With effect from Monday 23, January 2023, rural dwellers and Nigerians living where there are no banking services can swap their old N1,000, N500 and N200 notes for the redesigned notes.
The Central Bank of Nigeria (CBN) had insisted that anybody who wished to have the redesigned notes must open a bank account and deposit their old notes.
However, the CBN sent out a circular signed by Haruna Mustafa, Director Banking Supervision Department and Musa I. Jimoh, Director, Payment System Management Department to all Deposit Money Banks (DMBs) Mobile Money Operators (MMOs), Super Agents and Agents.
In the circular at the weekend titled: “Naira redesign policy: CBN launches cash swap programme in rural/underserved areas” the CBN said the programme will enable “citizens in rural areas or those with limited access to formal financial services to exchange old Naira notes for redesigned notes”.
From Monday, old N1000, N500, N200 notes can be exchanged for the newly redesigned notes and/or the existing lower denominations (N100, N50 and N20, etc) which remain legal tender.
Under the new initiative, agents can only exchange a maximum of N10,000 per person. “Amounts above N10,000 may be treated as cash-in deposit into wallets or bank accounts in line with the cashless policy”.
Agents are also required to demand for BVN, NIN, or Voter’s card details of the customers before accepting to exchange more than N10,000.
The new cash swap programme, the CBN said “is also available to anybody without a bank account.
“Agents were urged to open a wallet or account instantly upon request, “leveraging the CBN Tiered KYC Framework”.
This will, the circular, said will “ensure that this category of the populace are able to exchange or deposit their cash seamlessly without taking unnecessary risk or incurring undue cost”.
Agents were authorised to sensitise their customers on opening wallets/bank accounts and the various channels for conducting electronic transactions.
Some designated agents are eligible to collect the redesigned notes from DMBs “in line with the Revised Cash Withdrawal Limit policy”.
Agents have been given permission to “charge cash out fees for the cash swap transactions but prohibited from charging any further commissions to customers for this service”. The apex bank was however silent on how much the agents should charge as cash out fees.
As part of the cash swap programme, agents are expected to “render weekly returns to their designated banks regarding the cash swap transactions, while DMBs will in turn render same to the CBN on a weekly basis”.
The CBN warned that Principals (Super Agents, MMOs, DMBs) will “be held accountable for their agents adherence to the above guidelines”.
It assured rural dwellers and those targeted by the programme that “Cash Swap agents will be readily identifiable in all local governments, particularly those in the rural areas”.
The Central Bank of Nigeria (CBN) has mandated the enrolment of other financial institutions (OFIs) on the credit risk management system (CRMS).
CBN gave the directive in a circular published on its website and signed by Chibuzo Efobi, Director, Financial Policy and Regulation Department.
CRMS is the practice of mitigating losses by understanding the adequacy of a bank’s capital and loan loss reserves at any given period.
With this, the CBN and OFIs would be able to track any bank debtor to know if such a debtor owes another institution.
OFIs include development finance institutions (DFIs), microfinance banks, (MFBs), primary mortgage banks (PMBs), and finance companies (FCs).
“All OFls are hereby informed that the provisions of the regulatory guidelines for the redesigned credit risk management system for commercial, merchant, and non-interest banks in Nigeria issued on February 27, 2017 (Ref No. FPR/DIR/GEN/CRM/06/012) and the additional regulatory guidelines for the operation of the redesigned CRMS issued on September 10, 2018 (Ref No. FPR/DIR/GEN/CIR/07/007) have become applicable to all OFls,” the circular reads.
“Accordingly, and more specifically, enforcement of Section 3.1(a) of the guidelines on CRMS that captures the ‘submit before disbursement’ requirement shall commence on August 1, 2022.”
Section 3.1(a) of the regulatory guidelines for the operation of CRMS states that “rendition on the CRMS is required before the disbursement of any loan or credit facility.
“This process of submission does not interfere with any participating bank’s decision to extend a loan or credit to its customer. Consequently, rendition is only required after approval to disburse is given.”
The apex bank also reminded OFIs to ensure that all their customer accounts comply with the 10-digit Nigeria uniform bank account number (NUBAN) format, and are tagged with bank verification number (BVN) or tax identification number (TIN) for individual and non-individual accounts of the account holder and profiled on the Nigeria Inter-Bank Settlement System’s (NIBSS) industry customer accounts database (CAD) not later than June 20, 2022.
“These remain prerequisites for enrolment onto the CRMS,” CBN said.
