about $31bn, currency speculators would begin to suffer huge financial losses.

The CBN boss said, “Our reserves, as I speak to you now, is still trending upward and are almost at $31bn; and the fact that we have done this consistently for four to five weeks should tell everybody and those who doubt the strength of the central bank sustaining this policy that they are taking a risk and they will lose in this bid to want to place a wrong bet on the direction that we are going.

“The direction is that there is a determination to see to the convergence of those rates and with what we have seen so far, we are very optimistic that those (forex) rates will converge and all the elements in the foreign exchange market will begin to go down.”

He said the committee noted the consecutive positive contribution of agriculture to the Gross Domestic Product, adding that if properly implemented, the newly released Economic Recovery and Growth Plan as well as innovative and growth-stimulating sectoral policies would take the economy back to the path of growth.


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E-Financial

FG Makes u-Turn on Bank Account Re-Registration

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Federal government on Friday apologised for asking all account holders in financial institutions in the country to re-register their personal details.

FG makes u-Turn on Bank Account Re-Registration

Recall that the federal government had on Thursday ‎ordered that all persons holding accounts across financial institutions and insurance firms should complete and submit self-certification forms to their respective financial institutions.

The notice issued by the government to that effect read, ‎“This is to notify the general public that all account holders in Financial Institutions (Banks, Insurance Companies, etc.) are required to obtain, complete, and submit Self – Certification Forms to their respective Financial Institutions.

“Persons holding accounts in different financial institutions are required to complete and submit the form to each one of the institutions. The forms are required by the relevant financial institutions to carry out due diligence procedures, in line with the Income Tax Regulations 2019.‎”

The directive raised eyebrows, as account holders already possessed Bank Verification Numbers.

Following widespread condemnation that trailed the directive, the Federal Government backtracked on Friday, saying the fresh guidelin‎e was not for all Nigerians.

The government attributed the development to misinformation.

The clarification issued by the government on Friday read, ‎“We apologise for the misleading tweets (now deleted) that went up yesterday, regarding the completion of self-certification forms by Reportable Persons. The message contained in the notice does not apply to everybody. ‎FIRS will clarify Nigerians on the objectives of the directive.”

Also on Friday, FIRS, in a statement posted on Twitter, explained that the guidelines were only for non-residents, as well as people paying tax in more than one country.

Parts of the FIRS statement read, “The Self Certification Form is basically to be administered on Reportable Persons, holding accounts in Financial institutions, that are regarded as “Reportable Financial Institutions” under the CRS.

“Reportable persons are often non-residents and other persons, who have residence for tax purposes in more than one jurisdiction or country.”

“The information that indicates an account holder is a resident for tax purposes in more than one jurisdiction, is expected to be available to Financial Institutions during account opening processes, for the KYC and AML purpose.”


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Stanbic IBTC Bank Disowns Lagos ATM Fraudster

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Stanbic IBTC Bank PLC has disowned Tope Olajide, 22-year-old fraudster arraigned for theft of customers deposits.

Stanbic IBTC Bank Disowns Lagos ATM Fraudster

The Bank said this in a statement on Wednesday.

The statement said: “The attention of the management of Stanbic IBTC Bank PLC has been drawn to news currently circulating in the media, about the alleged arraignment of staff of the Bank on charges bordering on the theft of customers deposits.

“The Bank would like to clarify that the defendant, a 22-year-old Tope Olajide, IS NOT, and was at no point in time an employee of Stanbic IBTC Bank PLC.

“The alleged culprit was apprehended around 7:30 am, on Thursday, 27 August 2020, by security operatives after he was exposed by CCTV footage using ATM cards he had allegedly stolen and converted, to make withdrawals from the accounts tied to the stolen ATMs.

“The CCTV footage also showed the alleged culprit pretending to assist customers at ATMs whilst also attempting to fraudulently dispossess the customers of their ATMs.

“He was subsequently arraigned before an Ikeja Magistrate Court on Monday, 14 September, for stealing the debit cards of two customers and using them to unlawfully withdraw the sum of N427,000.

“The Bank would also like to implore members of the public to be security conscious when conducting transactions at ATMs. Customers are advised to report any suspicious actions around them to security operatives who are usually stationed around the Bank’s ATMs, when carrying out transactions at any of our ATM locations.

“As an organisation, we hold dear the values of integrity, and we will continue to prioritise the safety of our customers effectively.”


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Buhari Okays Establishment of CBN-Led Infraco

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President Muhammadu  Buhari has approved the establishment of an   Infrastructure Company (Infraco) to be driven by the Central Bank of Nigeria (CBN) in partnership with the African Finance Corporation (AFC) and the Nigerian Sovereign Investment Authority (NSIA).

Buhari Okays Establishment of CBN-Led Infraco

Mr. Godwin Emefiele, CBN governor

This is coming  on the heels of the foreign reserves’ slump to $36 billion following a cocktail of monetary policy interventions by the apex bank to cushion the scathing effects of the COVID-19 pandemic on the economy.

Mr Godwin Emefiele, CBN governor, made these disclosures in Abuja at the annual conference of the Chartered Institute of Bankers of Nigeria (CIBN) with the theme: Facilitating a Sustainable Future: The role of Banking and Finance.

According to him, Infraco would enable the use of private and public capital to support infrastructure investment that will have a multiplier effect on growth across critical sectors.

“This entity would also be able to raise funds from the capital markets and mobilise long term finance to address some of our infrastructure needs, while providing reasonable returns to investors. “We believe this well-structured fund can act as a catalyst for growth in the medium and the long run. The support of the banking community will be important in achieving this objective.

“A well-built infrastructure system, comprising hard infrastructure such as roads and ports, and soft infrastructure such as broadband penetration, can have a multiplier effect on growth by enabling the expansion of business activities in the country”, he explained.

On foreign reserves, Emefiele attributed its crash to the decline in foreign exchange earnings and subsequent adjustments in the value of the naira to the dollar.


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