CBN’s top policy engagements in 2021

From the declaring companies trading on crypto-currency as illegal, to the launch of Nigeria’s digital currency, eNaira, and the introduction of the 100-for-100 PPP, the outgoing year, 2021, saw many policies of the Central Bank of Nigeria (CBN) that changed, shaped or redefined the Nigerian business environment. In this report, NCHETACHI CHUKWUAJAH takes a look at some of them.

Declaring crypto trading as illegal           

IN February, 2021, the Central Bank of Nigeria (CBN) directed that Deposit Money Banks, Non-Bank Financial Institutions and Other Financial Institutions to close the accounts of individuals or institutions engaging in the trade of crypto currencies.

CBN governor, Godwin Emefiele, had said that such accounts were conduit pipes used to facilitate terrorism financing, illegal financial flows, money laundering, scams, etc.

The CBN was granted its request by a Federal High Court, to freeze the accounts belonging to some technology crypto-trading platforms that offered foreign and local stocks for 180 days pending the completion of investigations on their dealings.

The apex bank had alleged that the companies, which include; Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited, and Trove Technologies Limited were complicit in operating without licence as asset management companies “and utilizing FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of the CBN circular referenced TED/FEM/FPC/GEN/01/012, dated July 01, 2015.”

 

CBN’s Naira-for-Dollar initiative

In order to boost diaspora remittances to the country, the CBN introduced an incentive called ‘Naira-4-Dollar Scheme’ in March, 2021. The initiative ensured that for every $1 received through the CBN’s licensed International Money Transfer Operators, N5 is paid.

The initiative was aimed at shoring up the country’s foreign exchange (FX) inflow.

 

The BDC operators-CBN debacle

Towards the end of July, 2021, the CBN governor, Godwin Emefiele, at the end of its Monetary Policy Committee meeting, announced the bank’s decision to halt the weekly allocation and sale of FX to Bureau De Change operators.

Emefiele had said the BDCs wee frustrating the bank’s efforts to maintain the country’s FX reserves by going contrary to their primary objective of selling dollars to retail end users who need $5,000 or less to charging exorbitantly for dollar exchanges, therefore creating artificial scarcity.

He accused BDC operators of being facilitators of graft, illicit financial flows and money laundering through their operations.

“We have noted with disappointment and great concerns that our Bureau De Change operators have abandoned the original objective of their establishment which was to serve retail end users who need $5,000 or less. Instead, they have become (illegal) wholesale dealers in foreign exchange to the tune of millions of dollars per transaction.

“Despite the fact that Nigeria is the only country in the world today where a central bank sells dollars directly to Bureau De Change operators, but the operators in the Nigerian Bureau De Change segment have not reciprocated the bank’s gesture to help maintain price stability in that market.

“Given this behaviour, it is not surprising that since the CBN began to sell foreign exchange to Bureau De Change, the number of operators has risen from a mere 74 in 2005 to over 2,700 in 2016 and almost 5,500 BDCs as of today (July 27, 2021),” Emefiele had said.

The CBN governor also warned that the CBN would not hesitate to sanction any bank found complicit in facilitating illegal forex dealings with BDC operators.

In July, the Naira sold for N505 to a dollar in the parallel (black) market but has reached an all-time high of between N565 and N570 as at December, 2021.

 

Banning of Aboki FX

Following the stoppage of sales of forex to BDC operators was the CBN’s clampdown on the operations of Aboki FX, a website that collates and publishes exchange rates in the parallel (black) market in Nigeria.

Emefiele had said that the owner of the website, Mr Adedotun Oniwinde of using the website for “illegal activity that undermines the economy.”

The CBN governor said by living in England and making predictions of exchange rates in the country, Aboki FX was putting undue pressure on forex and further devaluing the Naira.

“He is a Nigerian, living in England; we will track him, Mr Oniwinde. We will track you. We cannot allow you to continue to kill our economy.” the CBN governor added.

As a result, the management of Aboki FX, in a statement, announced its decision to suspend publishing of exchange rates and debunked the allegations against its director by the CBN.

“All allegations against our director are yet to be confirmed but we at AbokiFX DO NOT trade FX nor do we manipulate parallel market rates,” the statement read.

“Outside the media allegation, we have not received any communication from any government body and our accounts are not closed as stipulated in the media. We sincerely hope this suspension will lead to the Naira appreciation from next week.”

 

Launch of eNaira

In October, 2021, the CBN launched the Central Bank Digital Currency (CBDC), eNaira, which is a digital equivalent of the physical naira.

At the launch of the eNaira, President Muhammadu Buhari said the CBDC has the capacity of increasing the country’s Gross Domestic Product by $29bn dollars over the next 10 years.

The CBN said the digital currency would drive financial inclusion, strengthen electronic payment in the country and enhance movement of people from the informal to formal sector.

A statement on the eNaira website said, “eNaira is a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira. eNaira serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments.”

The CBDC, which has the eNaira speed wallet and eNaira merchant wallet, was launched and Google playstore and Applestore after four years of incubation. The App saw over 600,000 downloads in less than four weeks after it was launched, according to Emefiele.

“In less than 4 weeks since its launch, almost 600,000 downloads of the e-Naira application have taken place.

“Efforts are ongoing to encourage faster adoption of the e-Naira by Nigerians who do not have smartphone,” Emefiele had said at the 56th Chartered Institute of Bankers of Nigeria (CIBN) Annual Bankers Dinner in November, 2021.

 

CBN’s 100 for 100 PPP

Still in October, the CBN introduced a new financial instrument, 100 for 100 PPP (Policy on Production and Productivity).

The policy is designed to financially support 100 targeted private sector companies every 100 days beginning from November 1.

Under the scheme, companies can apply for loan of up to N5bn while loan application higher than N5bn would require approval from CBN’s management.

The CBN said the initiative was aimed at providing long term loans to companies to acquire machinery, plant and working capital.

“Quarterly, starting from November 1, 2021, the initiative shall select 100 private sector companies with projects that have potential to significantly increase domestic production and productivity, reduce imports, increase non-oil exports, and overall improvements in the foreign exchange generating capacity of the Nigerian economy.

“The initiative, which shall be bank-led, will be rolled over every 100 days (that is, quarterly) with a new set of companies selected for financing under the initiative,” the apex bank had said.

It said interest rate under the intervention would be at not more than five per cent per annum (all inclusive) up to February 28, 2022, adding that interest on the facility would revert to nine per cent per annum (all inclusive) effective from March 1, 2022.

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