Business

Cash-induced Recession Imminent, Experts Warn As Naira Scarcity Persists

Published

1 year ago

February 14, 2023

As the naira scarcity lingers with its attendant effect on Nigerians, financial experts have warned that the country may slip into a cash-induced recession.

For many Nigerians, the currency scarcity hardship has become a nightmare without an end.

Accessing cash is now a miracle everyone desires. Some commercial banks’ Automated Teller Machines have turned into graveyards due to the non-availability of money, a situation some Point of Sales agents have taken to their advantage by charging outrageous fees.

February 10 was earmarked as a deadline by the Central Bank of Nigeria to phase out the old Naira notes. However, the Supreme Court, in an ex parte order, stopped the CBN from implementing the deadline pending a substantive hearing on Wednesday.

The development compounded the currency crisis for many Nigerians as some traders are in limbo on whether to accept or reject the old naira notes.

The Central Bank Governor, Godwin Emefiele, continues to run from pillar to post looking for a solution, the crisis lingers.

On Monday, Emefiele was reported to have met with President Muhammadu Buhari for the third time since the currency crisis started.

Despite assurance from the CBN and Buhari on the availability of the new Naira notes, the effect of its scarcity bites harder, with rural dwellers resorting to trade by barter and the currency of neighbouring countries for transactions.

Network failure and unsuccessful transactions have marred alternative banking platforms, especially the USSD.

In a chat with DAILY POST on Monday, a Financial Inclusion/Wealth Management expert, Mr Idakolo Gbolade disclosed that the country risks a real cash-induced recession because its economy mainly depends on cash.

“The risk of a cash-induced recession is real because our economy is still largely cash-based and the cost of food items being reduced due to low patronage and even in many occasions no patronage.

“Nigerians spend long hours in the queue in the banks and ATMs. Many hours that should have been used for productive ventures to oil the economy, billions are being lost daily as the cash crunch bites harder.

“The amount of cash in circulation presently cannot aid an effective business cycle in the economy. If these pressures continue, we could witness a cash drought aided by the CBN. The consequences of allowing these cash shortages to continue are dire for the economy, and with inflation already high, the recession is imminent.

“I want Nigerians to be proactive and embrace alternatives to cash since the government is trying to fast-track cashless policies without a solid network backbone to aid seamless banking.

“We should also put pressure on the government to reduce the hardship this policy is causing the ordinary Nigerians by ensuring we vote for the right candidate that can lessen these burdens on the people”, he stated.

Also, a Professor of Management and Accounting at Lead City University, Ibadan, Godwin Oyedokun said the currency crisis is a self-inflicted plague.

He stated that commercial banks’ and saboteurs’ attitude had succeeded in making the CBN’s Naira redesign cumbersome.

“The issue of scarcity of Naira is now getting beyond any theory because I want to believe that the problem is a self-inflicted plague.

“POS making outrageous profits from charges showed that the policy has created more problems for Nigerians.

“Solve the problem of scarcity of cash, every other thing will fall in place, but with the attitude of those in authority, mainly commercial banks, they have succeeded in making a mockery of the policy.

“The CBN is advised to wake up to its responsibility. I had said it before when the CBN said it had dispensed enough money to banks, it should make public the list of the banks and amount disbursed.

“Compel the banks also to account for the money to avoid hoarding.

“I know when the court resumes hearing, it would consider the issue of jurisdiction and rule on it before a substantive case would commence.

“Let’s see how it will pan out with the Supreme Court because legal luminaries have divergent views,” he added.

Also speaking, Malachy Ugwumadu, a human rights lawyer and past national president of the Committee for Defense of Human Rights, CDHR, disclosed that while Nigerians await a Supreme Court ruling on Naira redesign, the new and old naira notes can continue to exist.

Ugwumadu made this disclosure during an Arise Television interview on Monday.

“With the Supreme Court ruling, the old and the new notes can continue to exist as legal tender in Nigeria pending the determination of the matter.

“It would be contemptuous if the CBN and the Federal government give further directives contrary to the existing ex parte order”, he stated.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, urged the CBN to comply with the Supreme Court’s order.

“The restraining order by the Supreme Court on this matter is unambiguous. What I expect is for the CBN to comply with this order. Failure to do so could amount to contempt of court. If the order had been obeyed, the currency crisis would have eased considerably”, he stated.

Earlier, the Nigeria Governors’ Forum, NGF, warned that the nationwide cash crunch could result in a CBN-induced recession.

In all this dilemma, Nigerians have remained resilient, even amidst suffering, earnestly seeking solutions from the Federal Government.

Business

CBN Sells Fresh Dollars To BDCs At N1,021/$

Published

3 days ago

April 23, 2024

Editor

The Central Bank of Nigeria (CBN) started fresh and direct sales of US dollars at N1,021 per dollar to Bureau De Change operators.

Nigeria’s apex bank disclosed this in a circular signed by its Director of Trade and Exchange Department Hassan Mahmud.

“We write to inform you of the sale of $10,000 by the Central Bank of Nigeria (CBN) to BDCs at the rate of N1,021/$1. The BDCs are in turn to sell to eligible end users at a spread of NOT MORE THAN 1.5 percent above the purchase price,” the circular posted on its website read.

