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Tag: Banks

  • Loan Policy Violation: CBN clears air on deductions, states when affected banks will get refund

    Loan Policy Violation: CBN clears air on deductions, states when affected banks will get refund

    The Central Bank of Nigeria (CBN) on Thursday clarified that the deductions on some banks’ Cash Reserve Ratio (CRR) were not a fine but a punitive measure for their failure to abide by the regulator’s directive on the new lending regime of 60 per cent deposits to them.

    The clarification was given at the end of the Bankers’ Committee’s meeting, comprising chief executives of deposit money banks (DMBs) and monitors of the financial sector, by CBN’s Director of Banking Supervision, Mohammed Abdullahi in Abuja.

    He stated that the deductions were proportionate to the levels of default.He said: “ It is wrong to say the deductions are fine because the banks are not losing the money to the CBN. The only implication is (that) the amount debited would not be invested in money market instruments by them. Once the affected banks raise their lending to the deposit threshold, their accounts will automatically be credited.

    “ CBN never said there is going to be a fine. The circular said at the cut-off point in the event that you don’t meet the threshold, funds would be debited from you and added to your CRR. What you have there is not a fine, neither is it a levy, but a shortfall based on the parameters set by the CBN. It is going to be a continued process.”

    Abdullahi explained that the action was taken to force banks to play their fundamental role of financial intermediation, particularly to the real sector which he maintained, had suffered stunted growth and discrimination over the years.He said N860 billion was lent by the banks in three months on account on the apex bank’s new regulation, hoping that more impact was to follow in the coming years.

  • CBN deducts N500bn from 12 banks for violating loan policy

    The Central Bank of Nigeria (CBN) has deducted nearly N500 billion from Six Deposit Money Banks (DMBs) listed on the Nigerian Stock Exchange (NSE) as well as six other lenders for failing to meet the 60 percent loan to deposit ratio (LDR) before Monday, September 30, 2019.

    Recall that the apex bank had in July 2019 directed all banks in the country to give 60 percent of their total deposits as loans to customers, threatening to fine any company that fails to comply with this.

    According to the apex bank, the aim of the loan policy to stimulate economic growth by promoting lending to the real sector of the economy.

    After the deadline on Monday, the apex bank released another circular, raising the LDR to 65 percent and gave the lenders till December 31, 2019 to meet up or be further sanctioned.

    The CBN, in an approved debit instruction, took the sum of N499.1 billion from 12 financial institutions that failed to meet the requirements before the deadline this week, six of them are quoted firms.

    These banks are First City Monument Bank (FCMB), which was sanctioned N14,371,064,742; First Bank of Nigeria, a flagship subsidiary of FBN Holdings Plc, was fined N74,668,880,480; Guaranty Trust Bank (GTBank) was sanctioned N25,147,933,628; Jaiz Bank got a fine of N7,525,165,552; United Bank for Africa (UBA) got a fine of N99,676,181,916; while Zenith Bank received the highest sanction of N135,629,337,625.

    Other lenders also punished by the CBN were Citibank, which was asked to pay N100,743,055, 321; FBNQuest Merchant Bank was requested to pay N2,697,456,144; Keystone Bank got a fine of N4,162,938,879; Rand Merchant Bank received a fine of N2,823,177,399; Standard Chartered Bank was asked to pay N30,027,137,984; while SunTrust Bank received a fine of N1,703,205,427.

    According to the CBN, the 12 affected lenders will lose the money at source from their Cash Reserve Requirement (CRR) domiciled with it (CBN). The CRR is a portion of the banks’ deposits kept with the CBN for regulatory reasons.

  • CBN moves to sanction banks for e-payment breach

    Bank chiefs who breach Central Bank of Nigeria’s (CBNs) e-payment reporting rules, including using unapproved third party end-to-end payment solution are to face sanctions, the apex bank said on Tuesday.

    Chief executives of banks who flout the apex bank’s guidelines will get a warning letter with the institution fined N2million, the regulator said in the approved guideline on end-to-end electronic payment of salaries, pensions, suppliers and taxes it released

    The CBN insists on approving all third party payment solution being deployed by banks.

    The approved guideline, said the banks were expected to promote the adoption of end-to-end electronic payments by all stakeholders covered by this regulation.

