QUES: Does the political authority support the CBN’s decision on BDCs and the FOREX allocation?
EMEFIELE: It is important to know that the CBN, in line with the CBN Act, has a mandate to monitor the market and ensure financial systems stability.
Other than price and monitoring of market stability, the CBN’s mandate includes to ensure the country’s reserve is maintained as well as the exchange rate.
So, it is CBN’s primary role ascribed by law that we are doing what we are doing.
Nigeria remains one and only country whose central bank is selling FOREX to BDC operators. We have, as a result of requests and pressures, continued to do this to see that those who operate in this market are able to do so, because we see an opportunity to create business for them. The CBN believes as long as they do this not only for their benefit, but for the benefit of the economy, we should continue to support this initiative.
But we have become very disappointed and concerned about the activities of the BDC operators in Nigeria.
The CBN is unhappy about it, because rather than being supportive, in line with the original objective, which was to sell dollars to people who immediately need about $5000 to travel, they have turned themselves into agents that facilitated graft and corruption in Nigeria.
We believe that this cannot be tolerated. The CBN has also been awash with complaints about the modus operandi of BDC operators, and it’s becoming so disgraceful that we felt at this stage we have to take a decision.
The MPC deliberated extensively on this. This is an issue that even the political authorities have engaged the CBN on it, and we tried to see how we can defend the BDC operators.
Put bluntly, even our leaders who constitute the political authorities, have raised concerns about the modus operandi of BDC operators in Nigeria.
The CBN did its best to defend them; to see that they play certain roles in the economy. At this stage, we can no longer continue to defend them.
The political authorities themselves have long sought that this should stop.
Now that we have reached a point where we can no longer continue, because of the illegal activities, particularly money laundering, graft and corrupt tendencies perpetrated by players in the BDC segment of the economy, we believe that this can now stop, and we would stop henceforth.
We know that there are people who, legitimately, under certain pressures, would approach the BDCs to buy dollars to travel and pay medical bills and stuff.
The CBN is saying that those dollars it has been selling to BDC operators, customers do not have to go there again.
Customers should go to their banks, provide them with minimal documentation, they will attend to them.
Indeed, they would transfer the money electronically. They do not have to give cash to customers, in line with the CBN’s cashless economy policy.
We cannot be talking about cashless policy in Naira and not supporting cashless policy in dollars.
An attempt was made to dollarize our economy. We cannot continue to allow it.
So, when we talk about the pressure on exchange rate of the Naira, it is not by people who used it legally to do business, like paying medical bills, school fees and not to perpetrate graft and corruption.
Customers are advised to go to their banks, and the bank would take their documentation and do the transfers for them. They do not need the BDCs, given the fact the CBN is so disappointed in them, and we cannot continue with that practice.
We have said so in four or five MPC meetings ago that what happened in the FOREX market, where the operators are perpetrating graft and corruption, and exchange of bribe money, cannot be tolerated.
Instead of taking Naira in big bags and choose to collect dollar in small bags, the CBN would not facilitate that for customers again. This is not what the CBN should support. That is why we have taken this position.
QUES: Digital currency roll-out, how prepared is the CBN?
EMEFIELE: Yes, the CBN is on it. Digital currency is what central banks all over the world provide as an alternative to the current money arrangement.
What the CBN is saying is that if a customer has some Naira in his or her account, he or she can convert part of that into his or her digital money wallet by way of digital currency.
The CBN would support that. When it starts, CBN would move some of the balances of banks with the CBN to those banks in digital currency.
If one has N10 million in the bank, one can move N2million into a digital currency, by asking the bank to debit one’s account and move the value of N2million into one’s digital wallet for one to spend across countries.
The CBN thinks that this is a noble idea. We are not the first to do this. We know of the BBOC in China has unveiled theirs, and many other central banks in the world are at various advanced stages of unveiling their digital currencies.
Our own digital currency, which is 5BNaira will soon come into operation by October. We are working very hard to realize this.
The objective is that as a payment system we believe that transactions would be cheaper and more efficient.
On digital economy, the Nigerian economy, just like the rest of the world, is going digital, and cash cannot play in that space.
Therefore, e-Naira, which would represent the equivalent of cash, would be used as the fiat currency to effect transactions.
In the area of facilitating monetary policy transmission, the CBN believes the rise of private digital money, such as Facebook PM and others, would mean less visibility to the amount of money in the system, and the inability of monetary authorities to properly pursue monetary policy decisions.
