CBN asks banks to rescue the economy

The Central Bank of Nigeria has charged Deposit Money Banks in the country to work towards salvaging the distressed economy as the role of returning it to normalcy remains their responsibility owing to their financial intermediation activities that cut across all sectors.

CBN Governor, Mr. Godwin Emefiele
CBN Governor, Mr. Godwin Emefiele

Aside the intervention policies of the CBN, which are extended to the target populace through the banks, there is an added role for the financial institutions in evolving innovative approach to the nation’s development agenda, according to the apex bank.

The CBN Governor, Godwin Emefiele, who made the charge in his opening address at the 2016 Bankers’ Committee retreat in Lagos on Friday, noted that at a critical time in the country’s history, the emphasis on diversification and support for its achievement must be accorded priority by bankers.

At the retreat with the theme: ‘Economic Recovery: The Role of the Banking Sector’, the governor reiterated that banks must come up with innovative solutions that would enable the finance sector to play a key role in driving Nigeria’s growth and development.

The retreat, which is the eighth in the series, is an annual event where members of the Bankers’ Committee engage in strategic review of critical developments within the financial system and the economy.

Emefiele added, “The focus on economic recovery by bankers is timely, given the sustained external headwinds we are grappling with, triggered by several factors. Chief of such is the 70 per cent plus decline in the price of crude oil between June 2014 and June 2016.

“With over 90 per cent of our export revenues coming from the sale of crude oil, the drop in its prices along with the end of the quantitative easing programme in the United States has led to a huge impact on our economy, particularly in the foreign exchange market.”

Meanwhile, the Lagos State Governor, Mr. Akinwunmi Ambode, has charged banks to take their role of reviving the economy seriously.

Ambode, who was represented by the Deputy Governor at the opening of the retreat, Dr. Idiat Adebule, called for a change of orientation and support for policy instruments aimed at achieving the overall goal of reviving the economy.

“We must innovate now, because there is no option to get out of the recession. We must get it right too. The banking sector has a major role to play, because the survival of other sectors depends in part on sustainability and vibrancy of banks,” he said.

He gave an assurance that the suggestions of the bankers would be given due consideration by the government and its agencies to serve as a guide in policy formulation.

But noting that there is a paradigm shift, Emefiele said that emphasis was now on creating an enabling environment for a more diversified growth structure that was not dependent on the sale and production of one produce, crude oil.

CBN Hints on Plans to Restructure Commercial Agricultural Credit Scheme

The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele has disclosed that the apex bank, under its Commercial Agricultural Credit Scheme (CACS) has over N250 billion which has not been fully disbursed as well as a N220 billion micro, small and medium enterprise development fund, with just N80billion utilised so far.

CBN Governor, Godwin Emefiele
CBN Governor, Godwin Emefiele

‎According to him, the central bank is interested in how small holder farmers can benefit from the Anchor Borrowers’ Programme (ABP), through the micro, small and medium enterprise.

Emefiele , a member of the Presidential Task Force on Agriculture, disclosed this while fielding questions from journalists at the Odeda Farm Institute, Odeda during the Task Force’s inspection of the facilities of the Institute and some farm centres in the state.

The Presidential Task Force, which also included the Minister of Agriculture, Chief Audu Ogbeh and the Kebbi State governor, Abubakar Atiku Bagudu, were earlier conducted by the state governor, Senator Ibikunle Amosun, round Eriwe Fish Farm in Ijebu-Ode, Greenhouse Technology Centre, Kotopo in Abeokuta and Owowo Farm Settlement in Ewekoro local government area.

Emefiele added: “When we find a state that is serious and ready to work with us, we burst the commercial agricultural credit scheme facility that we have because the President has mandated that those who are serious, we must support. That is the essence of this.”

He added that the Bank of Agriculture (BoA) will be properly restructured by the Federal government towards assisting farmers to boost agricultural production in the country and ensure food sufficiency.

Emefiele said that if the restructuring was eventually done, it would help the bank to perform its primary responsibilities well.

The CBN governor explained that the team was mandated by the president to go round the entire federation on a fact-finding mission on how to resuscitate some of the age-long agricultural potentials of the country.

He added that the President specifically tasked the team to locate how to ensure increase in the production of cassava, maize and resuscitate cocoa production in the southwest emphasising maize production will support the poultry productivity in the South Western part of the country.