CBN further warned that failure to comply with the stipulated timelines would attract appropriate sanctions.
Insurance professionals who gathered at this year’s 2022 edition of Fellows’ Hangout in Lagos organised by the Chartered Insurance Institute of Nigeria (CIIN) have been urged to structure their area of specialisation to promote industry awareness.
The Chairman, Examination Committee, CIIN, Olusola Ladipo-Ajayi, who spoke on a paper titled: ‘Contributions of Fellows to the growth of the Institute’ at the CIIN 2022 Fellows’ night, said there is a need for collaboration between the institute’s relevant stakeholders to promote insurance awareness and place the industry on the path of growth.
Ladipo-Ajayi tasked insurance fellows to hold meetings regularly and make recommendations that would assist the institute saddled with the responsibility of promoting insurance awareness.
He implored them to join hands with the institute to audit course books; help to supervise examinations and assist in determining skills and knowledge programmes.
Chairman, of the Society of Fellows, Prof. Joseph Irukwu, who was represented by the past President, Sunny Adeda, decried the number of fellows of the institution, which is 121, compared to India with 3,767 insurance fellows.
Adeda beseeched insurance practitioners and the public to embrace the institute’s examinations, stressing that the insurance industry currently has less than 4,000 professionals.
The President, CIIN, Dr. Muftau Oyegunle, charged the institute to determine a high standard of knowledge and skills for persons seeking to become registered members of the professional body, adding that he has strong confidence that this would help grow the industry.
The Central Bank of Nigeria’s Monetary Policy Committee on Tuesday raised the benchmark interest to 13 per cent. The governor of the Central Bank, Godwin Emefiele, said the action was to tame the rising inflation rate in the country.
Inflation in Africa’s most populous country soared to 16.8 percent in April, according to a report by the National Bureau of Statistics (NBS). The soaring rate was driven by fuel price increases and accelerating costs for food, including bread and cereals.
The CBN on Tuesday said that the global economic outlook remains uncertain amid rising commodity prices worsened by the Russia-Ukraine war.
Earlier in the month, a 0.5 percentage points interest rate hike announced by the United States’ Federal Reserve had reverberated around the globe, spurring other economies to hike rates.
The U.S. Fed raised its benchmark interest rate to a target rate range of between 0.75% and 1%, the largest hike in 22 years. The decision followed a 0.25 percentage point increase in March, the first increase since December 2018.
Like the US, other big economies of the world have raised their rates.
Monetary Tool
The interest rate is one of the key tools deployed by central banks across the world to manage the flow of money and productivity in their respective countries. A change in the interest rate could have an effect on macroeconomics and other key economic indicators like consumer spending and borrowing.
In Nigeria, the tool allows the apex bank to effect changes in broad monetary policies designed to facilitate the government’s planned fiscal policy.
Mr Emefiele explained on Tuesday that at the MPC meeting, six out of the 11 members of the committee voted to raise the key rate.
The committee also voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR, just as it maintained the Cash Reserve Ratio (CRR) at 27 per cent.
The CBN governor argued that the sharp rise in inflation across both the advanced and emerging market economies has generated growing concerns among central banks across the world, adding that the progressive rise in inflation driven by rising aggregate demands and wage growth has put sustainable pressure on price levels.
Inflationary Pressure
The major determinant of the CBN’s hike in rate on Tuesday was the need to tame rising inflation. Until Tuesday, Nigeria hadn’t altered its interest rate since September 2020 when the CBN reduced the monetary policy rate from 12.5 per cent to 11.5 per cent.
In the midst of the global hike, the nation faces a dicey situation amid efforts to contain inflation, keep domestic prices stable, and ensure economic growth.
Mr Emefiele addressed this concern on Tuesday, thus: “On the need to tighten, MPC feels compelled that tightening would help moderate inflationary trade-off from the steady growth so far recorded and improve real GDP.
“It also feels that tightening would help rein inflation before it assumes the galloping frame considering the rising increase in headline inflation month-on-month.”
By hiking the interest rate to 13%, it is expected that borrowing would become more difficult and consumers would have less money to spend. By implication, amid lower demand among consumers, manufacturers of goods would be wary of raising prices. In effect, all of these would combine to reduce inflationary pressure.
But the hike could also fail to tame inflation if other macroeconomic indicators go wrong.
Manufacturers’ nightmare
A hike in interest rate is often considered manufacturers’ nightmare as it stifles productivity and expansion.
As the apex bank raises its rates to 13%, manufacturers hoping to borrow from banks may have been shut out of the windows due to the higher cost of borrowing amid falling demands.
