Business

Cashless Policy: CBN Lists Next Moves

Published

1 year ago

December 29, 2022

Amidst early gains from the recently launched twin policy on cashless economy, the Central Bank of Nigeria, CBN, has kick-started some key steps towards consolidating the policy measures.

The twin policy is anchored on the Naira redesign and establishment of new limits on cash withdrawal from banks, all geared towards effective monetary policy and security environment while taming corruption.

Meanwhile the apex bank has also indicated that the policy has recorded some achievements setting the base for the new reinforcements.

The key steps includes the commencement of a nationwide stakeholder engagement and sensitization to promote understanding of the cashless policy, particularly in rural areas, markets and underserved communities across the six geopolitical zones of the country.

The apex bank, in conjunction with Bankers Committee and Share Agents Network Expansion Facility, SANEF, is also strengthening the Agent Network Capacity by intensifying agent rollouts across the country (especially underserved locations) and enhance Agents’ ability to carry out a wider variety of financial services in addition to 12 Classified as Confidential cash-in and cash-out (electronic card distribution, wallet/account opening, BVN onboarding, bills payment, etc).

A geospatial map of available financial access points is also being completed and the apex bank said it shall be made public to inform all stakeholders of the locations of physical and electronic financial access points where they can process transactions electronically.

The CBN promised to continue to be flexible in its implementation of cashless policy and monitor its impact especially on vulnerable segments of the society but ensure the multiple advantages are achieved.

In response to the Naira redesign policy banks’ vaults have recorded about N190 billion inflow as Currency Outside Banks, COB, fell by 6.7 per cent month-on-month in November to N2.64 trillion from N2.83 trillion in November 2022.

The N2.64 trillion COB in November represents the lowest in 12 months since October 2021.

Further reflecting the impact of the CBN cashless policy, currency-in-circulation (CIC) similarly fell month-on-month (MoM) by 4.0 percent, to N3.16 trillion in November from N3.29 trillion.

Recall that the CBN Governor, Mr. Godwin Emefiele, on October 26, announced the redesigning of the naira notes in denomination of N200, N500 and N1,000 in October, citing persisting concerns with the management of the current series of banknotes among other things.

Consequently, the CBN directed that bank customers must deposit the old notes by January 31st when they will cease to be legal tender, while the new notes were released into circulation on December 15th.

According to Emefiele, one of the challenges primarily include: significant hoarding of banknotes by members of the public, with statistics showing that over 80 percent of currency in circulation are outside the vaults of commercial banks.

He said as at the end of September 2022, available data at the CBN indicate that N2.73 trillion out of the N3.23 trillion currency in circulation was outside the vaults of commercial banks across the country.

Achievements of cashless policy

Meanwhile the CBN Deputy Governor, Financial System Stability, Mrs Aisha Ahmed, has reeled out the achievements of the cashless policy since its first phase in 2012 to date.

Addressing the national Assembly on the twin policies last week Ahmed stated: ‘‘The implementation of the cashless policy was a critical element that catalyzed the transformation being witnessed in the Nigerian financial and payments system.’’

She listed some of the key achievements to include: Expansion in financial access points (ATM, PoS, Agents and mCash); Proliferation of e-payment Platforms; Growth in electronic channels adoption; Enhancement financial inclusion; International Recognition of Nigeria’s Payment System & growth in vibrant fintech ecosystem; Positive impact on GDP; and Financial resilience of citizens during COVID.

On the revised cash withdrawal limit, she noted that the CBN is not unmindful of the concerns raised in response to the new limits and would remain flexible to make the necessary adjustments to ensure wider public acceptance of the policy.

This, according to her necessitated the upward reviewe of the cash withdrawal limits to N500,000 weekly for individuals (from N100,000) and N5,000,000 weekly for corporates (from N500,000).

Furthermore, the applicable charges above the limit have been reduced to 3% and 5% respectively. Mobile money agents who provide cash-in cash-out services in rural areas have also been recognized and provided for in the revised guidelines.

Justifications for the cash limits

The CBN has explained that it carried out in-depth analysis of over-the-counter intra-bank cash transactions over 12 months (November 2021- October 2022) to assess the impact of the policy on the generality of citizens.

The outcome showed that a significant value of cash transactions was below the maximum thresholds indicated under the extant cashless policy and were thus not subject to the cash processing charges. It also showed that 94.04% and 62.63% respectively of volume and value of cash transactions by individuals were below the threshold while 82.36% and 39.38% of the volume and value of cash transactions by corporates was below the threshold.

Other outcomes are as follows: Transactions at agent locations are also below the thresholds. For instance, 99% of cash withdrawals at agent locations are below N300,000, average cash out transaction size per individual is N18,000, whilst average cash withdrawals by agents is between N1,000,000 and N2,150,000.