Of course, in terms of financial inclusion, the CBN believes that with over 30 percent of banking adults still outside the financial system, the ability to have all payments through the CBN’s e-Naira initiative would bring most of them into the formal financial sector.
QUES: How ready is the CBN?
EMEFIELE: The use of cash in transactions is declining everywhere in the world, including Nigeria. With the advent of digital currency and digital commerce, which are booming in the country, more and more people would follow in adopting the use of electronic money to facilitate digital commerce.
So, the CBN’s e-Naira is the digital representation of cash, which means as a fiat currency, it would be just as widely acceptable as the physical currencies.
We recognize the need for wide stakeholder engagement, to create awareness on the use of e-Naira as alternative to cash, to further drive towards a cashless society.
We have made advanced progress on our digital currency initiative. We have already appointed BITs Incorporated as our technical partner. They were selected out of ten other solution providers based on their performance during a rigorous evaluation process on diverse criteria, including technology ownership and control, implementation timeline, efficiency, ease of adoption, support for platform security and implementation experience.
The CBN is very confident that BITS Incorporated has all that is needed to qualify them to be our partner. I am very sure the CBN would be making good progress here.
QUES: The update on cryptocurrency
EMEFIELE: Let me say that the Nigerian economy is big enough to accommodate choices Nigerians make with regards to how they want to transact their businesses.
The e-Naira is being introduced to complement the existing types of monies and not to replace them.
Cryptocurrencies are private monies, which are not regulated by any regulatory authority. Therefore, using them is the individual’s own decision.
If a person decides to use them, it means he is taking his or her risk. If the person makes his money, the CBN will wish the person good luck. But if the person loses his money, the CBN would laugh at him.
For the CBN, the instructions and directives have been passed to the banks that they cannot use their banking and payment systems and infrastructure to allow cryptocurrency agents or users to carry out their transactions.
That policy remains in place. I am not sure the CBN is about to change that policy.
QUES: Stability of the banking system?
EMEFIELE: On deposit money banks showing signs of distress, let me say that all those social media messages going round are all fake news.
The CBN is currently doing everything possible to trail those who are determined to create problems, to create banking system instability.
We are determined to unravel who they are and bring them to the public when we find them.
But let me say that the strategic health of the Nigerian banking industry remains very strong.
For instance, at the MPC meeting, data were provided to the members to review the financial soundness indicators of the Nigerian banking industry.
Capital adequacy ratio (CAR) averaged 15.5 percent for the National banks against the 10 percent they are meant to have.
For the international banks operating with international licenses, they are supposed to have about 15 percent. If one has an average of 15.5 percent, the CBN believes the capital adequacy rate of the Nigerian banking industry is well capitalized and can meet any shocks if they arrive.
Also, non-performing loans ratio today stands at 5.7 percent. The prescribed maximum is 5 percent.
Given that this a time when there is global economic crisis, if our banking industry has 5.7 percent NPL rate, instead of 5 percent, I think its an indication of our sound banking system.
Again, liquidity ratio for the banking industry today is 41.3 percent, against a minimum of 30 percent. If the banks have an average of 41 percent, this is another indication of a sound liquidity in the banking system.
Total assets of the banking industry rose from N37.8 trillion in May 2019 to N56.3 trillion today as at June 2021.
Total deposits in the banking industry increased from N22.8trillion in May 2019 to N33.853 trillion in June 2021.
Gross loans have grown from N15.4trillion in June 2019 to N22.04trillion in June 2021.
NPL ratios have dropped from a high of 11.17 percent in May 2019 to 5.7 percent in June 2021, against a maximum threshold of 5 percent.
I wish to appeal to the members of the banking public to go about their banking businesses in any bank of their choice.
The CBN is monitoring the banks. When it finds some weaknesses in some banks, the CBN would target the shareholders.
We have always told the bank shareholders and insiders that they don’t own the banks alone.
The CBN analysis shows that the balance sheet of an average five-year old bank, the size of the deposit is almost ten times the shareholders capital of those banks.
So, if you ask me who owns the banks? I will say it is the depositors that own the banks and not the shareholders.
The shareholders have the fiducial responsibility they have to perform. But, where the CBN finds them wanting, they would be taken out for the banks to survive and depositors don’t lose their money.
QUES: Update on INFRACORP status
EMEFIELE: Yes, I made a commitment that before the end of the second quarter of 2021 that INFRACORP would take off.
The update is that it takes a process to set up an infrastructure corporation that is meant to raise about N14 trillion, plus N1trillion equity from the equity owners, in line with the world global practice standards.
