The Central Bank of Nigeria’s Monetary Policy Committee will hold its first meeting for the year today (Monday) and Tuesday to review developments in the economy and probably set a new direction for growth this year.
The 11 members of the MPC meet once in two months to evaluate the economy and make adjustments in key variables to set direction for economic growth.
The meeting is coming at a time the country is passing through a biting recession, which has seen inflation rate as high as 18.55 per cent, massive job losses, low consumer confidence, high volatility in exchange rate and other acute economic challenges.
Experts, who spoke to our correspondent on Sunday, forecast that the committee would leave key economic variables, including the Monetary Policy Rate (benchmark interest rate) and the Cash Reserve Ratio unchanged in view of the critical state of the economy.
According to them, there is a need for the MPC to lower the benchmark interest rate and adjust the CRR in order to enhance the capability of the Deposit Money Banks to create credit in the economy.
There was, however, a consensus among the experts that these policy adjustments might not happen.
They argued that the MPC had not historically shown that it was in favour of such policy adjustments in a recession.
“I think that because it is the beginning of the year, the MPC may not adjust any of the monetary policy rates; they will likely want to wait to see the direction the economy will go for the year,” the Director-General, West Africa Institute of Financial and Economic Management Studies, Prof. Akpan Ekpo, said.
It is believed that none of the tools of monetary policy can be adjusted to enhance the process of taking a country out of a recession.
Contrary to this view, Ekpo said recent studies had shown that an aggressive adjustment in a monetary policy tool could reverse recession.
However, he said, “I am not sure the MPC will want to carry out an aggressive adjustment in any of the tools of monetary policy.
“Take for instance, can the committee vote to bring the benchmark interest rate from the current 14 per cent to say 10 or eight per cent? No. This is why I am predicting that the committee may leave the policy rates unchanged for now; again, it is the beginning of the year.”
He advised the CBN on the need to work with the Ministry of Finance to achieve policy coordination between the fiscal and monetary authorities.
According to him, this is necessary to bring the country out of recession in the next few months.
A professor of Economics at the Olabisi Onabanjo University, Sherriffdeen Tella, said the MPC had increased or left unchanged the monetary policy tools in previous meetings.
He added that it was high time the committee brought down the rates.
Tella explained, “By now, it should be obvious to the MPC that the type of inflation we are experiencing in the country is cost push and not demand pull. It is not a demand pull inflation means it is not coming as a result of excess money supply, which the MPC is trying to mop up from the economy.
“The inflation is caused by increase in the prices of goods and services, which have been occasioned by significant increases in the cost of production caused by naira depreciation and high cost of credit. As a result, what the MPC needs to do now is to lower the MPR and increase the banks’ capability to increase credit.”
The MPR was retained at 14 per cent by the MPC at its 253rd meeting in November last year. It predicated its decision on the need to mitigate the fragile macroeconomic conditions and the strong headwinds confronting the economy, particularly the implications of the twin deficits of current account and budget deficits.
UACN Property Development Company (UPDC) Plc will soon shop for N5 billion from the capital market through existing shareholders. The funds would be raised via a rights issue of 1.719 billion ordinary shares of 50 kobo each at N3.00 per share on the basis of one new share for every one share already held.
The Nigerian Stock Exchange (NSE) disclosed at the weekend that UPDC has already applied for the approval and listing of the right issue through its stockbroker, Stanbic IBTC Stockbrokers Limited.
The Chairman of UPDC, Mr. Larry Ettah had last May disclosed plans by the company to raise fresh capital to boost its operations.
Speaking to shareholders during the company’s annual general meeting (AGM) in Lagos, Ettah said the capital injection would be in form of rights issue, disposal of low performing assets and sell down of surplus stake in the real estate investment trust (REIT) among others.
“Our strategy for 2016 and beyond includes deleveraging the business through equity capital injection by way of rights issue, sell down of surplus stake in the REIT and disposal of low-performing assets, as well as leveraging on partnerships and alliances that are in sync with the company’s long term goals,” he had said.
As part of capital injection, UPDC raised N16.799 billion commercial paper (CP) under its N24 billion CP Issuance Programme.
Speaking on the debt capital, Managing Director of UPDC, Mr. Hakeem Ogunniran, said the CP issuance had afforded the company a better opportunity to successfully diversify its short-term funding sources at a 25 per cent reduced cost, thereby enhancing their value-creating capability for the company’s various stakeholders.
