The strength of every economy lies in its ability to broaden the scope of financing development activities that will in turn create wealth and improve lives. The Central Bank of Nigeria (CBN) has as it priority, the task of stimulating economic development through interventions in key sectors of the economy.
When Godwin Emefiele came on board the CBN Governor on June 3, 2014, he recognised the crucial role to be played by the Development Finance Department (DFD) of the apex bank to stimulate growth in the real sector despite visible pressure on the naira as well as a decline in foreign reserves.
Emefiele was determined to reposition the developmental financing initiatives of the bank to boost specific enterprise areas like agriculture, manufacturing, health and oil and gas.
The CBN chief also promised to establish Secured Transaction and National Collateral Registry as well as a National Credit Scoring System that will improve access to information on borrowers and assist lenders to make good credit decisions.
Besides, he set out to build a resilient financial infrastructure that serves the needs of those at the lower rung of the market, especially those without collateral.
So far, the CBN has facilitated the refund of N4.01 billion to bank customers based on complaints that were resolved and directives communicated to them following the Consumer Compliance Examinations and a spot-check conducted on the banks. The apex bank has also concluded full deployment of the Consumer Complaint Management System (CCMS) with the migration of all banks to the live –platform of the system.
The regulator launched the Cashless Nigeria Project in Lagos State in 2012 and by July 2015, the project went live nationwide.
CBN’s Director of Payments, ‘Dipo Fatokun, said the cashless project was meant to support use of e-channels of payment, reduce service cost, increase tax collection, reduce leakages, enhance greater financial inclusion and engender economic growth.
He explained that it was initiated against the backdrop of cash dominance in the payment system, a development which encouraged the circulation of huge sums of money outside the banking system and imposed huge currency management cost on the economy.
The CBN also introduced Agent Banking to increase financial inclusion while the inauguration of Electronic Payments Incentive Scheme (EPIS) was to encourage the adoption of e-payment by rewarding merchants, card holders and sales persons in the transaction chain.
Head, Acquiring Cards and e-Banking Department, Ecobank Nigeria, Mrs. Funso Oyelohunnu, commended the CBN for the EPIS reward initiative, stressing that it would further encourage the use of e-payment channels.
She noted that the emergence of Ecobank customer as one of the winners of the draw attested to the efficiency of the bank’s e-payment channels.
“This is a great initiative. As a bank, we are glad that one of our customers is one of the winners. This is a further proof that our various e-payment channels are efficient. This is an opportunity to urge both customers and non customers of the bank to make our e-payment channels their choice,” she said.
Speaking during the redemption of prizes in Lagos, representative of the Banking Payment System Department of the CBN, Isah Abubakar, said the apex bank will continue to give the desired support for the EPIS project.
He hailed the transparent process used in selecting the winners, noting that the cashless banking initiative has been helping to promote financial inclusion and getting banking to the grassroots.
“The CBN is behind the incentive scheme and will support any project that takes banking to the grassroots,” he said.
Emefiele explained that the N300 billion Real Sector Support Facility (RSSF) was part of the CBN’s efforts to unlock the potential of the real sector for output growth, value added productivity and job creation. According to him, the facility would support large enterprises for start-ups and expansion of the financing needs of N500 million up to a maximum of N10 billion.
He said: “The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors. The facility is expected to improve access to finance by Nigerian Small and Medium Enterprises (SMEs) to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors.”
Another N213 billion Nigerian Electricity Market Stabilisation Facility is aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). The facility covers legacy gas debts and the shortfall in revenue during the Interim Rule period (IRP).
It is expected that this will guarantee the take-off of the Transitional Electricity Market (TEM). Already, over N56.68 billion disbursed to five generating companies and five distribution companies.
The observed challenges in the power sector, Emefiele said, are interconnected with the unexpectedly huge revenue shortfalls in the industry, which needed to be fixed.
He said the Agricultural Credit Guarantee Scheme Fund (ACGSF) was established to provide credit guarantees on facilities extended to farmers by banks up to 75 per cent of the amount in default net of any security realised.
The bank chief explained that the period under review witnessed an increase of loan limits for unsecured lending from N20,000 to N50,000 and that the loan limits for secured lending to corporate bodies under the ACGS rose from N10 million to N50 million.
To boost agriculture financing, the ACSS was inaugurated to develop the agricultural sector of the economy by providing credit facilities to farmers at single digit interest rate to enable large scale farmers exploit the untapped potentials of the sector.
Statistics from the CBN showed that since June 2014, 60 per cent of the Commercial Agricultural Credit Scheme (CACS) funds have been dedicated to six focal commodities (rice, wheat, cotton, sugar, dairy products and fish), which have been utilising huge resources from the dwindling foreign reserves.
According to the data, the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) was launched in 2014. It further showed that N43.57 billion has been disbursed to state governments, participating financial institutions (PFIs), microfinance institutions and finance cooperatives. More than 61.6 per cent of the beneficiaries have been found out to be women and N30.31 million has been accessed by 292 People Living with Disabilities (PLWD).
Emefiele assumed office when there was pressure on the naira as well as a decline in foreign reserves. But, the CBN has taken specific measures to shore up the naira value. It has also ensured that the local currency remains stable, especially at the official market where it exchanges for N198 against the dollar.
To put the naira volatility under check, the CBN has also stopped the funding of Bureaux de Change (BDCs). Announcing the policy shift in Abuja, Emefiele said: “The bank (CBN) would henceforth discontinue its sales of foreign exchange (forex) to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source.
“They must, however, note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws”.