He said, “For us to go round the entire federation, not just about rice, tomatoes, millet but also about even coming down South. What can we do to resuscitate some of our age-long agricultural potential.”

CBN, experts disagree on interest rate

The Central Bank of Nigeria is unlikely to reduce the benchmark interest, investigation has shown.

Experts, however, disagree with this position.

Godwin Emefiele, CBN Governor
Godwin Emefiele, CBN Governor

Also, as economic recession continues to hit the country, there are indications that more companies will lay off workers by year end.

Findings by our correspondent on Thursday revealed that the CBN Governor, Mr. Godwin Emefiele, and his team were not ready to yield to calls for interest rate cut by experts.

It was learnt the CBN governor believed, among other things, that an interest rate cut might not necessarily translate to more lending to companies by banks.

Sources at the CBN said Emefiele notwithstanding fresh calls for interest cut, was not ready to change his position on the matter.

At the annual Bankers’ Night last Friday, the CBN governor had argued against interest rate cut.

He said, “For those who say we need a rate cut to spur growth, we need to remind them that high inflation is inimical to economic growth. Indeed, many empirical studies have estimated the threshold level at which inflation becomes growth retarding to be 11 per cent for developing countries. With ours at 18.3 per cent, one must question the judgment of cutting interest rates at this time.”

However, economic experts said unless the CBN reduced interest rate in line with the capital injection by the Ministry of Finance, the economy would continue to experience slow growth.

The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said, unless the Monetary Policy Rate was reduced, the economy would continue to face challenges.

He said, “The policies have to complement one another. The fiscal policy is moving in the right direction, but it is not enough. We need increased stimulus and increased injection. But we cannot do this with the current level of interest rates.

“Therefore, something has to happen to bring the interest rates down. The monetary policy has to be consistent with the fiscal policy, or else we will continue to have contraction.”

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said there was a need to inject liquidity into the local economy by reducing the benchmark interest rate, and inject liquidity into the forex market by accessing forex line from the International Monetary Fund to stabilise the naira exchange rate.

FG’s huge debts crippling financial system – CBN

The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday called on the Federal Government to urgently evaluate the level of its domestic indebtedness and develop a framework for settling these debts.

CBN Governor, Mr. Godwin Emefiele
CBN Governor, Mr. Godwin Emefiele

The committee, in a communique issued at the end of its two-day meeting held at the headquarters of the CBN in Abuja, warned that the huge government indebtedness to economic agents had slowed down business activities.

In the communique, which was read by the CBN Governor, Mr. Godwin Emefiele, the committee noted that the development was not good for the economy as it was compromising the integrity of the financial system.

While reiterating that monetary policy alone could not address the current economic crisis, the CBN governor noted that the committee called for an enrichment of fiscal and other sector initiatives and interventions towards resolving the growth challenges in the economy.

He said these interventions were vital in order to promptly revive confidence in the economy.

Emefiele said, “Members stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations.

“The MPC urged the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitising the debts in order to settle its outstanding domestic contractual obligations, which cut across all sectors of the economy.

“These accumulated debts have slowed the business activities of economic agents, most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the bank (CBN) to commit to greater surveillance and deployment of early warning systems in managing the banking system.”

The CBN governor said the committee called on security agencies to sustain their checks on the activities of illegal foreign exchange operators in order to bring sanity to that segment of the market.

He said, “The extant foreign exchange regulation outlaws the trafficking of currency on the streets as some unlicensed operators currently do.

“Thus, to evolve an appropriate naira exchange rate that stabilises the foreign exchange market, Bureau De Change operators must strictly observe the terms and conditions of their licences.”

On whether the CBN was supporting jail terms for people hoarding dollars, Emefiele said the apex bank would not support any such move.

He said while the current foreign exchange regulations of the CBN did not in any way support jail term for people who hoard dollars, he was aware that the Nigerian Law Reform Commission was working towards reviewing the regulations.

The apex bank boss, however, added that the CBN would not support any move to prescribe jail terms for people who hoard dollars.

He said, “Let me use this opportunity to reiterate that it is not in our foreign exchange regulations that people should be jailed or their dollars confiscated. But I am aware because just today (Tuesday), I was told that the Nigerian Law Reform Commission is looking at reviewing the exchange regulations, just like it normally will from time to time depending on the exigency of the time.

“We have not been contacted regarding whether or not some of the clauses that are involved are included in the review to be conducted by the Law Reform Commission.

