E-Financial
CBN Uncovers $2.4Bn False Forex Claim Pressuring Naira – Cardoso
Central Bank of Nigeria (CBN) uncovered invalid foreign overdue claims totalling $2.4 billion, which have pressured the naira for long and spooked the currency market, Olayemi Cardoso, governor, Central Bank, said on Monday.
Olayemi Cardoso, governor, Central Bank,
Cardoso said the discovery was made after an audit by the consultant that the Central Bank engaged brought several shady deals to light.
After seven years of being concealed from public knowledge, the audited accounts of the CBN became public last year during which auditors revealed a $7 billion backlog of unmet dollar demand from investors and currency users.
That has created an overhang in the market which, unless cleared, could keep the naira pressured, leaving the currency on a continued free fall against the dollar.
The CBN hired Deloitte to investigate the forex claims to get a true picture of things,
Cardoso said during an interview with local TV Arise, broadcast Monday morning.
The Deloitte report found that as much as $2.4 billion of the said backlog are false claims, with claimers unable to present import documents in some instances, he said
“We had had reasons to believe we needed to take a harder look at these obligations. So we contracted Deloitte management consultants to do forensics of all these obligations and to actually tell us what was valid and what was not,” Cardoso said.
“The result that came out of this was startling in a great respect. It was startling. We discovered that of the roughly $7 billion, about $2.4 billion had issues, which we believe had no business being there and the infractions on that ranged from so many things, for example not having valid import documents and in some cases, entities that do not exist.
“There were account parties who had asked for foreign exchange and got more than they asked for. There were some who didn’t even ask for any and got. So there were whole loads of infractions there,” he added.
Nigeria’s naira has been on a much-prolonged retreat, dating back to the pandemic days, against the dollar as a heap of unmet obligations to investors and exporters continues to strain the currency, which has weakened to a dross.
Naira finished 2023 as the world’s worst-performing currency, weighed down by illiquidity and commonplace speculative practices among market operators and street traders.
Currency users are having to throng the parallel market, where the exchange rate is higher but the dollar is in greater supply, to have their needs met.
President Bola Tinubu set out shortly after his inauguration last year to liberalise the foreign exchange system, which has been bogged down by an unorthodox regime that pegged the exchange rate rather than allowing the naira to trade freely and find price discovery.
The CBN collapsed the multiple naira exchange rates, adopted under the immediate past CBN governor, Godwin Emefiele, into a single window as part of a slew of currency reforms that followed. It went further to initiate its first devaluation round under the current administration around mid-June.
Those market-friendly moves were aimed at courting international investors but they are hurting Nigerians at home, considering that they are adding fuel to an already elevated inflation by making imported goods and raw materials much more expensive.
In the week that just went by, naira’s official rate dived by over 36 per cent, dropping to a lower level than the street rate, after the CBN overhauled its approach to setting the rate in the official market and came hard on traders involved in misguiding the public with distorted prices.
Between the point Mr Tinubu took office and now, the naira has depreciated by approximately 68 per cent, 50 per cent in 2023 alone.
But banks also have been fingered in the speculative activities that are pressuring the naira.
Cardoso gave a tall order to banks at the end of January, ordering them to increase dollar supply to the market by ensuring their foreign exchange net open position does not exceed 20 per cent of shareholders’ funds unimpeded by losses.
Put differently, the gross amount of loans lenders can grant in foreign currency must not exceed one-fifth of their shareholders’ funds, which could force banks to make the remaining cash available to the market, a push that could boost liquidity in the system.
Cardoso said at the interview that those making invalid claims of $2.4 billion would not get anything.
“As they were identified, we wrote to the authorised dealers to come in and explain what the situation was. Sadly, quite frankly, much of those has not been disputed to our satisfaction.”
So far, the apex bank has settled requests in the neighbourhood of $2.3 billion including those from airlines operating in the country, he went further to say. That leaves the balance of the genuine arrears of dollar demand at $2.2 billion.
Cardoso assured that the remainder will be cleared very shortly.
“I think we are at the end of this, to put it that way,” he said.
Last month, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, told Bloomberg the government had opened talks with the World Bank with a view to securing a lifeline of between $1 billion and $1.5 billion from the World Bank to rescue the naira.
Central Bank of Nigeria (CBN) has awarded the country’s second Payment Terminal Service Aggregator (PTSA) license to Unified Payments, Nigeria’s premier financial technology company, following a rigorous and transparent process,
The move is targeted at enforcing existing requirement that all transactions from point-of-sale channels in Nigeria must go through a licensed Payment Terminal Service Aggregator (PTSA).
The CBN is enforcing the laws to clamp down on financial crimes and other market misconducts and it aligns with the CBN’s objectives to fully track all electronic transactions in Nigeria, given the propensity of using such transactions to fund insecurity, violent crimes, banditry, kidnapping as well as other vices.
According to one analyst, “By awarding a second PTSA license, the apex bank has proactively responded to industry operators who had expressed serious concerns about channelling all transactions through a single aggregator, the Nigeria Interbank Settlement System PLC (NIBBS), as has been the case for some years.
“With the new policy direction, payments service providers would henceforth route all transactions through either of the two licensed Companies.”
