When Mr. Godwin Emefiele became the Governor of the Central Bank of Nigeria (CBN) on June 3, 2014, there was visible pressure on the Naira as well as a decline in the country’s foreign reserves.
On assumption of office, Emefiele unveiled his vision for the Nigerian financial sector. This include: pursuing gradual reduction in key interest rates, and include unemployment rate in monetary policy decisions; maintain exchange rate stability and aggressively shore up foreign exchange reserves; and building sector-specific expertise in banking supervision to reflect loan concentration of the banking industry. Others are: abolishing fees associated with limits on deposits and reconsider ongoing practice in which all fees associated with limits on withdrawals accrue to banks alone; introducing a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, and oil and gas.
In spite of the challenges, chief of which has been the fall in the global price of crude oil, Emefiele and his team at the CBN, within the past 12 months, have recorded notable milestones.
Financial System Stability: Within the past one year, CBN has regulated operations of Bureaux de Change (BDCs) to check rent-seeking among operators, depletion of the nation’s foreign reserves, unauthorized financial transactions, and dollarizing the economy, among others. 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 percent, to be in breach of the objectives and provisions of its guidelines.
Bank Supervision: Towards achieving the mandate of ensuring safety and soundness of the financial system, CBN 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. It also 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 companies in October 2014. In January 2015, it carried out the Risk Asset Examination of 24 banks as at December 31, 2014. Within the period, CBN commenced the implementation of the BASEL II Accord aimed at promoting financial system stability by ensuring that banks are adequately capitalized and have enhanced risk management systems.
Consumer Protection: The bank has within the period facilitated the refund of more than N4.01 billion to bank customers based on complaints resolved and directives communicated to them following the Consumer Compliance Examinations and a spot-check conducted on the banks. It concluded full deployment of the Consumer Complaint Management System (CCMS) with the migration of all banks to the live platform of the system.
Other Financial Institutions: The reform of the BDC segment of the Foreign Exchange Market was concluded on 31st July, 2014, resulting in 2,501 BDCs with caution deposits and capital base of N35 million each. The bank issued a final licence to the National Mortgage and Re-financing Company (NMRC) to commence operation in 2015 under the Housing Fund Programme (NHFP). It carried out further reforms of Primary Mortgage Banks (PMBs), with 32 PMBs fully capitalized as at June 30, 2014 while 10 were in the category given up to December 31, 2014. Licences of 21 PMBs which failed to recapitalize or had remained technically insolvent were revoked. It also 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 MSMEs in Nigeria.
In his maiden remarks, the CBN Governor pledged to reposition the developmental financing initiatives of the bank. New schemes and interventions introduced to complement the existing ones include: N300 billion Real Sector Support Fund (RSSF) established to help unlock the potential of the real sector to engender output growth, value added productivity and job creation. N152 billion has been approved for five projects under RSSF; N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF) aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). N56.68 billion has been disbursed to five generating and five distribution companies under the scheme. Under existing schemes and intervention programmes, the Commercial Agricultural Credit Scheme (CACS) guidelines were reviewed to enable DMBs assess the fund at 2 percent from CBN and lend at an all-inclusive interest rate of 9 percent with a spread of 7 percent. Expiration of the scheme has been extended from 2016 to 2025. Also, disbursement of funds under the Micro, Small and Medium Enterprises Development Fund (MSMEDF was formally flagged-off in 2014. N43.57 billion has so far been disbursed, with 61.6 percent of beneficiaries being women, while N30.31 million has been accessed by 292 People Living with Disabilities (PLWD)
Banking and Payments System
In conjunction with the office of the Accountant General of the Federation (OAGF), e-collection element of the Treasury Single Account (TSA) took off on March 1, 2015. This ensures real time remittance of government receipts directly into the Consolidated Revenue Fund Account (CRF) to enthrone transparency and accountability in management of government receivables, and promotes effective monetary policy and reduces cost of liquidity management borne by the bank. Removal of charges on cash deposits was also introduced to encourage flow of deposits to DMBs.
Following the sharp decline in global oil prices and the resultant fall in the country’s foreign exchange earnings, there was a widening margin between the rates in the interbank and the rDAS window, thus engendering undesirable practices including round-tripping, speculative demand, rent-seeking, spurious demand, and inefficient use of scarce foreign exchange resources by economic agents. CBN closed the rDAS/wDAS foreign exchange window at the bank in order to check further pressure on the country’s foreign exchange, avert the emergence of a multiple exchange rate regime and preserve the country’s foreign exchange reserves.
A summary of Emefiele’s performance in the past one year indicates that he and his team have ensured stability in the sector, in spite of global and domestic challenges. Analysts agree that the bank under his watch is on the right track to guaranteeing the soundness and stability of the Nigerian financial system. Going forward, it is hoped that, working