“But I am saying here categorically that if we are contacted, or whenever it becomes an issue for discussion, we will advise against a clause that forbids people from keeping their dollars if they chose to, or a law that says people should be jailed for keeping foreign currencies.”

When asked if the apex bank was concerned about some of the risks facing the banking system owing to the current economic crisis, the CBN governor admitted that while all players in the financial system were facing “tremendous risks,” the central bank would ensure that they would not crystalise to a point where depositors’ funds would be lost.

He said, “As a result of the current challenges being faced by the global economy, all agents in the financial system, such as banks and other players, are facing tremendous risks.

“When there is a slowdown or recession, naturally banks will face certain risks such as non-performing loans rising and different other risks, and this imposes on the regulator a greater challenge to ensure that it strengthens its prudential guidelines to ensure that the banks and particularly depositors are protected.

“Nigerian banks, like other banks in other climes, are facing risks. But those risks are surmountable, and the central bank is doing all its best to ensure those risks don’t crystalise to a point where we will begin to talk about depositors losing their deposits. So for that reason, the rumour about banking sector risks is overtly elevated.”

On whether the apex bank was considering reducing the number of BDC operators so as to better regulate their activities, the governor said the CBN might consider that option at the appropriate time.

He said, “We believe that everybody (BDC) is entitled (to have a licence) once the regulations are set; there is no need to preclude you if you meet the conditions. But of course, naturally, the regulator, which is the CBN, has a right to put in place policies that limit entry. If we want to limit entry, we know what to do.

“I can assure you we will do it anytime we decide to limit entry or even exacerbate exit from the market, and that is something we will look into at the appropriate time.”

On the foreign exchange inflow through the CBN, the governor said the country recorded a decline of $447.5m or 31.85 per cent from $1.4bn in September to $957.37m in October.

He attributed the decrease to lower crude oil and other government revenues in the period under review, lamenting that despite the resumed Joint Venture payments in October, the total outflows also continued to decrease.

Foreign exchange outflows, according to him, dropped significantly by 58.68 per cent from $2.25bn to $1.01bn during the period.

Emefiele said the committee implored the CBN to continue to direct more focus at making foreign exchange available to the agriculture and manufacturing sectors of the economy.

This, according to him, can be achieved by enforcing its policy directing Deposit Money Banks to allocate 60 per cent of the available foreign exchange to these sectors.

On the Monetary Policy Rate, the CBN governor said the committee decided to leave it unchanged at 14 per cent.

He explained that all the 10 members who attended the MPC meeting agreed to maintain the current monetary policy stance.

Apart from the MPR that was retained at 14 per cent, the governor said the committee also voted to retain the Cash Reserves Ratio at 22.5 per cent.

Also retained were the liquidity ratio, which was left at 30 per cent; and the asymmetric window, which was left at +200 and -500 basis points around the MPR.

FG proposes jail term for dollar hoarders

The Federal Government has proposed an amendment to the Foreign-Exchange Act to enable the imprisonment of anyone who holds foreign currencies, especially the dollar, for more than 30 days.

CBN Governor, Mr. Godwin Emefiele
CBN Governor, Mr. Godwin Emefiele

This is the latest measure the government and the Central Bank of Nigeria are considering to stem the volatility in the exchange rate and bolster the ailing naira, according to a Bloomberg report.

In the new proposals, which were published on the website of the Nigerian Law Reform Commission last week, the CBN is seeking the power to control capital flows and stop people from taking forex out of the country.

According to the draft amendment of the Foreign Exchange Act, anybody holding dollars in cash for more than 30 days risk a jail term for as long as two years or a fine of 20 per cent of the amount.

Regulators should also be able to prevent money being repatriated “in accordance with the terms and conditions as may be prescribed by the central bank from time to time,” the draft states.

The existing law is “narrow in scope and prohibits the seizure, forfeiture or expropriation of imported money by the government without providing for exceptions,” it adds.

The amendments, according to the document, are necessary “for effective monitoring and control, and to ensure probity in foreign exchange transactions in Nigeria.”

The CBN has increased capital controls since the price of oil, Nigeria’s main foreign exchange earner, started crashing in the second half of 2014.

It had pegged the naira for 15 months until June this year, a move analysts blamed for causing investors to flee the country, the economy to contract in the first half of the year and the inflation rate to rise to an 11-year high.