When the benchmark rate was pegged at 11.5 per cent, banks typically charged manufacturers and other lenders between 12 to 30 per cent on loans. With the hike in rate (13%), the charges could skyrocket.
Earlier in the year, the Manufacturers Association of Nigeria had said the average rate at which its members borrowed money from banks was 20.75 per cent and 21.25 per cent in 2020 and 2019, respectively.
“It is important for the CBN to carry out a coordinated reduction in the monetary policy rate and lending rate,” MAN said in a statement.
Employment and Productivity
A hike in interest rate slows down productivity, as manufacturers struggle to keep machinery in operations and pay salaries. Those who look forward to borrowing for expansion and production would have to shelve such ideas in the face of the high cost of accessing funds. Persistent low interest rates favor larger companies because it allows them to increase production, employ more people, and expand. When the interest rate is hiked, the reverse is the effect.
In terms of job creation, a hike in interest rate could have effect—if marginal—on the number of jobs created or lost.
Unemployment Rate in Nigeria averaged 13.55 percent from 2006 until 2020, climbing to an all-time high of 33.30 percent in the fourth quarter of 2020. Even if the impact may not be significant in the immediate, the hike in interest rate and attendant fall in productivity could throw a number of people out of jobs.
Stocks, Bonds, and Forex
By default, low interest rates can cause the stock market to go up, just as the market records depreciation when the apex bank raises interest rates.
By implication, change in central banks interest rates affect prices of various assets such as bonds, stocks and houses.
The exchange rate can also be affected by the increase in rates, because a hike in a nation’s interest rate relative to other countries makes the domestic currency denominated assets more attractive to foreign and domestic investors. This can lead to a rise in demand for the domestic country’s currency in relation to other foreign currencies.
Meanwhile, as domestic currency strengthens, imported goods would become cheaper while locally produced products would become more expensive in the foreign market. This could as well affect demand, and lead to reduction in foreign exchange earnings with possible impact on balance of payments.
In the case of Tuesday’s increase in Nigeria’s interest rates, it remains uncertain how much this would affect the nation’s foreign exchange in the light of the widespread hike in rates across different economies around the globe.
As of press time Wednesday, numerous central banks across the world have hiked their rates in the wake of the United States’ hike in rate earlier in the month. Like the US’ apex bank, the Bank of England increased interest rates from 0.75% to 1% in order to tackle soaring inflation that is expected to rise above 10% in the coming months. The bank also warned that the cost-of living crisis could plunge the economy into recession in 2022.
Similarly, Australia’s central bank as well as the Reserve Bank of India (RBI) raised their rates to accommodate the changing dynamics.
A credit score is a three-digit number known as a CIBIL score that is given to you as a representation of your creditworthiness. Credit bureaus associate this score with your profile based on your financial wellbeing. If you have a history of making all your credit payments on time, clearing your card debt balance, and taking justified loans, then your statement will reflect a good credit score. Any credit score which has credit utilization below 30% is considered a good score.
Benefits of Your Good Credit Score:
You’ll get the best rates on car loans, home loans, and other personal loans: Lenders who wish to offer a loan to clients first check their credit scores to determine their creditworthiness. If you have a good score, you will be able to close a good deal with lower interest rates and premiums from the vendor.
Secure higher credit limits on credit cards: If you have a good credit score, you will be approached by more and more premium lending institutions with higher spending limits. A good credit score automatically reflects well on your creditworthiness and you can take advantage of that in the form of higher credit limits on your cards.
Access to the best-rewarding credit cards: Several credit cards offer various benefits to privileged customers in the form of discounts on different online shopping platforms, cash back, complimentary movie tickets, discounts at luxury dining restaurants and hotels, travel miles, and much more. A good credit score will help you unlock such cards at lower rates.
Eligible for a pre-approved loan offer: High creditworthiness will up your chances of being offered pre-approved loans from banks and financial institutions. A good CIBIL score goes a long way in ensuring that you get reasonable interest rates on these pre-approved loans too.
What Factors Impact Your Credit Score?
Timely bill payments: Pay your bills on time to ensure that your CIBIL score is not impacted negatively.
Pay off your debts:Debt accumulation can result in a weak credit score. You can also consider debt consolidation by using a personal line of credit, which offers seamless debt management and lower credit rates.
Manage how often you apply for credit: Applying for credit too often results in ‘hard inquiries’ on your credit score, which further weakens your score. So be judicious in choosing when to apply for credit, and span out your applications.