The proliferation of financial access touch points and e-payment channels across urban and rural areas which presents citizens with ample alternative for financial transactions further justifies the nationwide implementation of the policy. 6,500 branches of banks and other financial institutions, 1.4million agent locations, 900,000 POS and 14,000 ATMs.

Meanwhile, Ahmed had also noted that the twin policies were in compliance with best practice. She stated: ‘‘The Policy is in line with the CBN’s quest to adopt international best practices and international conventions, especially in view of recent reputational damage with some Nigerians perpetuating advance fee fraud’’.

She added that the policies fall within the statutory responsibilities of the Central Bank, saying, ‘‘The CBN’s mandates and responsibilities under the CBN Act 2007 as amended empowers it to promote a sound and stable financial system and credible efficient payment system- Section 2d, Section 47 of the CBN Act and the policies were issued pursuant to these legal provisions. The actions are well within this mandate.’’

Misconceptions on the policies

Addressing the many misconceptions of the Naira Redesign and Cash-less Policy, Ahmed stated: ‘‘Currency denominations of N5, N10, N20, N50, and N100 remain legal tender, are unaffected by the Naira redesign policy and are available for use across the country including at markets in rural areas and informal sector of the economy.

‘‘There are currently no processing fees applied to cash deposits. Unlimited amounts can be deposited without charge, to enable seamless and unrestricted deposit of any notes affected by the currency redesign.

‘‘The processing fees on cash withdrawals are not new as these have been in place in Lagos, since 2012, and in five other Cash-less states and FCT, since July 2013.

‘‘The charge applies on the excess over the prescribed limit only not on the entire transaction amount. For instance, withdrawal of ₦550,000 by individual- fee is excess over N500,000 limit (i.e. ₦50,000x 3%= ₦1,500); Withdrawal of ₦6,000,000 by a corporate- fee is excess over N5,000,000 limit (i.e. ₦1,000,000 x 5%= ₦50,000).

‘‘The Policy does not prohibit cash transactions above the prescribed limits. Such transaction shall attract the processing fees to serve as incentive for account owners to embrace more efficient electronic payment channels.

‘‘The policy applies nationwide in recognition of the plethora of financial touch-points that are available in all the States of the Federation’’.

Benefits of cashless

CBN had listed the benefits of the implementation of full cashless policy to include:

· Building on the successes already recorded which have been highlighted in 3.0 above. Benefits include:

• Reduction of cost of cash management (processing, movement, security, destruction of old notes) which is often passed on indirectly to Nigerians including eliminating the physical risk of cash – robbery, kidnapping, terrorism!

• Promote Nigeria’s positive reputation for fighting money laundering and terrorist financing. Cash limits are recognized in Anti Money Laundering Laws due to its role in advancing these illegal activities.

• Reduction in incidences of crime – armed robbery, kidnapping, terrorism financing, advance fee fraud, graft, ransom payment and extortions. etc.

• Deepening the Nigerian payment system through more innovation and cheaper costs

• Financial inclusion – the route to scaling financial inclusion is through electronic channels. Mobile phone penetration in Nigeria is 152m (according to NCC). EFINA survey shows that 81% of Nigerians excluded have mobile phones

• USSD helps to overcome the need for internet connectivity to smart phones

• Economic opportunities for small businesses & rural communities to facilitate trade and improve livelihoods, thereby boosting economic growth

• More effective transmission of monetary policies

• Overall growth, development and stability of the financial system

VANGUARD

Business

CBN Gives New Directive On Lending In Real Estate

Published

3 days 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.”

Business

JUST IN: Dangote Slashes Diesel Price

Published

4 days ago

April 16, 2024

Editor

The Dangote Petroleum Refinery has announced a reduction in the price of Automotive Gas Oil, popularly called diesel, from N1,200/litre to N1,000/litre.

It announced this in a statement issued on Tuesday by its spokesperson, Nduka Chiejina.

The statement read in part, “In an unprecedented move, Dangote Petroleum Refinery has announced a further reduction of the price of diesel from N1,200 to N1,000/litre.

“While rolling out the products, the refinery supplied at a substantially reduced price of N1,200/litre three weeks ago, representing over 30 per cent reduction from the previous market price of about N1,600/litre.

“This significant reduction in the price of diesel at Dangote Petroleum Refinery is expected to positively affect all the spheres of the economy and ultimately reduce the high inflation rate in the country.”

According to The PUNCH report, last week, oil marketers called on the refinery to reduce its diesel price, as they urged managers of the facility to sell at N850/litre.