“ALL eligible BDCs are therefore directed to commence payment of the Naira deposit to the underlisted CBN Naira Deposit Account Numbers from today, Monday, April 22, 2024, and submit confirmation of payment, with other necessary documentations, for disbursement of FX at the respective CBN Branches.”

CBN’s move is coming as the naira is recording a slight depreciation against the dollar after weeks of gains.

In late March, the bank also sold $10,000 to each of the eligible Bureau De Change (BDC) operators in the country at the rate of N1,251/$1.

Like in the most recent sales, it warned BDCs against breaching terms of the dollar sales, vowing to sanction defaulters “including outright suspension from further participation in the sale”.

The fortunes of the naira have fallen sharply since President Bola Tinubu took over in May. Inflation figures have reached new highs and the cost of living hitting the rooftops.

Nigeria’s currency slid to about N1,900/$ some months ago at the parallel market. But in recent weeks, it has gained against the dollar.

The Nigerian authorities have also doubled down on their crackdown against cryptocurrency platform Binance and illegal BDCs.

On March 1, the CBN revoked the licences of 4,173 BDCs over compliance failures.

Business

JUST IN: FirstBank Gets New MD/CEO

Published

5 days ago

April 22, 2024

Editor

Olusegun Alebiosu has been appointed as the Acting Managing Director/Chief Executive Officer of First Bank of Nigeria Limited (FirstBank Group), effective April 2024.

Alebiosu steps into this pivotal role from his previous position as the Executive Director, Chief Risk Officer, and Executive Compliance Officer, a position he held since January 2022.

Alebiosu brings to the helm of FirstBank over 28 years of extensive experience in the banking and financial services industry. His expertise spans various domains including credit risk management, financial planning and control, corporate and commercial banking, agriculture financing, oil and gas, transportation, and project financing.

Having embarked on his professional journey in 1991 with Oceanic Bank Plc. (now EcoBank Plc.), Alebiosu has held several notable positions in esteemed financial institutions.

Prior to joining FirstBank in 2016, he served as Chief Risk Officer at Coronation Merchant Bank Limited, Chief Credit Risk Officer at the African Development Bank Group, and Group Head of Credit Policy & Deputy Chief Credit Risk Officer at United Bank for Africa Plc.

Alebiosu’s academic credentials further enrich his professional profile. He is an alumnus of the Harvard School of Government and holds a Bachelor’s degree in Industrial Relations and Personnel Management. Additionally, he obtained a Master’s degree in International Law and Diplomacy from the University of Lagos, as well as a Master’s degree in Development Studies from the London School of Economics and Political Science.

A distinguished member of various professional bodies, including the Institute of Chartered Accountants (FCA), Nigeria Institute of Management (ANIM), and Chartered Institute of Bankers of Nigeria (CIBN), Alebiosu is renowned for his commitment to excellence and ethical practices in the banking sector.

Beyond his professional endeavors, Alebiosu is known for his passion for golf and adventure. He is happily married and a proud parent.

With Alebiosu’s appointment, FirstBank of Nigeria Limited anticipates continued growth and innovation under his leadership, reinforcing its position as a leading financial institution in Nigeria and beyond.

Business

CBN Gives New Directive On Lending In Real Estate

Published

1 week ago

April 17, 2024

Editor

The Central Bank of Nigeria, CBN, has released a new regulatory directive to enhance lending to the real sector of the Nigerian economy.

The directive, issued on April 17, 2024, with reference number BSD/DIR/PUB/LAB/017/005 and signed by the Acting Director of Banking Supervision, Adetona Adedeji, signifies a notable shift in the bank’s policy towards a more contractionary approach.

In line with the new measures, the CBN has reduced the loan-to-deposit ratio by 15 percentage points, down to 50 per cent.

This move aligns with the CBN’s current monetary tightening policies and reflects the increase in the Cash Reserve ratio rate for banks.

The LDR is a metric used to evaluate a bank’s liquidity by comparing its total loans to its total deposits over the same period, expressed as a percentage.

An excessively high ratio may indicate insufficient liquidity to meet unexpected fund requirements.

All Deposit Money Banks are now mandated to adhere to this revised LDR.

The CBN has stated that average daily figures will be utilised to gauge compliance with this directive.

Furthermore, while DMBs are encouraged to maintain robust risk management practices in their lending activities, the CBN has committed to continuous monitoring of adherence and will adjust the LDR as necessary based on market developments.

Adedeji has called on all banks to acknowledge these modifications and adjust their operations accordingly. He emphasised that this regulatory adjustment is anticipated to significantly influence the banking sector and the wider Nigerian economy.

The circular read in part, “Following a shift in the Bank’s policy stance towards a more contractionary approach, it is crucial to revise the loan-to-deposit ratio policy to conform with the CBN’s ongoing monetary tightening.

“Consequently, the CBN has decided to decrease the LDR by 15 percentage points to 50 per cent, proportionate to the rise in the CRR rate for banks.

“All DMBs must maintain this level, and it is advised that average daily figures will still be applied for compliance assessment.

“While DMBs are urged to sustain strong risk management practices concerning their lending operations, the CBN will persist in monitoring compliance, reviewing market developments, and making necessary adjustments to the LDR. Please be guided accordingly.”