The CBN within the past one year has regulated the operations of BDCs to check rent-seeking among operators, depletion of the nation’s foreign reserves, unauthorised financial transactions, dollarizing the economy, the unwieldy number of the BDCs and the unenviable position of Nigeria as the largest importer of dollars in the world.
For instance, out of 130 BDCs sampled based on volume of purchase from banks, as at the time of the reforms, the bank found 121 BDCs, representing 93 per cent, to be in breach of the objectives and provisions of the guidelines.
The Civil Societies Organisation (CLO) has thrown its weight behind the CBN’s action. It alleged that majority of the BDCs are owned by politicians, who use their influence to corner forex meant for the common good.
CLO President Igho Akeregha said the apex bank’s decision to stop sale of forex to BDCs was in order. He alleged that those faulting the apex bank’s decision do not mean well for the economy, and are mostly politicians who are benefiting from the dollar sales to BDCs.
He said the BDCs have veered off their roles in the economy and become windpipe for politicians, who are mainly their owners.
Akeregha said: “Go to the Corporate Affairs Commission (CAC) and asked who the directors of these BDCs are. We have it on good authority that some politicians have 10 and even 12 BDCs. A senator owns 24 BDCs. With time, we are going to mention names if they do not stop harassing those who want to rebuild this economy.”
The CLO also urged the Federal Government to prioritise its forex cache to optimise its use and support the most productive sectors of the economy, which are needed to reverse the ugly economic crisis facing the nation.
It urged the CBN to plug all the leakages and have a hands-on approach to stem further devaluation of the naira.
Besides proposing the abolition of fees associated with limits on deposits. Emefiele also has a plan to review the ongoing practice in which only banks get all charges accruing for withdrawals.
Despite the challenges, chief of which has been the fall in the prices of crude oil at the international market, Emefiele and his team at the CBN, have regulated the operations of the BDCs to check rent-seeking among operators, depletion of the nation’s foreign reserves, unauthorised financial transactions, dollarization of the local economy, the unwieldy number of the BDCs and the unenviable position of Nigeria as the largest importer of dollars in the world.
Towards achieving the bank’s mandate of ensuring the safety and health of the financial system, it conducted a risk-based examination of all banks with high and above average composite risk rating in June 2014 and those with moderate and low composite risk rating in September 2014.
Among other examinations, the CBN carried out the foreign exchange examination of all banks in September 2014, as well as the routine examination of all discount houses and financial holding institutions in October 2014. In January 2015, it carried out the risk asset examination of 24 banks as at December 31, 2014.
In the period under review, the bank commenced the implementation of the Basel II Accord aimed at promoting stability in the financial system by ensuring adequate capitalisation of the banks.
Besides, the reform of the BDC segment, the CBN issued a final licence to the National Mortgage and Re-financing Company (NMRC) to commence operation last year under the Housing Fund Programme (NHFP). The bank carried out further reforms of Primary Mortgage Banks (PMBs).
The apex bank also carried out further reforms of Primary Mortgage Banks (PMBs) where 32 PMBs had fully capitalised as at June 30, 2014 while 10 were in the category given up to December 31, 2014. Licences of 21 PMBs, which failed to recapitalise, or had remained technically insolvent, were revoked on November 12, 2014.
It (CBN) partnered with the Federal Government and development partners to midwife the Development Bank of Nigeria that is envisaged to address the paucity of low interest and long-term funding for Micro Small and Medium Enterprises (MSMEs).
The CBN also established a governance structure for National Financial Inclusion Strategy and completed the geo-spatial mapping survey of all financial access points across the country. It has also engaged seven state governments on the implementation of the National Financial Inclusion Strategy as well as ensured the gradual reduction in percentage of financially excluded adults from 46.3 per cent in 2010 to 39.5 per cent by December, 2014.
“Other schemes include: the Power and Airline Intervention Fund (PAIF), Capacity Building programmes through the existing Entrepreneurship Development Centres (EDCs) and the CBN/NYSC Entrepreneurship Training held in four centres,” it said.
In collaboration with the Office of the Accountant General of the Federation (OAGF), e-collection element of the Treasury Single Account (TSA) started on September 15. Real time remittance of government receipts directly into the Consolidated Revenue Fund Account (CRF) to enthrone transparency and accountability in management of government receivables. Also, promotes effective monetary policy and reduce cost of liquidity management borne by the bank.
The MDAs, under the TSA platform, have increased from 340 to 543. In continuation of the BVN scheme for banks customers, enrolment rose from 15,000 as at June 3, 2014 to over 20 million presently.
Managing Director, Meristem Wealth Management, Sulaiman Adedokun, said depositors are to get more interest on their deposits because of the implementation of the TSA.
The investment expert said: “When government earnings are warehoused in a single account, there will be many things to work out, especially funding of certain sectors of the economy. But, that is on the logistics part of it. The actual impact of this is the crowd out effects from the banking sector because the interest will go up, as banks go on looking for more deposits”.
“And again, with the TSA, we have a better declaration of funds, adding that states can even get better allocation under the TSA regime because leakages are blocked.
Association of Bureau de Change Operators of Nigeria (ABCON) President Aminu Gwadabe lauded Emefiele’s leadership, especially his determination to source petrodollars from International Oil Companies (IOCs) and other autonomous sources for BDCs.
He explained that BDCs lack the capacity to deal directly with the IOCs because of the intricate nature of the transactions, saying operators would rely on the CBN’s expertise and experience to handle the transactions and boost liquidity in the system.
Also, financial analyst, Stephens Adegbesan, said that under Emefiele’s watch, there have been improvement in corporate governance as well as risk management processes in many of the lenders.
He explained that the beauty of the banking reforms, which Emefiele inherited, remains that no bank has failed, no depositor lost money with the entire process executed with minimal cost.
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