The process starts with appointing the transaction adviser, which has already been done. KPMG is our transaction adviser.
Then, the appointment of asset managers, which we have just done.
We expect that in the course of this week we will advertise the appointment of the CEO and the Chief Investment Officer of the INFRACORP, who has to be a world class person who understands infrastructure, financing infrastructure business.
We want a well-respected person. We are not going to take just any person, to make sure we get it right.
If we get it right, then it would be easy for us to raise N15trillion, so that we can go for another phase.
Let’s not forget that the Nigerian Infrastructural deficit is so wide that N15 trillion would be considered to still be a drop in the ocean.
That’s why we must get the first step right, so that the world would welcome us when we go for the second, third and fourth outing.
QUES: Update on providing credit to small and medium enterprises.
EMEFEIELE: At the lecture in the University of Lagos, I was lamenting the gap between theory and practice. True, why should we have people who studied agricultural economics or science from the university, yet we cannot feed ourselves. Yet we say Nigeria has a lot of agricultural potentials, and people have a degree in agricultural economics and science, extension services, yet they do not know the basics or owning a farm. We are saying that if one is a graduate of agriculture, for instance, the CBN would like to work with universities to say that with the vast land that they have, the CBN can support them to see how the student can own small farms before graduating. They can conduct research about seedlings or type of fertilizers and other inputs that could be put in a small piece of land that can give the highest possible yield or output.
I repeat this is the time for this to happen. As a result of COVID-19 every country has closed up. We have got to a point where people that produce drugs held on to their drugs; people who could produce food, held back their food.
How could a country with a population of 200 million people survive? That is the reason the CBN is determined and saying if accessing credit is the problem, the CBN would solve that problem for those with the capacity to go into agriculture.
All we need is a commitment and dedication to ensure that when a loan is taken, it would be paid back.
Between that lecture and now, CBN has sent its development finance officers to all the universities and met with the committee of VCs and have assessed the need based on which a framework to support the initiatives of the universities is being worked out.
Its not about agriculture alone. We talked about Pharmacy. Why should a Pharmacy graduate come out of school and become just a drug dispenser and cannot even produce common sanitizer?
We will seek to provide our youth with entrepreneurship programme. The CBN does not mind if what it has to do is to collaborate with the university and NYSC and say: We will seize your degree and NYSC certificate and keep them as collateral and give you money to go into farming, Pharmacy, or do research that would help or country; that would help create job for yourself and others.
That is what we need. CBN is talking about developing the entrepreneurial skills in our young people. Agriculture today in Nigeria is the most profitable business one can imagine to go into today.
There are people who CBN gave loans to under its Anchor Borrowers programme (about N10billion). After that, we bought their produce and repayment of their loans.
After that we gave them extra, in some cases more than N10 billion as cash to put in their businesses.
So, why would you as a youth sit down and be looking for job when your entrepreneurial skill can be developed.
That is why we are saying we must bridge the gap between what you study in school and what you want to do, so that when you graduate, you can practice what you studied, because your entrepreneurial skills have been developed.
That is what the CBN is doing. The framework will soon be out. It is a programme the CBN is very excited about. We are hoping that our universities would embrace this for the good of our country.
QUES: Inflation figure and hope of prices going down
EMEFIELE: Yes, the inflation rate dropped from 17.93 percent in May to 17.75 percent in June.
When you say rate of inflation, means prices are growing up. Only that in this case, the rate of increase is decelerating. We are praying and hoping that we can get to a point we are not talking about inflation, but deflation, even though I have not seen that before. But at least we are making progress to say that the rate of increase in prices is reducing.
The CBN data supports the fact that it is reducing. In fact, we are unhappy that the rate is slow, with inflation rate dropping from 17.93 percent to 17.75 percent. This is not a fantastic reduction. Which means one would be right to say that prices are still high. But we must all work together to see that it comes down very very fast.
QUES: CBN intervention in targeted credit facilities
EMEFIELE: CBN intervention in targeted credit facilities, particularly in the health sector has done well.
We will recall that even the MPC itself identified the fact that through intervention facilities, CBN has seen its own objective of price monitoring stability being achieved.
The MPC has encouraged the CBN management to do more. So, we will continue to do this. But we would appeal to all Nigerians that when one takes money as loan, use for good reasons and pay back.
It is not national cake, nor a grant. It is a loan, which one must pay back. Let me warn, if you think you took the money you would not pay back under some king of funny arrangement, you will pay back. The CBN has your data. We know where you are. We will find you. So, use the money for a good purpose and pay back so that others can also have a chance.
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