Ettah had disclosed that the company was recalibrating development towards the retail segment and has put in place strategies to enable it take advantage of emerging opportunities in the segment.
According to him, despite the slow-down in the luxury segment, the Nigerian real estate market remained attractive as there were significant untapped potential in the residential category, and numerous opportunities in the retail, commercial and industrial segments of the market in the near term.
He explained that growth in the commercial segment has been driven by new investments in high growth sectors like retail, hospitality/tourism and telecommunications, while the spike in demand for residential housing is linked to population growth & rising income levels (emergence of middle class).
He disclosed that although real estate development activity was increasing in several states of the federation, demand and supply for commercial and residential properties remain more predominant in Lagos, Abuja and Port Harcourt.
The Nigerian stock market (equities category) has sustained its losing streak for three straight days, posting a N15bn drop in the Nigerian Stock Exchange market capitalisation.
A total of 196.469 million shares valued at N2.611bn were traded in 3,317 deals.
The NSE market capitalisation, at the close of trading on Thursday, dropped to N9.015tn from N9.030tn, while the NSE All-Share Index closed at 26,201.60 basis points from 26,245.34 basis points.
Amid persistent mixed trading across key sectors, the equity market traded lower as the NSE ASI shed 0.17 per cent. Meanwhile, global markets traded mixed ahead of European Central Bank’s decision on monetary policy rate (base interest rate held at zero per cent).
The banking sector and the oil/gas sectors swung into positive territory following gains in Ecobank Transnational Incorporated Plc, United Bank for Africa Plc, Total Nigeria Plc and Mobil Oil Plc, which shares appreciated by 4.23 per cent, 1.57 per cent, 3.34 per cent and 1.34 per cent, respectively.
The industrial goods sector closed 0.29 per cent lower, after closing relatively flat for three consecutive sessions, as five per cent loss in Berger Paints Nigeria Plc and 0.6 per cent loss in Dangote Cement Plc stocks outweighed 4.83 per cent gain in Cutix Plc and 0.6 per cent gain in Cement Company of Northern Nigeria Plc.
The consumer goods sector extended its year-to-date barren run as Champion Breweries Plc and Nigerian Breweries Plc lost 0. 42 per cent each and Nestle Nigeria Plc shed 0.40 per cent.
Market breadth turned positive with 20 advances and 19 declines.
“We expect the overall mixed sentiment (with a bearish bias) to remain the theme of the trading week. Hence, we foresee another tepid session on Friday (today),” analysts at Vetiva Capital Management said.
At Wednesday’s bond auction, the Debt Management Office sold N34.95bn, N74.90bn and N105.10bn, respectively on the five-year, 10-year and 20-year bond at respective yields of 16.8990 per cent, 16.9945 per cent and 16.9920 per cent.
Amid the liquidity mop up, the interbank call rate advanced by 250 basis points to 10 per cent. Meanwhile, at the foreign exchange interbank market, the naira spot rate depreciated by N0.25 while the one-year forward rate appreciated by N29 to close at N305.50 and N349, respectively.
At Wednesday’s Primary Market Auction, the CBN auctioned a total of N269bn across the 91 day-to-maturity, 182DTM and 364DTM bills at respective stop rates of 13.8999 per cent, 17.25 per cent and 18.6499 per cent (effective yields: 14.40 per cent, 18.87 per cent, 22.91 per cent).
Despite the mop-up, the Treasury bills market turned bullish as yields declined by 13 basis points on the average buoyed by healthy demand across board. Particularly, yields on the 133DTM, 196DTM and the 329DTM bills moderated to 16.95 per cent, 19.21 per cent and 20.94 per cent, respectively.
The bonds market, however, traded bearish as yields adjusted to auction levels. Notably, yields on the auction bonds – 14.50 per cent FGN July 2021, 12.50 per cent FGN January 2026 and 12.40 per cent FGN March 2036 rose by 30 basis points, 24 basis points and 23 basis points, respectively to settle at 16.79 per cent, 16.89 per cent and 16.87 per cent.
“Given the liquidity mop up, we expect mixed trading to persist at week close albeit with a bearish tilt,” the analysts noted.
The naira fell against the United States dollar at the parallel market to 498 on Thursday, from 497 on Wednesday.