    The approved guidelines also mandated bank customers that receive duplicate or excess payments into their accounts but fail to refund to the bank will have their Bank Verification Number (BVN) placed on the watchlist.

    In the CBN regulation on electronic payments and collections for public and private sector, it said that in the event of duplicated/excess payment not noticed but withdrawn by the beneficiary, the beneficiary shall make funds available for refund to the payer.

    It said non- compliance shall result in placement of the beneficiary on the BVN Watch-list.

    The regulator said that bank employees and pensioners are to maintain appropriate bank accounts with banks, Other Financial Institutions or any other approved channel for receiving payments such as mobile money/electronic wallet, subject to the CBN’s approved Know Your Customer limits; provide valid account and contact details to the Payer; report cases of non-payment, delayed payment or wrong payment of salaries/contributory pension remittances carried out on a CBN approved e-payment platform, to the Payer; register and maintain a Retirement Savings Account (RSA) with a licensed Pension Fund Administrator (PFA).

    It said the apex bank in exercise of its powers under the CBN Act, 2007 released the new guidelines to fully align with the core objectives of the National Payments System Vision 2020 (PSV2020) to ensure the availability of safe, effective and efficient mechanisms for conveniently making and receiving all types of payments from any location and at any time, through multiple electronic channels.

    This, it said, will reduce the time and costs of transactions, minimise leakages in revenue receipts and at the same time provide reliable audit trails, thereby ensuring that the Nigerian Payments System aligns with international best practices.

    The regulator also said that banks, other financial institutions and mobile money operators are to promote the adoption of end-to-end electronic payments by all stakeholders covered by this Regulation.

    The financial institutions are to also provide payers and beneficiaries with appropriate accounts with banks, other financial institutions or any other approved channel for receiving payments such as mobile money/electronic wallet, subject to the CBN’s approved Know Your Customer limits.

    The e-payment payers are to also adopt end-to-end electronic payment of salaries for employee staff strength of 20 and above; maintain appropriate account with banks or other financial institutions and adopt a CBN approved end-to-end electronic payment platform and use for all forms of payment and collections.

  • CBN confirms issuing operational licenses to three new banks

    The Central Bank of Nigeria (CBN) has confirmed the issuance of banking licences to three new players, bringing the number of banks operating in the country to 23.
    According to a circular hosted on the apex bank’s website, the new operators are; Titan Trust Bank Limited, TAJ Bank Limited and Globus Bank Limited. While two of the newly licensed banks will operate as commercial lenders, the third, TAJ Bank Limited, was licensed to operate as a non-interest bank.
    The newly licensed TAJ Bank Limited has joined Jaiz Bank as the only two operating as non-interest banks in the country.
    With the latest development, the number of commercial banks with national authorization now stands at 11. Banks with national authorisation are banks with a capital base of N25 billion and are allowed to operate in all states of the federation but barred from having offshore operations.
    The number of commercial banks with regional authorization (having a capital base of N10 billion and restricted to operate within a geographical scope of a minimum of five and a maximum of 10 contiguous states) now stands at three. Also, the licensing of TAJ Bank Limited as a non-interest bank with regional authorisation means there are now two non-interest banks operating in the country.
    Recall, that Jaiz Bank is the first and only non-interest rate bank to be licensed by the CBN with the license to operate in all states of the federation (national authorisation).
    According to sources, Globus Bank Limited obtained its regional banking license in 2019 and began operations on May 2, 2019. The executive director of Globus Bank Limited is Elias Igbinakenzua who has had stints as Executive Director of Zenith Bank and Access Bank respectively.
    Titan Trust Bank was established in 2018 but officially obtained its license in April 2019 as a national bank and started operations. The executive director is Adaeze Udensi. The bank’s operations include SME banking, Digital banking and Commercial banking.

  • Why CBN must conduct regular stress tests on Nigerian banks, By Mike Owhoko

    Why CBN must conduct regular stress tests on Nigerian banks, By Mike Owhoko

    The Central Bank Governor, Godwin Emefiele, has been advised to conduct stress tests on the Nigerian banks more regularly to determine the true health status and capital adequacy of these banks to withstand potential adverse effects and challenges in a dynamic and vulnerable economy like Nigeria aimed at protecting depositors’ funds and other investors’ interests.

