E-Financial
Move Towards Exchange Rate Unification Positive – Report
A report by the FSDH Research has described recent move by the Central Bank of Nigeria (CBN) to achieve exchange convergence is positive, saying it would ensure clarity and improve market confidence in the economy.
The report also stated that the move would enable Nigeria to unlock funding from several multilateral organisations such as the International Monetary Fund (IMF) and the World Bank and ease the pressure on the exchange rate in the medium term.
It further stated that the central bank’s current move towards unified exchange rate was expected to ensure flexibility and market- determined rate, which it stated to a large extent would, reduce arbitrage, round-tripping and could move the naira towards its fair value.
“The CBN’s move is expected to instill confidence in the market as foreign investors are more likely to participate in a less fragmented market that can be fairly predictable.
“Given this framework, the options available for the CBN include raising the interest rates to incentivise inflow of capital into the economy that may hurt economic recovery in subsequent quarters or relax capital control rules/restrictions and simultaneously increase market interventions to prevent significant depreciation of the naira that may result in external reserves depletion,” the report stated.
It, however urged the CBN to follow up the move to unify the exchange rate with a set of consistent forex policies that would seek to improve market liquidity and prevent every form of foreign exchange arbitrage and unnecessary subsidies.
It also urged the CBN to clear forex backlogs, which the IMF estimated to be $2 billion in February 2021, to further instill confidence in the market.
The report, which was titled: ‘Nigeria’s Foreign Exchange Policy Note- Navigating through the Tides of Uncertainty’.
It added that: “As much as Nigeria needs effective management of foreign exchange and unification of exchange rate to boost confidence, the supply shortage of foreign exchange is still a major problem.
“Increasing foreign exchange supply from non-CBN sources is vital in maintaining exchange rate stability in the I&E window and reducing speculative activities.”
The report predicted that the CBN would be faced with, “policy trilemma” to explain Nigeria’s foreign exchange and monetary choices.
The ‘trilemma’ refers to the trade-offs a government faces when making crucial monetary policy decisions because only two out of the three objectives could be achieved at a time.
It added: “With COVID-19, Nigeria maintained the two objectives of having a fixed/managed official exchange rate and monetary autonomy at the expense of free movement of capital. This was evident in the capital controls and forex backlogs.
“The recent move by the CBN to adopt the I&E market rate as the official rate will enable the CBN to control interest rate while capital controls can be relaxed, but exchange rate will have to be flexible.
“Whether the naira appreciates or depreciates will depend on the level of capital inflows and outflows, CBN’s involvement in the market and the external reserves position.
“This means only way to maintain a stable exchange rate is to attract even more capital into the economy or intervene heavily in the forex market using the external reserves.”
It added that the planned issuance of Eurobond by the government would provide some relief in the market and boost external reserves in the short term.
However, from the fiscal and trade perspective, “Nigeria will need to leverage on the African Continental Free Trade Area (AfCFTA) agreement to boost non-oil exports and increase foreign exchange inflows.”
The FSDH also recommended that, “providing direct incentives for businesses to produce for exports by implementing port reforms as well as developing a comprehensive industrial and trade strategies would be important steps that the government must take.
“Our 2021 forecasts for key indicators include real Gross Domestic Product (GDP) growth of 1.3 per cent, an average exchange rate of N430/$ and an inflation rate of 16.6 per cent.”
E-Financial
CBN Says OPay, Moniepoint, Others can Start Onboarding New Customers Soon
Central Bank of Nigeria (CBN) has said that mobile money operators including fintech firms like OPay, Palmpay, Kuda Bank, and Moniepoint will resume the enrolment of new customers “in another couple of months”.
Olayemi Cardoso, governor, stated this on Tuesday at the 295th Monetary Policy Committee (MPC) of the apex bank in Abuja when the MPC jacked up interest rate from 24.75 per cent to 26. 25 per cent.
Cardoso, said the apex bank has engaged many of the players on the need to strengthen their operations.
He said to block money laundering and illicit flows, the apex bank brought up “remedial measures that will help that sector to tighten up on onboarding and even existing clientele base”.
“I am confident that as time goes on, and hopefully in another couple of months, all these will be something of the past and then you will see that sector going back into what they’ve been known to do before, but certainly with a very stronger regulatory framework,” he said.
