CBN to launch digital currency following Osinbajo’s suggestion

…Alleges unethical practices

…Suspends processing of new license

…Retains MPR at 11.5%

By Emmanuel Elebeke

The Central Bank of Nigeria (CBN) yesterday cancelled   the weekly dollar sale to Bureaux De Change (BDCs), accusing operators of multiple BDC ownership and  facilitating   graft and corruption in the country. 

CBN Governor, Mr. Godwin Emefiele disclosed this   in Abuja   while addressing the press on the outcome of the Monetary Policy Committee (MPC) meeting in Abuja.

The CBN had been selling $20,000 per week to each of the over 5,000 BDCs across the country. 

Emefiele however said that the   apex bank will henceforth channel weekly allocations of dollar sales to commercial banks to meet legitimate foreign exchange   demands, adding that   processing of application for new BDC licences has also been suspended. 

Meanwhile, the CBN at the end of its Monetary Policy Committee (MPC) meeting in Abuja yesterday retained   all its policy rates constant citing the need to l enable the continued permeation of current policy measures in supporting the recorded growth recovery and macro-economic stability.

Consequently, the Monetary Policy Rate (MPR) was retained at 11.5 per cent. The asymmetric corridor around the MPR was also retained at   +100/-700 basis points while the Cash Reserve Rate, CRR,   Liquidity Ratio, LR, were also retained at 27.5 per cent and 30 per cent respectively. 

Suspension of dollar sale to BDCs.

Explaining the rationale for stopping dollar sale to BDCs, Emefiele said: “It is important for us to note that in line with the CBN Act, we have   a mandate other than pricing and monetary stability   to ensure we maintain the reserve of the country as well as the exchange rate of the country. Nigeria remains one and the only country selling foreign exchange to BDCs but because of pressure and requests, we have continued to do this to see that those who operate in this market   are able to do so because we   see it as an opportunity to create business for them.

“We believe that   as long as they do this, they do it to the benefit of the economy but we have become very disappointed   and concerned about the activities of the BDCs in Nigeria. We are unhappy that rather than sell about $5,000 to travellers, they have turned themselves to   agents that facilitate graft and corruption in Nigeria and we   believe that this cannot be tolerated.

“The CBN has also been awashed with complaints   about the modus operandi of BDCs and   it is becoming so disgraceful that we feel that at this stage we need to   take a decision. 

“There is evidence of prevailing ownership of several BDCs by the same promoters to procure multiple foreign exchange from the CBN. Several international organisations, embassies patronise BDC through illegal forex dealers to fund their institutions. 

“The Committee deliberated extensively on this, and this is an issue that even the authorities had engaged the CBN on   and we tried our best to see how we could defend the BDC operators. Even our leaders who constitute political authorities have raised concerns about the modus operandi of   BDC operators in Nigeria. We did our best to defend them,    that they play certain roles in our economy.

“At this stage, we cannot no longer continue, we are carrying political authorities along because they themselves had wanted this to stop. Now that we can no longer continue because of the illegal activities, and corrupt tendencies exhibited   by the players in the sector, we believe this must stop and we have   stopped it henceforth.

“We know that there are some people who legitimately would want to go to them to buy dollars, we are saying they should go to their bank and validate minimal documentation and they will attend to you.   Indeed they will transfer your money electronically, in line with our cashless policy; they do not need to give cash. We cannot be talking about cashless naira and be supporting cash in dollars, an attempt to dollarize our economy.   We cannot continue with sharp practices that are going on there. If you know you have a legal transaction to make,   go to your bank, you do not need BDC given the form they were found in recent times.

“What happens in that (parallel) market as insignificant as the volume is, they are all perpetrating corruption, exchange of bribe money instead of taking naira in big bags, they choose to collect dollar in small bags, we will not facilitate that for you again, it is not what CBN should support.”

CBN digital currency

Emefiele also spoke of the rationale behind the proposed digital currency of the CBN. 

He said: “Digital currency is what CBN all over the world are providing as an alternative to the money arrangement.   We will support that, when it starts. It is a moving idea and we are not the first to do it and it will certainly come into operation by October and we are working very hard for this.   The objective is that it will make transactions cheaper and more efficient and there will be less work to complete.

“ The Nigerian economy, just as the rest of the world is going digital, cash cannot play in that space.   Therefore, eNaira,   which will represent equivalent of cash, will be used as fiat currency to effect transactions. 