    This advice was contained in an open letter written to the CBN Governor by renowned journalist and author, Michael Owhoko who stressed that tests should be conducted every six months in order to compel the banks to comply with global regulatory standards on capital adequacy and liquidity.

    This, he said, will not only prove the resilience of the banks to shocks induced by inherent risks, but will also instill confidence in the banking public, reassure foreign interests and their partners that the Nigerian banking industry is safe for business.

    Specifically, Owhoko emphasized the need for a sound and improved quality capital and better risk cover for the banks in order to achieve capacity to withstand shock, particularly during period of fluctuating crude oil prices to which the nation depends largely for foreign exchange.

    The author said further that he knows that the CBN conducts stress tests on the banks, but the frequency does not allow the institution to get the true picture of financial strength of these banks. According to him, conducting stress tests on the banks every two or three years is not enough, as scenarios change almost after each test due to sliding performance of the economy, making him to suggest that stress tests be conducted bi-annually.

    “As you know, the Nigerian banks are not immune to the vulnerability of the mono commodity nature of the Nigerian economy and high-tide financial environment. That is why I am recommending that stress tests be conducted on a bi-annual basis on the Nigerian banks because of their current feeble substructure and weak capital base. This will put the banks on their toes. Remember, it is the duty of the CBN to identify areas that are vulnerable to risk and protect depositors’ funds,” he said.

    Owhoko added that the essence of the regular stress tests is to save the unsuspecting depositors from falling victim of likely distress in any of the banks and that since non-performing loans contribute significantly to the weak state of health of these banks, CBN should fish out for sanction, debtor-companies that deliberately secure loans with the intention of not paying back.

    Below is the full text:

    An Open Letter to CBN Governor, Godwin Emefiele, over health of Nigerian banks

    Dear Mr. Godwin Emefiele

    I congratulate you on your re-appointment as Governor of the Central Bank of Nigeria (CBN) for a second term. This appointment, I believe, is divinely orchestrated to ensure consistency in economic policies and, to afford you the opportunity to improve on the economy, particularly, the misery index, among others, which currently, do not inspire hope in the country.

    However, the purpose of this letter is not the misery index, even though current levels of inflation and unemployment are at feverish level, the essence of my letter is for you to be conducting stress tests on the Nigerian banks bi-annually. This is informed by concerns on the current state of health of the banks, which is causing apprehension among Nigerian depositors over safety of their investments.

    My dear Governor, I know you conduct stress tests on the banks, but the frequency does not allow you to get the true picture of financial strength of these banks. Conducting stress tests on the banks every two or three years is not enough, as scenarios change almost after each test due to sliding performance of the economy. Therefore, in my view, stress tests should be done bi-annually.

    I am also worried about CBN’s restricted target during stress test which technically focuses more on effective risk capacity and global benchmark compliance of banks without considering and envisaging concerns on the overall health of the Nigerian banks.

    Since stress tests determine capital adequacy and capacity of quality of assets of a bank to withstand potential adverse effects and challenges in a dynamic and vulnerable economy like ours, regular disclosure of state of health of these banks are imperative. This will not only instill confidence in the banking public, it will also reassure foreign interests, their partners and other potential investors that all is well with the Nigerian banking industry and, is safe for business.

    Imagine if the recent acquisition of Diamond Bank by Access Bank had not occurred, and Diamond Bank was allowed to go under, a lot of depositors would have lost their investments. I knew long before the distress symptoms began to manifest, which prompted me to quickly approach Diamond Bank to close my account, without also disclosing to anybody, to avoid a run on the bank.

    As you know, the Nigerian banks are not immune to the vulnerability of the mono commodity nature of the Nigerian economy and high-tide financial environment. That is why I am recommending that stress tests be conducted on a bi-annual basis on the Nigerian banks because of their current feeble substructure and weak capital base. This will put the banks on their toes. Remember, it is the duty of the CBN to identify areas of vulnerability to risk and protect depositors’ funds.

    The role of the internal and external auditors of these banks is unhelpful as some of them conspire with their principals and operators to present a contrived healthy balance sheet. The CBN examiners or inspectors may be aware of these unethical practices and cover-up, yet, opt to collaborate to give them soft landing without appropriate penalties.

    As CBN Governor, you know at the moment that some of the large, medium and small banks are not compliant with global regulatory standards on capital adequacy and liquidity, making them fall short of international best banking practices. Indeed, how resilient are these banks to shocks induced by inherent risks like credit, liquidity, interest rates and foreign exchange?