This came hours after the Central Bank of Nigeria resumed dollar sales to Bureau De Change operators through Travelex.
Before dropping to 498, the naira had appreciated to 495/dollar early on Thursday.
The currency traded flat at 497/dollar consecutively between Monday and Wednesday.
Economic and financial experts said the resumption of dollar sales to the BDCs by the CBN through Travelex would help boost the naira.
The local currency has been under persistent pressure owing to scarcity of dollar in the economy.
Economic and financial experts are divided over the outlook of the naira and most economists believe the local currency would continue to fall against the greenback unless the CBN reviewed its monetary and foreign exchange policy.
According to an economic expert, Mr. Henry Boyo, the currency monetary policy framework adopted by the CBN is flawed and there is an urgent need for the central bank to jettison it for a framework that can take the country off the current economic challenges.
He stressed that unless this was done, the rising oil prices would not make the economy better.
Boyo said, “The oil revenue is not the problem; the primary cause of the oppressive dilemma is the distortional process the CBN adopts for infusing the dollar revenue into the domestic money market to drive economic growth.
“President Muhammadu Buhari must be disturbed that the naira exchange rate has suffered so poorly under his watch, particularly after he promised parity between the naira and dollar, if he won the election.
He added, “Unfortunately, the worst has yet to come, because, if crude oil price further rises while output remains favourable, the dollar will paradoxically spike well above N500/$1 and may approach N1000/$1 before December 2017!
“Any attempt to bridge the widening gap between official and parallel market exchange rates will devalue the naira and trigger a steep rise in fuel price to shoot inflation well beyond 20 per cent and make Nigerians poorer still.”
“We will continue to see reasonable volatility of the naira during the first half of this year. The fundamental issues underlying the volatility of the naira have not been addressed,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
According to Ezun, the naira will continue to depreciate at the parallel market while the CBN will keep managing the official rate around 305/dollar.
“It will depreciate further but there has been some resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity,” the Ecobank analyst added.
The Nigerian Stock Exchange (NSE) has approved the application of Portland Paints and Products Nigeria (PPPN)Plc to raise additional capital from existing shareholders via a right issue.
The company had last September applied to the NSE that it would issue 600 million ordinary shares of 50 kobo each at N3.30 per share on the basis of three new shares for every two shares already held to shareholders.
However, the NSE has approved the application at an issuing price of N1.70 instead of the N3.30 initially proposed by the company. With the new price, PPPN will be raising about N1.020 billion from the right issue.
The Chairman of PPPN, Mr. Larry Ettah last year gave indication of the right issue when he told the shareholders at the company’s s annual general meeting that it would raise additional capital in pursuit of its plan to improve returns and address the high leverage position of the company and other business expansion plans.
“We will apply the planned rights proceeds to minimise the debt exposure risks of our business as well as carry out targeted expansion in our operations. The business will focus on its growth brands as well as make the necessary investment in marketing to improve its brands’ awareness and visibility,” Ettah said.
According to him, the company commenced a process of restructuring the business focusing on internal efficiencies and reviewing our route to market model in a bid to ensure that we build a sustainable future for the business.”
He had assured that despite the challenges and risks posed by the business environment, the company, whose flagship brand is Sandtex, would continue to consolidate on the restructuring and seek growth opportunities to deliver returns to the shareholders.
He disclosed that the company would focus on innovation and seek opportunities to introduce new products into its array of brands as it pursues increased profitability.
PPPN recorded 159 percent growth profit after tax in 2014 to N148 million, from N57.3 million in 2013. However, the company did not pay dividend because it was conserving funds to finance its expansion and business re-engineering process. Meanwhile, the equity market declined further yesterday with the NSE All-Share Index declining by 0.17 per cent to close at 26,201.60.
The Governor of Central Bank of Nigeria, Mr Godwin Emefiele, yesterday offered insights into the prevailing economic crisis in the country, explaining that it was caused by the nation’s failure to diversify the base of its economy.
The CBN chief, who spoke in Abuja at the Annual Media Trust Dialogue, with the theme, “Beyond Recession: Towards a Resilient Economy,” also defended the monetary policies of the apex bank, saying they were made in the best interest of majority of Nigerians.