Manage your credit card usage: Using the credit card within limits and ensuring timely payment of the bills will positively impact your credit score.
Check your CIBIL score and report regularly: It’s good to keep a tab on your credit report and periodically check your credit score to help identify any inaccurate or incorrect information and rectify it.
Securing a good credit score requires perseverance, diligence, and prudency. Be realistic with your financial spending capacity before using various means of credit; be sure that make your bill payments on time. With a high credit score, there are several more benefits that you shall reap. You may be able to secure an interest-free loan, better credit rates; you will even be able to save on rentals and mortgages. You will be able to negotiate the best deals and interest rates. So make sure that you consistently work towards achieving a good credit score.
For Nigeria to surmount its liquidity challenges, generate foreign exchange (forex) and remain competitive, there is a need to target a heavy inflow of foreign direct investment (FDI) through a wholesale listing of its corporate assets, liberalise infrastructure and commercialise greenfield real estate portfolio.
An economist, Dr. Ayo Teriba, while addressing participants at the Economic Associates (EA) one-day quarterly conference on ‘Nigeria’s Economic Outlook’ in Lagos on Thursday, said aside from unbundling its assets, Nigeria needs to aggressively increase its average cross-border mergers and acquisition deal counts from six deals a year in the next 15 years.
According to him, Nigeria needs to initiate policies that will boost its FDI and remittance inflow sustainably.
He pointed out that this would enable the country to attract huge capital inflows, record domestic liquidity, stability, inclusiveness, diversified growth, shared prosperity and national cohesion post-pandemic.
Teriba insisted that the only way Nigeria could achieve sustainable growth is through privatisation of public assets and subsequent listing them on the stock market.
He said ensuring speedy listing of the companies would ultimately improve the depth of the capital market and create wealth for the people.
“There should be a policy that any company that Nigeria has equity in, must be listed on the exchange. It is only when these assets are listed that you can securitise them for financial value.
“Until we generate a third party claim in any of our assets, it cannot be financial. It is only when it is in a financial firm that we can raise liquidity from it to impact our balance sheet.
“To have companies in the petroleum sector that do not have any market value is a tragedy to Nigeria,” he said.
The economist argued that the country is rich in assets but economically poor, noting that until the nation generates optimal returns from its assets, it may not record any meaningful growth.
He also pointed out that trade flows are drying up globally while financial flows are surging significantly due to cross-border investment deals.
Teriba stressed the need for the country to be more strategic to stay ahead of trends in attracting sufficient financial inflow to grow the economy.
FCMB Bank (UK) Limited, an independently incorporated subsidiary of First City Monument Bank Limited (which is a member of FCMB Group Plc), has introduced its Personal and Business banking proposition in London, United Kingdom and Lagos, Nigeria at an impressive ceremony attended by the top echelon of the business community within and from outside the country.
The development follows the latest variation of permission obtained by the United Kingdom-based Bank to extend its services to include retail (investments) for individuals and business enterprises. This is in addition to the existing wholesale deposit taking activities, foreign exchange, treasury, corporate banking and trade finance offerings to corporate and institutional customers of FCMB Bank (UK) Limited.
The variation of permission was granted by the Prudential Regulation Authority, the financial services regulatory body of the United Kingdom, and it became effective on June 8, 2018.
The Personal and Business banking proposition of FCMB Bank (UK) Limited is anchored on the Bank’s London Leverage and Africa Awareness. This will enable the financial institution deliver its promise of being the Corporate and Private Bank for African-oriented entrepreneurs, investors and professionals across all their banking needs.
The Group Chief Executive of FCMB Group Plc, Mr. Ladi Balogun, explained at the ceremony that the launch of FCMB Bank (UK) Limited’s personal and business banking proposition is as much a statement of substance as it is one of intent. According to him, “our successful UK platform has proven to be of great importance to the Nigeria stockbroking and international trade finance activities of FCMB Group. Leveraging our deep networks in Africa’s biggest economy, the importance of a London presence to many of our Personal and Business banking customers, and technological innovation, we welcome this opportunity to meaningfully serve more of our customers and grow the value of our UK franchise”.
Also speaking, the Chief Executive Officer of FCMB Bank (UK) Limited, Mr. James Benoit, said, “with the extension of its services, the Bank is now able to receive deposits from both customer segments as well as provide them bank loans to enable them meet their financing needs. The deposit products on offer include current, notice savings and fixed deposit accounts at competitive rates; while its lending products include Buy-to-Let Mortgage Loans enabling target customers to acquire a piece of London and purchase property to include in their investment portfolios.’’.