Details later…

Business

Nigeria’s Oil Production Drops Again, Now 1.23mbpd – OPEC

Published

1 week ago

April 12, 2024

Editor

Nigeria’s crude oil production witnessed the second consecutive monthly decline since the beginning of this year, as it dropped to 1.231 million barrels per day in March, the Organisation of Petroleum Exporting Countries stated on Thursday.

OPEC disclosed this in its latest Monthly Oil Market Report for April 2024, stating that crude oil production details which it got through direct communication from Nigeria showed that the country pumped less oil in March when compared to what was produced in February.

Data from the report indicated that Nigeria produced 1.322 million barrels per day of crude in February this year, but this dropped to 1.231mbpd in March, representing a plunge of 91mbpd.

The report further stated that the country had produced 1.427mbpd of crude in January, but this was not sustained in February as it dropped in that month, while the southward oil production continued in March.

OPEC data, however, showed that the country’s average crude oil production in the first quarter of 2024 was 1.327mbpd, higher than the 1.313mbpd average oil production in the fourth quarter of 2023.

Nigeria’s first quarter oil output in 2024 was also higher than the 1.201mbpd average production in the third quarter of last year.

Oil theft and pipeline vandalism have dealt severe blows on Nigeria’s oil production, limiting the country’s output and making it fall below the volume approved for Nigeria by OPEC.

The PUNCH reported on Wednesday that the Nigerian National Petroleum Company Limited recorded 155 oil theft incidents in one week.

The report that stated the company revealed that during the review period, 53 illegal pipeline connections and 36 illegal refineries were uncovered in the Niger Delta.

“Between March 30 and April 5, 2024, a total of 155 incidents were recorded across several locations in the Niger Delta region from various incident sources,” the firm stated.

In a summary of the incidents, NNPCL stated that it recorded 53 illegal connections, discovered 36 illegal refineries and 32 wooden fibre boats, identified 14 pipeline vandalism cases, eight vessel infractions and four oil spills, as well as made seven vehicle and one vessel arrests.

Some of the incident sources include the Nigeria Agip Oil Company, Tantita Security Services Ltd, NNPCL Command and Control Centre, Shell Petroleum Development Company, NNPCL 18 Operating Ltd, among others.

Providing additional details, the company said, “In the past week, 32 wooden boats conveying stolen crude and illegally refined products were seized and confiscated in Rivers and Delta states.

“On land, seven vehicles loaded with stolen crude were arrested in Imo, Delta and Rivers states. 53 illegal connections were uncovered between March 30 and April 5, 2024 in Bayelsa, Rivers and Delta states.

“14 cases of vandalism were also recorded in Rivers, Bayelsa and Delta states, while illegal storage sites where stolen crude and illegally refined products are kept were uncovered in Akwa Ibom, Bayelsa, Rivers and Delta states.”

The national oil company also stated there were clusters of illegal refineries in Abia State, as activities of oil thieves had devastated the effected environments in the state.

It said 36 clusters of the illegal refineries were discovered in the past week across several locations in Rivers and Abia states.

“Four cases of oil spills due to activities of vandals were recorded in the past week,” NNPCL stated, adding that in Rivers State, oil leaks from a wellhead is destroying aquatic lives.

NNPCL stated that 38 suspects were arrested during the week under review, stressing that the national oil company would not back down on the war against crude oil theft until the menace is eradicated.

Nigeria has been losing trillions of naira to crude oil theft, a development that has made some international oil companies to divest from onshore to deep offshore oil fields, while others have exited the country.

In November 2023, for instance, The PUNCH reported that the Federal Government revealed that more than N4.3tn worth of crude oil was stolen in 7,143 pipeline vandalism cases within a period of five years.

The report stated that the government disclosed this at the Nigeria International Pipeline Technology and Security Conference in Abuja, with the theme, ‘Bolstering Regulations, Technology and Security for Growth.’ The conference was organised by the Pipeline Professionals Association of Nigeria.

In a presentation at the conference by the Nigeria Extractive Industries Transparency Initiative, a Federal Government agency, the organisation revealed that oil theft and losses in Nigeria had become a national emergency.

The Executive Secretary, NEITI, Ogbonnaya Orji, said oil theft was an emergency that posed serious threat to oil exploration and exploitation with huge negative consequences on economic growth, business prospects and profit earnings by oil companies.

Providing data from the agency’s reports to back his claims, he said, “NEITI disclosed that in the last five years, 2017 to 2021, Nigeria recorded 7,143 cases of pipeline breakages and deliberate vandalism resulting in crude theft and product losses of 208.639 million barrels valued at $12.74m or N4.325tn.

“NEITI reports also disclosed that during the same period Nigeria spent N471.493bn to either repair or maintain pipelines.”
PUNCH