Panelists at the dialogue had come down heavily on the central bank’s monetary policies, arguing that they weighed heavily in favour of the few rich in the country. They were particularly critical of its forex policy which allocates 60 percent of the nation’s forex to the manufacturing sector that they said accounts for only 10 per cent of the Gross Domestic Product (GDP).
At the parley were other prominent Nigerians, including the Speaker of House of Representatives, Hon. Yakubu Dogara; Minister of Finance, Mrs. Kemi Adeosun; a former minister of Petroleum Resources, Chief Philip Asiodu; and the Chairman, Standard/IBTC, Mr. Atedo Peterside, who all proffered solutions to the nation’s biting economic hardship.
But Emefiele said the panelists’ perception of the CBN policies was wrong, submitting that the “policies were put in place to help Nigeria pull through the hard time.” He said the forex policy was meant to stimulate the economy at a time of acute scarcity.
He explained that the country found itself in the present situation due to lack of appropriate commitment to economic diversification, especially when the earnings from oil were as high as $140 per barrel, just as he noted that earnings of the government had risen to as high as $3.2 billion and fell to about $500m per month recently. According to the governor, there was also a time when the crude oil price stabilised at $105 per barrel over a period of five years.
“What did we do with the huge accretion to the reserves then?” he queried yesterday. Emefiele therefore, counselled critics of the CBN and government policies that “priority will be given to Nigerian masses by managing the limited resources to provide for industrial raw materials, plants and equipment and agricultural inputs in order to create employment and generate wealth.”
One of the panelists, Mr. Atedo Peterside, had raised concern that the foreign exchange policy of the CBN was hurting business interests to which the CBN Governor responded that policy makers don’t make policies in isolation or are designed to hurt the citizenry but with the objectives to improve the life of all concerned and not just for a few powerful and rich individuals.
Many of the speakers at the dialogue, however, suggested radical and bi-partisan measures to build a vibrant economy.
They recommended that for the nation to overcome the recession and begin a trajectory of sound economic growth, it must, among others, go back to the era of rolling plans, embark on massive infrastructure development, and align fiscal and monetary policies efficiently.
In his opening remarks, Asiodu who was the chairman of the occasion, embarked on a historical journey, tracing the nation’s present economic stagnation to the abandonment of development planning.
He recalled that in the early ’70s, the Yakubu Gowon administration had a comprehensive development plan, which was jettisoned when former President Olusegun Obasanjo emerged as military head of state in 1976.
He recalled that successive administrations also abandoned development plans until the late Gen. Sani Abacha enunciated a broad economic plan, encapsulated under Vision 2010.
According to him, by 1998, all the institutions to galvanise efforts towards implementing the 2010 blueprint were already put in place by the Abacha administration.
That blueprint, he regretted, was also jettisoned by the civilian administration under former President Obasanjo in 1999.
Asiodu noted that the President Goodluck Jonathan government was to come up with Vision 2020 and the Transformation Agenda, which were not implemented to the letter.
He lamented that the lack of political will and commitment to pursue and implement development plans by past administrations set the stage for the deterioration of infrastructure, and brought the nation to the current economic quagmire.
Asiodu observed that in the first republic, Nigeria was at par with the Asian Tigers growth-wise because there were workable development plans. He said it was wrong to look at the economic recession from the standpoint of oil and the precipitous fall in the price of the commodity.
Asiodu, who was also a former Chief Economic Adviser to former President Obasanjo, said the fall in the price of oil was not the cause of the nation’s problem, arguing that many African countries without oil were doing well.
He called for a national income policy, and underscored the desirability of such a policy with a flash back to when he was in government.
In her presentation, the Finance Minister, Mrs. Kemi Adeosun, noted that lack of infrastructure had held the country down for too long, regretting that an abysmally low investment on infrastructure had been a trend over the years.
Adeosun lamented that the previous administrations missed the opportunity of investing massively on infrastructure, which she described as the bedrock of economic growth and development, when oil prices were very high.
She also debunked views that Nigeria is an oil economy, describing the notion as erroneous. According to her, with a daily oil production of 2.2 million barrels of oil per day (mbpd) for a population of about 180 million people, compared to Saudi Arabia’s 10 mbpd for a 30 million population, Nigeria cannot be described as an oil economy.
The minister stated that poor investment on infrastructure, corruption and inability to foresee the future when oil prices were high led to the current economic recession.