Other financial analysts and industry players have commended the Central Bank, affirming that “the move can be a massive step in the right direction. They also commended the open, transparent, and inclusive manner via which the selection process was managed, and the license awarded.
“The selection process, which lasted for months, began with an invitation for qualified organisations within the payment industry to submit an Expression of Interest document, alongside other requisite documentation and additional capital requirement of N1 billion.”
The new management of CBN decided not to give the license out without going through an open process – and for the first time in licensing a payment service provider – the apex bank went through a public bid process outlined in its publication of Friday, January 5, 2024, in different national newspapers. At the end of the process, Unified Payments emerged as the most preferred service provider.
Unified Payment Services Limited, also called Unified Payments or UP, is a shared service provider within Nigeria’s financial technology sector owned by a consortium of Nigerian banks. For over 26 years, the firm has provided payment technology to banks and other industry operators. The first and only non-bank entity that is a principal member and licensed acquirer of all of American Express, Mastercard, Visa, UnionPay and Payattitude. Unified Payments facilitates both local and international transactions.
Formerly known as ValuCard Nigeria Plc, Unified Payments led the way to introduce POS payments in Nigeria under its card scheme known as ValuCard which is the first payment card to be issued in Nigeria. The company later transformed into a scheme-neutral and option-neutral service provider enabling transactions under different schemes.
The company has continued to provide leading payment technologies and services, enabling different operators to leverage its capabilities and licenses, enabling prompt and seamless transactions.
Among the shareholders of Unified Payments are First Bank, Access Bank, United Bank for Africa (UBA), Guaranty Trust Bank Plc, Zenith Bank and Fidelity Bank. Other shareholders are Citibank Nigeria Limited, Ecobank of Nigeria Plc, First City Monument Bank Plc, Keystone Bank Ltd, Polaris Bank Ltd, Stanbic IBTC Bank Plc, Sterling Bank Plc and Wema Bank Plc.
Chartered Institute of Bankers of Nigeria, CIBN, has expressed support for the ongoing banking recapitalization exercise saying it will empower banks to lend more to the economy.
CIBN President, Dr. Ken Opara stated this yesterday while speaking at the annual lecture of the institute in Lagos, with the theme “Improving Availability of Credit in the Nigerian Real Economy: The Critical Importance of Liquidity.”
Okpara noted that the volume of credit to the real sector activities namely agriculture, manufacturing and services is low compared to their critical role in driving economic growth.
Consequently, he called for more credit to the real sector, saying, “I propose that we consider offering more credit to these key sectors and particularly the agriculture sector. It is for this reason that the Recapitalization exercise is a welcome development.
“The recently announced upward review of the Minimum Capital Requirements of Nigeria by the Central Bank of Nigeria would further empower banks to extend more credit to the economy’s productive sectors.”
To address these factors impeding credit to the real sector, Okpara suggested that, “The government needs to improve further the ease of doing business and infrastructural development, such as power, roads, rail networks, etc.
“Setting up industrial centres where these companies can co-habit and share common infrastructure. Harmonize and reduce the various taxes and levies, including locating them in a single hub.
“Banks need to be deliberate in de-risking these companies via Capacity building programmes, and Advisory services.
Specialised Financial Institutions can be created in addition to the Bank of Industry (BOI), especially credit guarantee agencies and risk-sharing institutions, to further facilitate the deepening of credit as practiced in countries such as China which significantly transformed its economy.
A new report claims that 20 per cent of Nigerians are using Bitcoin to carry out financial transactions every day.
According to the open-source blockchain website, Elastos, the research was compiled from online interviews conducted with 1,407 self-defined ‘tech savvy’ respondents in Brazil, Germany, Nigeria, South Korea, UAE, the UK, and the US.
The interviews were completed by a third party, a registered market research company and completed between 30 March and 04 April ’24.
The report further revealed that 67 per cent of Nigerians would have more trust in Bitcoin to put their life savings than banks and local governments.
The report reads; “The inaugural BIT Index (Bitcoin; Innovation & Trust) – compiled from over 1,400 self-defined ‘tech savvy’ respondents from 7 countries across the globe – sheds light on the actual perception and use of Bitcoin in people’s daily lives, irrespective of its current valuation. Elastos’ BIT Index is part of ongoing research to better track the ‘real world’ use of Bitcoin together with users’ motivations, expectations and barriers around the same.
“In particular, the data reveals the role being played by emerging markets in terms of understanding, usage and confidence around Bitcoin. Nigerian respondents’ levels of usage and trust compare starkly with those expressed from so-called ‘established’ markets such as Germany and the UK and Germany where daily usage levels are just 8% (for German respondents) and (9% for their UK counterparts).
“In terms of the trust – in addition to Nigeria – significant proportions of respondents from Brazil (35 per cent) and the UAE (32 per cent) would have more confidence in Bitcoin-based services to protect their life savings compared to those from markets such as the UK (20 per cent) and Germany (22 per cent).
“When it comes to ensuring the integrity of online transactions, emerging market respondents also revealed their relative confidence in Bitcoin, compared to alternatives. According to the data, 66 per cent of Nigerian respondents and 35 per cent from Brazil have more confidence in Bitcoin-based systems than alternatives such as banks, or national Governments, compared to figures of just 16 per cent (Germany) and 21 per cent (UK) who feel the same.
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