    Since global standards highlight guidelines for sound and improved quality capital and better risk cover aimed at promoting strong assets that can support periods of stress, it is essential stress tests are conducted every six months, particularly, when oil prices are heading down south with potential impact on macroeconomic stability.

    Besides determination of solvency status, the need for a regular stress tests is to save the unsuspecting depositors from falling victim of likely distress in any of the banks. Some of them exhibit cash strapped symptoms, but wear reversed look of sufficient sound health above capital-adequacy acceptable level, when indeed, all is not well, and are just within bear zone.

    There are Nigerians whose life savings are deposited in these banks, yet, upon withdrawal request, some of the banks are unable to meet their demands due to insufficient funds. This is more prevalent with domiciliary account holders. Rather, the banks opt to cap the amount that can be withdrawn.

    Mr. Emefiele sir, since non-performing loans contribute significantly to the weak state of health of these banks, it is high time CBN took specific interest in the underpinning reasons for the classification of bad debts by these banks. The stress tests should take into consideration, the trend of debtor-companies that deliberately secure loans with the intention of not paying back.

    Even without sufficient and rigorous efforts at recovery, some of these banks are quick to write-off bad loans. Banks should no longer be allowed to freely write-off these loans without CBN’s concurrence. However, this process should be preceded by sufficient attempts to ensure that all such loans are restructured for purposes of acquisition, failing which, before write-off.

    Besides, debtor companies linked to members of board of such banks should be severely sanctioned, including replacement of management or total takeover. Connivance by board members to create toxic loans through their proxy companies in the system is an indication of deficient corporate governance and, should not be condoned.

    The CBN must be transparent and firm in its efforts at enthroning high corporate ethical standards in banks in consonant with international best practices.

    Mr. Governor, for sanity and stability of the banking sector, it is my prayer therefore for you to conduct stress tests on the Nigerian banks every six months.

    Once again, congratulations on your reappointment as CBN Governor.

    Michael Owhoko

    June 18, 2019

    Michael Owhoko is a journalist, author and public relations consultant who has mostly worked in the banking, oil and gas, and media industries. He is the author of The Language of Oil and Gas; Career Frustration in the Workplace; Nigeria on the Precipice: Issues, Options, and Solutions; The Future of Nigeria; and Feminism: The Agony of Men. He is also the publisher of Media Issues, an online newspaper that can be found at www.mediaissuesng.com.

  • CBN issues operating licences to five new banks

    CBN issues operating licences to five new banks

    Indications emerged that the Central Bank of Nigeria (CBN) recently issued licences to five new banks to carry out financial services in the country.

    According to sources, one of the new banks may commence operations this week.

    However, further findings revealed that most of the newly licensed lenders are planning to kick off banking operations in the country before August 2019.

    According to a report by Business Day, one of the new banks, “Globus” is said to be spearheaded by Elias Igbinakenzua, a former Executive Director at a tier one bank.

    Recall that in late 2016, Mr Elias Igbinakenzua resigned from Access Bank and in 2017, he became the CEO of First Aluminium Nigeria Plc.

    “The Bank (Globus), whose head office is on Sanusi Fafunwa, Victoria Island, may open by May 2nd,” one of the sources quoted by Business Day said.

    The second bank would go by the name “Titan” and is said to have secured the services of a former Heritage bank executive director.

    Another owner of one of the new banks is said to be Indian – the former owner of Chi Limited who recently sold a majority stake to Coca Cola – and the initial strategy would be to target large Indian and Lebanese clients with investments in Nigeria especially in the manufacturing and other sectors, sources said.

    The other banks remain largely anonymous but would be a mix of micro-finance, Merchant and/or deposit money banks.

    It was reported that the apex bank is being driven by the need to attract new investments into the sector and serve the country’s over 50 million unbanked and under-banked people, even as current banks have struggled to grow loan books since an economic slump in 2016 caused bad loans to surge.

    CBN spokesperson, Mr Isaac Okorafor, did not respond to calls seeking more clarifications.

    Also, three bank CEOs declined to comment, as the CBN is yet to go public on the matter.

    According to findings, most of the capital needed to set up the banks were sourced locally in Nigeria.