She noted that the present administration was desirous of navigating the country out of past mistakes and launch it into a sustainable economic growth, anchored on massive infrastructure. Investment in infrastructure, she noted, was the key to the nation’s industrialisation.
In his presentation, the Chairman of Stanbic IBTC Bank, Mr. Atedo Peterside observed that while the present administration was doing some things right, it was equally taking many wrong steps, noting that there was a reluctance on the part of the government to break away from the past.
According to him, the Buhari administration has just this year to make an impact on the economic landscape and the general well-being of the nation as politicking would dominate the scene from 2018.
He listed some of the challenges of the administration as the inability to take bold, holistic and audacious approach to harmonise fiscal and monetary policies to attain sound economic outcomes.
Peterside said the government’s monetary and economic policies were at best unclear, citing the existence of multiple forex regimes and half-hearted policy on deregulation, among others.
On what he listed as 11 items he considered as the grey areas that government did not do well, he said not resolving the Niger Delta agitation expeditiously was a major undoing, which had dire economic consequences for the country.
That, he said, led to a $6 billion monthly revenue loss, even as he picked hole in the lack of will for the full deregulation of the downstream sector. He also pooh-poohed the CBN forex policy, particularly its directive to the banks to allocate 60 per cent of their FX resources to the manufacturing sector.
Peterside said it was wrong to allocate 60 per cent FX to a sector that accounts for about 10 per cent of GDP and leave a mere 40 per cent to all the other sectors, adding that it engendered a huge distortionary trend, created panic in the system and led to the disappearance of forex inflows.
He also stated that shying away from the political restructuring of the nation was a serious mistake on the part of the government adding that irrespective of how unpalatable the concept might sound to some people, it was a necessity.
While calling for an open mind on the issue, Peterside, who punctuated every point with “because I love my country,” noted that less than 25 per cent of the nation’s 36 states were economically viable.
In his keynote address, the Speaker of the House of Representatives, Hon. Yakubu Dogara, said he was optimistic the economy would come out of the recession soon, adding that the National Assembly was collaborating with the executive to turn the economy around.
He regretted that lack of development plans was the nation’s bane, adding that wasting resources to plan and not implementing such plans was wrong.
Dogara noted that while the federal government was tackling terrorism, it was disturbing that other security challenges, including armed robbery, kidnapping and other vices were on the prowl. He regretted that attracting Foreign Direct Investment (FDI) would be difficult in such an atmosphere.
For the nation’s capital market to make some reasonable level of recovery in 2017, stakeholders have charged directors of listed firms to streamline their business operations through backward integration strategies.
Quoted firms were encouraged to seek viable local content opportunities and indigenous production of commodities to solve problems emanating from inflationary pressures for guaranteed return on investment.
It is believed that if listed companies looked inward and source their materials locally, they would also develop smallholder farmers along the business chain and other rural traders in the long term.
Again, it would reduce, to the barest minimum, the exchange rate volatility and depreciation, which hurt economic performance by contracting output growth and inflation. Stakeholders, who spoke in an interview with The Guardian, linked part of the lull in the nation’s capital market to the failure on the part of companies’ board to initiating good policies that would help the management to drive the business. Indeed, they suggested that listed firms must adopt 100 per cent local sourcing of raw materials, noting that over dependence on foreign raw materials and exposure to foreign exchange has unfortunately, subjected firms to the vicissitudes of the Nigerian economy.Furthermore, they believed that local production would improve the performance of the listed companies and reflect on their share prices on the Nigerian Stock Exchange (NSE).
According to them, some board of directors have continued to invest on failing businesses that would never yield any dividend.For instance, the Managing Director of Trust Yield Securities, Rachidi Yusuf, explained that operators have adopted new measure to encouraging local production, firms by identifying local companies they can give necessary financial advice.
“We are encouraging local production, we are identifying local companies that we can give the necessary financial advice, financial back up and grow them to a level that you can encourage them to come and get listed on the stock Exchange.
“Most of these companies are having problems because of over dependence on foreign exchange either for their raw materials or technology and because there is shortage of foreign exchange, that is affecting them negatively.
“Since we are not sure when the resolution of that shortage will be, we are saying let them start looking inwards and a number of companies have started looking inwards they are now beginning to source their material locally and produce locally.