“ And of course, in the area of facilitating digital currency transmission, we know that the rise of private digital mining   such as facebook   variant and others   will have   less visibility to the amount of money in the system and here is the inability of the authorities to properly translate it into multiple policy decisions.”

READ ALSO: Breaking: CBN goes after BDC operators

In terms of    financial inclusion, the CBN Governor said, “we believe   there is a greater percentage of bankable adults who are still outside   the financial system.   The eNaira is going to be used to complement the existing type of monies and not to replace them. Crypto currency is fervently moralist which I want regulated by regulatory authority.   Therefore, using them is your own individual decision. If you decide to use them it means you are taking your risk, if you make your money, we wish you good luck but if you lose your money we laugh at you.

“For us at CBN, we have passed instructions to the banks that you cannot use your banking and payment structure to allow crypto agents to use them. That policy still remains in place and I am not sure we are about to change that policy.

We have made advanced progress on digital currency,    we have already engaged Gifts incorporation as our technical partner,   they were selected out of other 10 solution providers based on their performance   during a rigorous evaluation process in diverse areas.”

Banking industry remains sound

Reacting to questions on concerns   that some deposit money banks   are showing signs of distress,   Emefiele insisted that   banks are still sound,   and that the concerns are a product of   fake news.

“All the social media messages going round are all fake and indeed fraudulent. The CBN is doing everything possible to trail those perpetrators, who are creating problems for the banking system.   By God’s grace we will unravel who they are and bring them to the public when found,” he said.

Continuing, Emefiele said, “The   strategic work   of the Nigerian banking industry remains very strong. For instance at this meeting data was provided for the committee members and we reviewed the financial soundness indicators of the Nigerian banking industry. For the Capital Adequacy ratio, the   average was   15.5%, for the national banks they are only meant to have 10% and for the international banks 15%.

“If we have an average of 15.5%, I believe that the Nigerian banking industry is well capitalised   and can meet any shock if they arise. Again the non performing loan (NPL)   ratio    for the   banks is 5.7% and the prescribed maximum percent is 5%.    I think 5.7% is a sign of a sound banking system.

“The liquidity ratio for the banking industry today is 41.3%.   What is expected is a minimum of 30%. If the banks have an average of 41.3%, it is also an indication of a sound banking liquidity.   Total assets   from the value we saw today rose from N37.8 trillion in May 2019 to   N53.6 trillion as at June 2021.

“Total deposits in the banking industry have increased from N22.8 trillion in May 2019 to N33.85 trillion in June 2021. Gross loans have grown from N15.4 trillion   in   June 2019 to   N22.04 trillion in June 2021. I appeal to banking public to do their transaction without fear.”

N15 trillion Infraco fund

Speaking on the proposed N15 trillion Infrastructure Company (InfraCo) Emefiele   said “In the course of this week, we will place advertisements on the appointment of the Chief Executive Officer and Chief Investment Officer   of the infraCo. He must be somebody who understands financing infrastructure business and must be a   well respected person.   We are taking time because we want to get this right. We feel Nigeria’s infrastructure deficit is so wide that   N15 trillion will still be like a drop in an ocean, that is why we must get this right so that the world will welcome us when we   go for the second, thirds and fourth rounds.

Lamentation over rise in price of food items   

On the lamentation by Nigerians on   the rise in the average price of food, the CBN boss said the bank is working   hard to bridge the gap between theory learnt by agriculture graduates and   the practical.

“I am lamenting the gap between theory and practice.    Why should we have people who graduated from study of agricultural economy and yet Nigeria has a lot of graduates with agric potentials. We are   trying to say that if you are a graduate of agriculture, we will like to work with them to   see how they can   conduct research on   seedlings that will give us the highest   output.

“We are determined that if accessing credit is their problem,   we will solve that problem insofar as they are committed to pay.   We are going to roll out a framework to support the initiative with universities.   We will provide a youth entrepreneurship programme in collaboration with universities, whereby we seize their certificate and give them money. Our goal is to develop entrepreneurial skills in our young people.   For me, it is the most profitable business the youth can do. That is why we must bridge the gap between what they study in school and that when they graduate they can practice what they learnt. We hope the universities will cooperate with us.

Inflation rate

Speaking on inflationary   rate, he said the rate of increase is low compared to previous data, meaning that the rate at which the prices   are increasing is coming down. “Our data support this fact. As a matter of fact it is deflation. We are happy at the rate it is slowing   from 17.92% in May   to 17.75 in June, that is fantastic reduction, though prices of food may still be high.”

Vanguard News Nigeria

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