    The minimum capital requirement for a Regional bank is N10 billion, while for National banks its N25 billion and international Banks N50 billion, according to the Banks and Other Financial Institutions Act (BOFIA).

    The capital requirement of microfinance banks, which was amended by the CBN in 2018, is as follows: For a Unit Microfinance bank, the requirement is N200 million, while its N1 billion and N5 billion for a State and National Microfinance bank respectively.

    For a merchant bank, the minimum paid-up share capital is currently N15 billion.

    Attempting to place a finger on the motivation for licensing five new banks almost out of the blue, one of the sources said, “The CBN will not want to preside over an industry that is shrinking.”

    Another said “Nigeria is under-banked and investors are responding, if the CBN wants to grow credit, by N1 trillion, none of the old banks can take it. Banks available are already at capacity, in one way or another.”

    The CBN has been somewhat desperate for banks to increase lending to critical sectors but an economy fraught with risks has tamed lending appetite.

    Nigerian banks were unable to grow their loan books in the past year, a signal that the macroeconomic environment remains weak and non-supportive for growth.

    The 12 largest lenders quoted on the floor of the Nigerian Stock Exchange (NSE) saw combined loans and advances dip by 6.37 percent to N12.34 trillion in December 2018, from N13.18 trillion a year earlier. This compares with a 25.14 percent increase between the 2013 and 2014 financial year.

    The CBN is worried about the trend, Governor Godwin Emefiele indicated in the aftermath of the monetary policy committee last March.

    To encourage lending to the real sector, the CBN promised to allow banks draw down from their regulatory cash buffers sitting with the apex bank, if the banks gave loans to manufacturers and players in the agriculture sector at single-digit interest rates.

    The response has been largely underwhelming, with banks preferring instead to stash cash in double-digit yielding government debt where they take considerably less risk. Even the CBN’s surprise interest rate cut to 13.5 percent after keeping it at 14 percent for over two years, was not able to move the needle on lending.

    The banks argue that to increase lending the CBN should instead reduce the Cash Reserve Ratio (CRR) to free up idle funds. The effective CRR in the sector is as high as 40 percent.

    Licensing five new banks can pass for the latest strategy by the CBN to boost bank lending, according to a source.

    “However, if the problems that hinder the current banks from growing their loan books persist, then even the new ones will struggle,” the third source said.

     

  • Reps to investigate CBN, banks, others over stamp duties non-remittance

    The House of Representatives is to constitute an ad hoc investigative panel over the non-remittance of stamp duty by the Central Bank of Nigeria (CBN), money deposit banks and other collection agents.

    The lawmakers alleged the banks and other collection agencies are shortchanging the nation by refusing to remit the duties into the Federation Account of Nigeria.

    The ad hoc panel has four weeks to carry out the assignment and report back for further legislative action.

    This followed the adoption of a motion of urgent public importance by Goni Lawan (APC, Yobe), who noted that independent efforts by both local and international civil society organisations (CSOs) to get details of the collections have so far failed.

    According to him, the Nigeria Postal Service (NIPOST) in 2014 initiated the stamp duty collection scheme, following which a firm, the School Banking Honours (SBH) obtained authorization of the Central Bank of Nigeria (CBN) to engage the banks and other qualified collection agents.

    He said: “But the complicit irregularity by which public institutions including the CBN, Nigeria Interbank Settlement System (NIBSS), NIPOST among others, have over time failed to remit stamp duty taxes into the Federation Account running into trillions.

    “While the deductible amount per bank account may seem small, it cumulatively adds up to money in billions and trillions of Naira, and must be subjected to the full condition of disclosure and transparency.

    “If such funds were made available, they could have been used to pay salaries, provide infrastructure and financing economic development in the country, or at least should have generated some interests in the private accounts where the fund is domiciled”.

    In addition, the lawmakers regretted that due to concerns mounting over the non-remittance, it is clearly an obvious disobedience to the Treasury Single Account (TSA) policy for the stamp duties fund to be hidden in commercial banks instead of being remitted to the TSA.

    Speaker Dogara, in his remarks noted that at N50 for bank transaction of over N1000, the duties must have built into a huge fund capable of solving the challenges of paucity of fund associated with many of the nation’s abandoned and uncompleted projects.