“Those kinds of companies we would start identifying them and encourage them to come to the exchange to get more companies producing what is needed by Nigeria.”The President, Independent Shareholders Association of Nigeria, Adeniyi Adebisi, submitted that if companies remain low performing or moribund for a number of years on end, the question needs to be asked what the directors and management of such companies are doing to turn the fortunes of their companies around.
“What has been observed is that many of those in authority of these companies seem complacent, and satisfied with enjoying the benefits of their offices not minding the fact that shareholders who are not within their circle are not receiving anything.
“Personnel in this category should realize that the main purpose of their enterprises is to manage the resources put under their care to make profit and declare dividends to their shareholders.
“Any board of directors and its management that cannot achieve this over a period of time should be removed. Where it is discovered that major shareholders are colluding with others to hold down their company with complacency and inefficiency, other shareholders, especially the small shareholders should make things uncomfortable for such board by insisting on effecting a change.
“There are provisions in the Companies and Allied Matters Act that protect the interests of minority shareholders in this aspect.“Companies that ‘chant’ ‘harsh economic environment’ year in year out as excuse for their inability to make profits and declare dividend to their shareholders should be viewed as suspects,” he added.
The National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie, lamented that some stocks have remained at par value since the last few years, adding that these stocks have not in any way benefited the shareholders in terms of profitability which will manifest in dividends payment. He pointed out that most of the stocks at par value have failed to reward investors for several years. Therefore, there is no incentive to demand for them amidst competition from other good performing stocks
He noted that most insurance stocks fall under the category of non-performers, even as their condition worsened due to over exposure to the capital market during the meltdown.Okezie added that the time is ripe for listed companies that were yet to return to profitability to seek other investment options that would enhance growth.
The Nigerian Stock Exchange (NSE) All-Share Index fell by 0.13 per cent to close lower at 26,245.34 yesterday as the bears extended their control on the market. The equities remained under sell pressure towards consumer goods and oil and gas counters, leading to a decline of N11.3 billion in market capitalisation to close at N9.03 trillion.
The market had slipped into the bears’ territory on Tuesday, depreciating by 0.36 per cent following losses by highly capitalised stocks.
At the close of trading yesterday, the NSE ASI shed 0.13 per cent as stocks such as Forte Oil, Guinness Nigeria, Unilever Nigeria, Nestle Nigeria and Zenith Bank went down in value. A total of stocks shed weight compared with only 12 counters that appreciated. Guinness Nigeria Plc and Portland Paints and Products Nigeria Plc led the price losers with 5.0 per cent apiece to close at N63.65 and N1.71 respectively.
Diamond Bank Plc shed 4.8 per cent, just as Unilever Nigeria Plc and Transcorp Plc declined by 4.2 per cent and 3.3 per cent in that order. United Capital Plc lost 3.1 per cent as investors locked in profits recorded by the stock recently, closing at N3.39 per share. Other losers were: Neimeth (2.7 per cent); WAPIC Insurance Plc (1.8 per cent); Forte Oil Plc (1.8 per cent), Cadbury Nigeria Plc (1.4 per cent).
Cadbury will get a new managing director at the end of this month in the person of Mr. Muhammad Amir Shamsi. He will be replacing the current MD, Mr. Roy Naaman who was two years to reposition the company for better performance. Cadbury Nigeria Plc had hoped to consolidate its market share and tap into other expanding markets in West Africa with the appointment of Namaan.
However, Cadbury has not made significant progress since 2015. For instance, the company posted a decline of 46 per cent in profit after tax in 2015. Specifically, Cadbury Nigeria recorded a revenue of N27.825 billion for the year ended December 31, 2015, showing a decline of nine per cent from N30.518 billion, while profit after tax stood at N1.153 billion in 2015, down by 46 per cent to N2.137 billion in 2014.
The company is heading towards a dismal performance in 2016, having posted a loss for the nine months ended September 30, 2016.
Apparently weighing in on the current desperation by Nigerians to invest in the growing trend of Ponzi schemes, promising mouth-watering profits, the Central Bank of Nigeria (CBN) has warned Nigerians against the use of virtual currencies, including bitcoin, ripples, litecoin.
A statement issued on Tuesday by the CBN monitored on The Cable stated that virtual currencies are largely used in terrorism financing and money laundering, considering the anonymity of virtual transactions.