The latest move will further worry foreign investors, according to a Lagos-based research and investment advisory firm, SBM Intelligence.

The Department of State Security officials had last week arrested some black market forex dealers for exchanging the naira at a rate weaker than 400 per dollar, compared with the existing street rate of around 460.

The naira-dollar official exchange rate, which analysts accused the CBN of still manipulating, is 315 against the greenback.

“The CBN wants to take its regulatory onus to frightening proportions,” analysts at SBM said in an e-mailed note in response to the new draft law.

“The move smacks of desperation and can only result in negative investor perception and capital flight,” they added.

The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, said the apex bank did not introduce the bill in a text message response to Bloomberg. He did not elaborate.

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, while reacting to the development said, “If it did not emanate from the CBN as claimed by its spokesman, it may have emanated from the Presidency or other sources. But the fact is that when you compel people not to hold dollars after stopping the use of naira debit cards abroad, you are discouraging people to bring in money into the country.

“You also push more people to the parallel market and create further gap between the official and black market exchange rates.”

External reserve falls to $24.59bn

Nigeria’s foreign exchange reserves fell to $24.59bn by September 28, down 3.37 per cent from the previous month, the latest Central Bank of Nigeria data showed on Friday, as the bank stepped up its intervention to prop up the ailing naira currency.

CBN Governor, Mr. Godwin Emefiele
CBN Governor, Mr. Godwin Emefiele

The country’s reserves stood at $25.45bn last month, according to Reuters. The reserves had declined 19 per cent from a year ago.

The CBN has been selling the dollar to support the currency, but the naira hit a fresh all-time low of 490 per dollar on the black market on Friday.

The country’s external reserves had depleted to $24.8bn in September 21 this year.

The foreign exchange reserves fell by $600m in two weeks before shedding $1bn in four weeks, the CBN statistics showed then.

Specifically, the reserves fell from $25.8bn on August 16 to $24.8bn on September 16. It decreased by $600m from $25.4bn recorded on August 31 to $24.8bn on September 16.

The spate of decline in the external reserves follows the CBN’s almost daily interventions at the interbank/official foreign exchange market in recent weeks, as chronic dollar shortage continues to weigh on the economy.

In its efforts to defend the naira and prevent it from falling further at the official interbank market, the central bank has been selling dollars there more frequently.

The naira had fallen to an all-time low of 365.25 to the dollar at the interbank market on August 18 before making a gradual recovery.

CBN Governor, Emefiele donates 600 bags of rice to IDPs in Borno

Mr Godwin Emefiele, Governor of Central Bank of Nigeria (CBN), on Thursday, gave 600 bags of rice to Internally Displaced Persons (IDPs) in Maiduguri.

Godwin Emefiele
Emefiele, represented by Alhaji Ishaku Ibrahim, the Maiduguri Branch Comptroller of the CBN, said the token was a personal donation.

The CBN governor said the gesture was designed to cushion the hardship of the vulnerable displaced persons who are in dire need of assistance.
“We, therefore, call on the good people of Nigeria to rally round the Federal Government and insurgency-affected states to restore peace in the North-East.

“Today, my family and I return to this land hitherto renowned as the ‘Home of Peace’ to make a personal donation of an additional 600 bags of rice from my personal savings, to our vulnerable brothers and sisters in the IDPs’ camps.

“I am particularly glad to address you in an atmosphere of peace brought about by the hard work of our gallant soldiers, the determination of the Federal Government and efforts of government and people of Borno state, who crave for an enduring peace.

“We are happy about the huge successes that have been recorded in the area of security; but one is deeply concerned about reports of malnourishment emanating from the camps for IDPs.
“It is our fervent prayer and hope that in no distant time, this past glory will be restored; more especially now that the CBN is striving hard, in collaboration with fiscal authorities to diversify the Nigerian economy”, Emefiele said.

Gov. Kashim Shettima of Borno thanked the CBN governor for the donation of 30 tons of rice, including the 400 bags of rice donated on May 13.

“We remain liberally indebted for Mr Emefiele’s widows’ might to our displaced persons.

“Branch comptroller of CBN, Malam Ibarhim, we are grateful for your support to IDPs.

Shettima thanked Emefiele for selling the CBN quarters on Damboa road to the state government, assuring that the payments for the residential quarters would be made to CBN this month.” (NAN)