  • “How Banks Make Free Money From Govt Funds” – CBN Governor, By Henry Boyo

    “How Banks Make Free Money From Govt Funds” – CBN Governor, By Henry Boyo

    BY HENRY BOYO

    The oppressive impact of the myriad charges on the transactions of every owner of a bank account in Nigeria, was subject of discussion, in this column in recent weeks. Media reports have also suggested that these charges, may contribute trillions of Naira income for banks annually; indeed, the income from retained stamp duty charges, alone, may have exceeded N6 trillion, if figures bandied by NIPOST and agents are ultimately verified.

    The substantial incomes from bank charges, invariably, supplement hundreds of billions of Naira income from the regular, and extremely profitable business of granting loans to the CBN, States and Federal Governments and several businesses and account holders nationwide.

    The above title “How Banks make Free Money from Government Funds” (www.lesleba.com) was first published soon after key decisions made at CBN’s MPC No. 90 of 22/23 July 2013, were announced. Notably, over 5 years thereafter, the question still remains, whether or not the oppressive, financial absurdity, which incumbent CBN Governor Sanusi condemned, in 2013, still prevails today? A summary of that article follows, hereafter; please read on.

    “…First of all, you have got liquidity surplus in the banking industry; … there is over N1.3trn or so sitting in banks and belonging to government agencies. Now basically, they (these funds) are at zero percent interest, while banks are lending about N2trn to the government and charging 13 to 14 per cent! Now, that is a very good business model, isn’t it? Give me your money for free and I lend it to you at 14 percent; so why would I go and lend to anyone?” (Lamido Sanusi, CBN Governor, July 23, 2013)

    “The above statement, which, corroborates views regularly canvassed in this column, was Sanusi’s defence of CBN’s Monetary Policy Committee’s decision to raise the existing CRR (Cash Reserve Ratio) of 12 per cent to 50 per cent on all public funds, domiciled in commercial banks, in order to reduce the inflationary threat from aggressive credit expansion by banks.

    “Invariably, larger cash deposits create liberal opportunities for banks to leverage on such deposits, to expand credit and thereby increase public and private sector spending, which may, inadvertently, drive higher inflation rates.”

    “Thus, this latest requirement for banks to hold higher cash reserves is really an admission that the existing 12 per cent CRR, unduly, instigated credit expansion and drove higher inflation rates.” “Some critics may however, regard the much higher CRR as inappropriate, since it would also further reduce the already inadequate credit to cash beleaguered businesses.”

    “This column has, consistently drawn attention to the patently reckless strategy of banks lending their so-called surplus funds (excess liquidity) at atrocious interest rates to the same CBN, which ironically, induced the systemic excess cash supply!!

    “Thankfully, Sanusi may have finally recognized, according to him, that “If you want to discourage such perverse behaviour, part of it is to basically take away some of this money; a reserve requirement is therefore, supposed to make sure that the excess liquidity in the banks’ balance sheet, is evenly distributed”. Nonetheless, if CBN fails in practice, to ensure strict compliance with the new 50percent CRR policy, systemic surplus cash will persist and expectedly drive higher inflation rates with disastrous consequences for cost of loans, consumer demand and economic growth.”

    “Nevertheless, Sanusi’s fear that even the higher CRR may not adequately cage inflation is probably embedded in his warning that “if spending continues, and we are concerned about the liquidity conditions, we foresee in the nearest future, continued increase in the CRR across board….” Consequently, if surplus cash deposits persist despite the new measure, CBN would further increase its already oppressive CRR beyond 50 per cent for both public and private sector deposits; predictably, this may drive interest rates, sucidally, beyond 30 per cent!”

    “This writer has consistently decried the foolhardiness of government’s borrowing back its own cash deposits with banks, at extortionist interest rates and consequently advised instead that it would be more businesswise, for Ministries, Departments and Agencies to domicile their monthly naira allocations, internally with CBN. Regrettably our external debt strategy, also follows the same self-oppressive model of borrowing what one has in undeniable excess!” (see www.lesleba.com) for “Will you Borrow Back Your Own Money and Pay 17 per cent Interest? …Ask CBN!” –27/12/2004 and “MPR Hike: Failure of CBN’s Monetary Framework”, 01/08/2011).

    “All the same, Sanusi’s new directive of 50 per cent CRR for government deposits, is clearly, an uneasy half way measure, and critics may wonder why the CBN Governor cannot, in his characteristic style, take the bull by the horns, and demand that ALL government funds should be banked with CBN!”