“The attention of bank and other financial institutions is hereby drawn to the above risks and you are required to take the following actions actions pending substantive regulation or decision by the CBN,” the statement read.
“Ensure that you do not use, hold, trade and/or transact in any way in virtual currencies. Ensure that existing customers that are virtual currency exchangers have effective capital AML/CFT controls that enable them to comply with customer identification, verification and transfer, monitoring requirements.
“Where banks or other financial institutions are not satisfied with the controls put in place by the virtual currency exchanger/customers, the relationship should be discontinued immediately. “Any suspicious transactions by these customers should immediately be reported to the Nigerian Finance Intellignece Unit (NFIU).”
The apex bank said anyone trading in bitcoin is doing so at his or her own risk. “The CBN reiterates that VCs such as bitcoin, ripples, monero, litecoin, dogecion, onecoin, etc., and similar products are not legal tenders in Nigeria.
“Thus, any bank or institution that transacts in such businesses does so at its own risk.” Bitcoin was the best performing currency of the year 2016. It has appreciated from four cents in 2010 to over $1,000 in 2017.
The CBN’s warning may have been provoked by an online website, Mavrodi Mondial Moneybox popularly known by its over 2m subscribers as MMM which recently posted a message on its site intimating its customers that it may be adopting the bitcoin in future transactions.
It a statement posted under the heading: MAVRO-50% IS AVAILABLE WHEN YOU PROVIDE HELP IN BITCOIN, the online website hinted that “From now on, there is an opportunity for all of the participants of MMM Nigeria to acquire Mavro-50% when you provide help in Bitcoin.
“Mavro-50% work under the same rules as Mavro-30%. For example, all bonuses are rewarding to them according to the normal procedure. Bitcoin is an international digital currency. Bitcoin transactions take a few seconds and the transaction fee is charged very low ($0.05).
“Bitcoin does not belong to any government, companies or particular persons, which allows you to be independent from the banks and to manage your money as you want. MMM and Bitcoin strives to beat social inequality and to make the world more fair. With the help of Bitcoin MMM participants can provide financial help to each other worldwide,” it concluded.
The Securities and Exchange Commission has commenced the Risk Based Supervision (RBS) model with the aim of establishing a more robust regulatory framework for the capital market, THISDAY gathered on Monday.
This comes as the commission has also approved a framework for the regulation of systematically Important Financial Institutions (SIFI) in the Nigerian capital, Abuja. The commencement of the RBS model followed the approval by the Minister of Finance, Mrs. Kemi Adeosun.
THISDAY had last week reported the imminent commencement of the RBS framework. While the RBS framework will be for all capital market operators (CMOs), the framework for the SITI is targeted at systemic non-bank financial institutions that are under the regulatory purview of the SEC, whose failure could cause contagion effects and significant disruptions to the wider Nigerian financial system.
It was gathered that in identifying a systematically important operator, SEC would enhance its regulatory supervision through on-site inspections to monitor the compliance level of operators. On the other hand, SEC had said in recognition of the importance of RBS, and to align its oversight functions with global trends and the guiding principles of the International Organisation of Securities Commission (IOSCO), it has adopted RBS into its supervisory process. This is to ensure that regulatory oversight is more effective, investor protection is advanced and systemic risk is mitigated.
Before now, the commission had operated the class minimum capital requirement for operators. Under the class minimum capital requirement, the commission set minimum capital requirements for all capital market functions without giving much consideration to the assets size and inherent risks.
As part of the adoption process, a RBS framework has been developed to serve as a guide for staff of its inspectorate division and would apply to the prudential supervision of all CMOs. This framework is a dynamic working document that will be reviewed on a regular basis and as the need arises to ensure that it remains relevant in achieving the supervisory objectives of the SEC. A market operator told THISDAY on Monday that under the RBS, SEC would consider key principles that are fundamental to the process.
“Sound supervisory and predictive judgment in identifying and evaluating risk is considered fundamental to the effective application of this framework. Capital market operators (CMOs) would be conducted on a consolidated basis, including subsidiaries and all related entities of the CMOs,” the operator said.
It was also gathered that the intensity, scope and frequency of supervisory scrutiny will depend on the composite risk rating of a CMO.
Also, the RBS highlights a risk assessment summary which would indicate the risk profile of a CMO and would serve as the basis for allocating regulatory resources for ongoing monitoring and supervisory efforts.