He added that the Bank will be expanding its premises and entering into partnerships with Fintech providers to open up service options to its clients and enhance their overall banking experience.
Dignitaries at the launch commended the Board and Management of FCMB Group Plc for going the extra mile in ensuring the institution has a very strong presence in the United Kingdom through FCMB Bank (UK) Limited, which will go a long way to boost individual and business transactions between Nigeria and the United Kingdom, thereby enhancing customer experience.
Operating in the City of London, FCMB Bank (UK) Limited began its operations as a BIPRU €50k investment firm in September 2009 with CSL Stockbrokers (another subsidiary of FCMB Group Plc), providing the services of “receiving and transmitting” institutional client orders for Nigerian listed securities. Subsequent to the variation of its permission on September 27, 2013, the Bank commenced wholesale deposit taking activities across various segments.
The Central Bank of Nigeria (CBN) has issued fresh guidelines aimed at strengthening the payment system and development of other disruptive technologies relating to financial services.
The regulatory frameworks are contained in two separate documents issued by the apex banks. The documents are created to address challenges in regulatory sandbox and quick response (QR) code payment operations in the country.
“In furtherance of its mandates to, ensure the safety and stability of the Nigerian financial system, promote the use and adoption of electronic payments and foster innovation in the payments system, the Central Bank of Nigeria hereby issues the framework for QR code payments in Nigeria,” the CBN said in one of the documents that detailed the operational relationships among issuers, acquirers, merchants, other financial service providers and customers.
In the document, the Bank spelt out risk management issues and the reporting processes while allocating responsibilities to relevant participants in the value chain, warning that it “shall apply appropriate sanctions to any party that fails to comply accordingly”.
It stated: “Issuers and acquirers shall agree to minimum due diligence guidance for merchant onboarding without prejudice to know your customers/anti-money laundering (KYC/AML) requirements of the Bank… Issuers and acquirers shall ensure behavioural monitoring and fraud management systems are implemented to prevent, detect and mitigate fraud and money laundering.
“Issuers shall provide quarterly risk management assessment reports to the Director, Payments System Management Department. The risk management assessment report shall include, among others, fraud reports, vulnerabilities assessment and risk-mitigating measures introduced.”
According to the CBN, participants shall ensure full interoperability of QR code scheme in Nigeria and work towards achieving its seamless operation.
The regulator left the determination of transaction limit to issuers alongside customers. It, however, directed that the threshold should be set based on the outcome of a customer’s risk profile assessment.
Merchants are mandated by the regulatory framework to cooperate with acquiring banks or other participants, as the case may be, to investigate reported fraudulent cases. They are also expected to report all suspicious transactions to acquirers for necessary actions.
“QR code payments in Nigeria shall be based on the EMV® QR Code Specification for Payment Systems. The Bank may also approve the implementation of any other QR Code Standard provided it meets the prescribed security requirements within the framework, demonstrates interoperability with other existing implementation in the industry and/or cost benefits to end-users (merchants and customers),” the apex bank said.
QR code is a type of barcode that could be read by a digital device and which is used for financial transactions. QR code merchant payment is a growing innovation in the payment system. On the other hand, a regulatory sandbox is a formal process where firms conduct live tests of new, innovative products, services, delivery channels or business models in a controlled environment. Regulatory oversight, subject to appropriate conditions and safeguards, is an essential component of the process.
The CBN said: “This framework, therefore, defines the establishment, rules and operations of a regulatory sandbox for the Nigerian payment system to promote effective competition, embrace new technology, encourage financial Inclusion and improve customer experience, with a view to engendering public confidence in the financial system.”
It listed the objectives of the guidelines thus: increasing the potential for innovative business models that advance financial inclusion, reducing time-to-market for innovative products, services, increasing competition, widening consumers’ choice and lower costs and ensuring appropriate consumer protection safeguards in innovative products.
Other objectives are to define the roles and responsibilities of stakeholders and the operations of the sandbox for the Nigerian payments system, to ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system and to provide an avenue for regulatory engagement with financial technology firms in the payment space.
To participate in the regulator sandbox, products are expected to improve accessibility, enhance the efficiency and effectiveness of financial institution risk management and address gaps or open up new opportunities for financial benefits.
“An applicant shall identify the potential risks to financial institutions and financial consumers that may arise from the testing of the product, service or solution in the sandbox and propose appropriate safeguards to address the identified risks,” the CBN stated.
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