    “Invariably, total domiciliation of Government revenue in CBN, will lead to a significant contraction in systemic cash surplus, and thereby restrain inflation; regrettably, however, cost of funds to businesses may not fall significantly if government remains actively in competition with the real sector for both long and short term loans.”

    “Ultimately, an enduring cure to the high cost of funds and unyielding inflationary push is to tackle the root cause of excess liquidity; i.e. to first recognize excess liquidity as the direct product of CBN’s monthly substitution of naira allocations for dollar revenue, and secondly, to also ensure that beneficiaries of the federation pool receive dollar certificates for their share of monthly allocations of foreign distributable income. This arrangement would finally exorcize the, seemingly, perennial ghost of systematic cash surplus and its train of adverse consequences on our economy and peoples’ welfare”.

    “In its place, minimal, socially and industrially supportive, inflation rates will evolve with lower single-digit interest rates in tow! The naira will become much stronger, and eliminate any remote possibility of subsidizing fuel prices, thus achieving the erstwhile seemingly impossible task of benignly deregulating fuel price, so that, hundreds of billions of naira saved can be ploughed into critical social infrastructure and positive social welfare programs.”

    “Ultimately, the purchasing power of all income earners will improve to stimulate increasing consumer demand, which industrialists and entrepreneurs would hasten to profitably, satisfy, in a prevailing ambience of low inflation and interest rates and a much stronger naira.”

    Postscript April 2019: The Treasury Single Account (TSA) which consolidated all Government funds in CBN was ultimately implemented in August 2015, based on an earlier framework developed overtime by Obasanjo, Yar’Adua/Jonathan Administrations.

    Regrettably, however, TSA implementation and 50 per cent CRR, still did not remove the perceived liquidity surfeit in commercial banks, as the secluded Government funds filtered into the open money market the moment MDAs made expenditures from their treasury allocations. Indeed, the Bankers’ Committee Chairman had even declared that banks’ liquidity position was not seriously affected by the reductions in CRR. Inexplicably however, after the MPC No 103rd meeting, on 23rd September 2015, CRR was reduced to 25 per cent for all public and private sector deposits and later to 22.5 per cent in March 2016. Thereafter, CBN’s CRR, MPR and liquidity ratios remained unchanged for well over 24 months, despite the attendant disruptive economic impact, until after the MPC 123rd meeting in 2019 when the MPR alone was singled out for marginal reduction from 14 per cent to 13.5 per cent!

    Despite these subsisting harsh policy rates, CBN has continued to mop-up perceived Naira liquidity surplus at a rate which often correlates with Government’s annual fiscal plans! Consequently, CBN may have been compelled to pay high counterproductive double-digit interest rates to banks, in order to remove close to N9.0tn perceived surplus liquidity from the system in 2018! Invariably, conversely, the banks may have earned close to N1tn from such interest payments in 2018.

    Instructively, however, banks have continued to post humongous profits annually with the prevailing business model; inexplicably, however, businesses in the productive sector have continued to wail!

    SAVE THE NAIRA, SAVE NIGERIANS!!!

     

  • Robbery attacks: Banks shut down operations in Ondo

    Sequel to an armed robbery attack on Monday that left over seven people dead at commercial bank in Idoani, economic activities at the neighbouring Akoko area were on Tuesday paralysed.

    Commercial banks in the four local governments, especially in Ikare-Akoko, were shut down.

    Many people, who came for transactions, returned home without achieving their aim.

    Meanwhile, Governor Rotimi Akeredolu on Tuesday gave a marching order to security agencies to arrest the robbers, who attacked a bank on Monday at Idoani in Ose Local Government.

    Akeredolu spoke on Tuesday when he visited the Alani of Idoani, Oba Olufemi Olutoye, at his palace.

    The governor, represented by his deputy, Agboola Ajayi, described the incident as unfortunate, but implored security agents to fish out the perpetrators.

    Akeredolu assured people that his administration would partner security agencies to tighten security.

    He urged residents to assist the security operatives by giving them information, to reduce crimes.

    Oba Olutoye said the hoodlums also entered his palace by damaging the entrance door, “but their efforts eventually became fruitless.

    He appealed to the government to assist the bereaved families.

    However, security operatives said they have arrested a suspect with links to the robbery.