In April, the apex bank stopped fintech companies from onboarding new customers, a move that has been seen as a clampdown on the financial sub-sector by the Cardoso-led CBN.
When asked why the apex bank took the decision, the CBN chief said reports that the CBN has decided to clamp down on fintech firms are “furthest from the truth”.
He said “the fintechs have not been singled out for any exceptional kind of treatment”, adding that the CBN remained proud of the exploits of fintech firms in the last number of year and the apex bank would continue to support and strengthen them.
“However, regulation is very critical in a sector that seems to have grown so incredibly rapidly,” Cardoso said, citing illicit flows within the sub-sector.
“More recently, we had course to take a deep dive look at the whole issue of illicit flows and money laundering particularly within the non-heavy regulated banking system and we all know some of the issues that came out with cryptos and some of the messages we put out after that, which of course, gave us some course to know that there is the need for heightened surveillance.”
He said the apex bank has had major handshake with security agencies to identify the places to tighten regulations and surveillance in the sub-sector.
Cardoso said, “For that reason, we were concerned with respect to how we saw the issue of anti-money laundering and illicit flows as they made their way within the various sub-sectors of the financial industry and we felt there was a need for us to take a breather and work with different players to strengthen regulations, not by any means to throw them out of business.
“Let me re-emphasise that as at this point in time, we have not revoked the licenses of any of the fintech organisations.”
E-Financial
Flutterwave Refutes N11Bn Loss Due to Security Breach
Flutterwave, African fintech company, has debunked allegations in the media that it lost N11 billion ($7.25 million) due to a security compromise.
Flutterwave, led by Olugbenga Agboola, Nigerian tech millionaire has rejected accusations is the only Africa-focused Company to make CNBC’s 2024 Disruptor 50 List
In response to the avalanche of claims, Flutterwave said that it discovered suspicious activity on one of its customer platforms in April 2024. The corporation maintains that it aggressively prevented any loss of customer monies.
As a security precaution, Flutterwave will contact select customers to move their accounts and recommends that all customers implement multifactor authentication, 3D security, and IP whitelisting.
This recent incident raises security worries for the corporation, which accepts payments in over 30 currencies from 40 countries.
In March 2023, reports arose saying hackers stole N2.9 billion ($6.3 million) from Flutterwave. The corporation quickly rejected the charges, reaffirming its commitment to client fund protection.
Flutterwave was ordered by a Nigerian court to recover N19 billion ($12.5 million) for unlawful POS transactions that affected 6,000 accounts across 35 banks and financial institutions.
This came after a months-long inquiry into a technical malfunction that enabled the fraudulent transfers.
Agboola founded Flutterwave in 2016, and it has since been a forerunner in Africa’s ongoing payments revolution. The company, with headquarters in San Francisco and
Lagos, is a notable success story in the continent’s developing fintech sector.
Flutterwave entered the Rwandan and Egyptian markets in 2023, which was a golden year for expansion. It formed a strategic relationship with IndusInd Bank Ltd., a top Indian financial services provider.
The corporation announced a $50 million investment in the Kenyan market to secure an operating license.
These results highlight Flutterwave’s twin goals of transforming Africa’s payments ecosystem and developing a foothold in international markets.
In 2023, Flutterwave formed a strategic relationship with Microsoft, founded by Bill Gates and Paul Allen, American billionaires.
This effort intends to empower at least 10 million small and medium-sized firms (SMEs) across Africa, with a concentration on Nigeria.
The partnership harnesses the power of the fintech sector to boost economic growth and improve people’s lives by promoting financial inclusion.
This collaboration expands on the two companies’ current technological arrangement, which was signed earlier in 2023.
E-Financial
CBN raises interest rate to 26.25%
Monetary policy committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 24.75 percent to 26.25 percent.
This comes after Nigeria’s inflation rate rose to 33.69 percent amid the surge in food prices.
Olayemi Cardoso, CBN’s governor, announced the monetary policy rate adjustment at a news conference on Tuesday, May 21, during the committee’s 295th meeting in Abuja.
The monetary policy rate (MPR) is the baseline interest rate in an economy, which banks use to set their interest rates.
This is the third consecutive time the apex bank will be raising the benchmark rate this year. At the March MPC meeting, the benchmark rate had been increased by 200 basis points from 22.75 per cent to 24.75 per cent.
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