• Fri. Jun 9th, 2023

    INTERVIEW: How e-Naira digital currency will work – Emefiele

    ByBassey Udo

    Sep 20, 2021


    Update on activities of BDCs

    The only exchange rate the CBN recognizes today in the Nigerian foreign exchange market, which is the dominant market, is the investors and exporters (I&E) FX window. It is for everybody who want to procure or sell foreign exchange to import or export. They should go to the bank to obtain their foreign exchange. The CBN does not intend to recognize that there is any other place they can do that.

    Stoppage of allocation of FX to BDCs
    Recently the CBN stopped the allocation of foreign exchange to the BDCs. The CBN began to ask why it had to wait for so long, by continuing to allocate FOREX to BDCs.

    Nigeria remains the only country on earth to do that. The CBN is the only Central Bank in the world that would dip its hands into its reserves, the country’s commonwealth, to pack dollars to sell to BDCs in an attempt to stabilize foreign exchange rate in the market.

    I can recall that when exchange rate begins to go up like this in the black market, the CBN will call the banks to express worry that banks were not collecting dollars to sell, to change the situation. That is what the CBN was trying to adopt, to stabilize the exchange rate.

    For me, this was a wrong decision. The CBN should really applaud itself for deciding to stop this. And it has stopped for good.

    This is because the Bank of England does not sell dollar to BDCs. The same does not happen in the United States. It beats my imagination that Nigeria adopted this arrangement that tended to support illegal activities of people involved in graft and corrupt practices.

    Through this arrangement by the CBN, we unwittingly supported the activities of those who illegally buy foreign exchange from these black market, carry them in aircrafts out of the country to buy arms and ammunitions brought back into the country to commit crime, whether it is Boko Haram, kidnapping and all sorts of nefarious activities.

    The CBN would take our country’s dollar to sell to people to go and buy arms and ammunitions to come and hurt the people. That is what people want the CBN to continue to do. But we are saying that we cannot do that any longer.

    What the CBN is saying is that if anyone has any legal or legitimate business to conduct, the person should take it to the bank.

    If one wants to travel, pay school fees, or medical bills, one should go to his or her bank, they would sell you FX.

    If the amount you want is above the limit recognized by the CBN and the reason one is making the demand is legitimate, the bank is compelled to speak to the CBN to give more than the limit.

    If one has dollars to sell, one should also go to the bank. The CBN does not recognize any other institution to handle those. That is the position of the CBN.

    People are saying that banks are not selling. We will continue to monitor the banks. If anybody goes to the bank and they do not sell dollars to him for a legitimate business, we have advertised hotlines for you to call and inform us. We will intervene and ensure that the bank sells to you.

    However, if you go to a bank with fake flight tickets, visa, international passport, the bank would not be able to sell to you.

    If they sell to you mistakenly, because you hoodwinked them into selling to you, and after two weeks they found that you cancelled your ticket, or your visa is fake, they will call you as their customer to return the dollars. If you do not do so, your name, BVN and picture would be published on their website. The CBN would pick those details and forward to EFCC and other anti-crime agencies to pursue you until you return the dollars.

    We have a situation where one of the banks in one day sold dollars to 52 people who said they wanted to embark on a business travel.

    After two weeks, they checked to find out that 40 of them, about 70 to 80 percent of the people who wanted business travel allowance on the ground that they wanted to travel for business, had canceled their flight tickets.

    If we want to do legitimate business, let’s conduct legitimate business. The CBN will support you. We are not going to back on our decision on BDCs again.

    Aboki FX’s under investigation

    Yes, the CBN wrote a memo to banks requesting them to provide information about Aboki FX. The CBN has been monitoring the activities of Aboki FX in the past two and a half years.

    There was a time I asked that the owner of Aboki FX be invited for us to engage with him, to enable us understand his model of operations and how he usually comes about those FX rates he has been advertising.

    The CBN finds him as a Nigerian who lives in England and conducts these nefarious and criminal activities on our economy. It is an economic sabotage, and we will pursue him wherever he is and prosecute him.
    We will track and report him to international security agencies.

    We cannot allow him to continue to conduct illegal activities that kill our economy.

    Anyone who runs a legitimate business and follow CBN rules for use of financial systems legally, there is nothing to worry about.

    But those who think they are smart and want to continue to sabotage the effort of the CBN in running the country’s economy for the good of Nigerians, we will make life very difficult for them.

    The CBN will continue to do its job of safeguarding the financial system for the betterment of everybody.

    Findings about Aboki FX
    CBN’s preliminary findings about Aboki FX reveal that the company was registered in the UK in November 2015 and is owned by one person who claims in his regular filings that there are other people with significant interest in the business that he does want to name.

    Who are these persons? Why are they hiding?
    Since they are in the UK filings records, the CBN will conduct those findings.

    Since the inception of the Aboki FX business, he has continued to file the same 5000 Pound cash account to the UK government.

    Yet, in Nigeria, he and the company have over 25 bank accounts with about eight banks in both Naira and dollar denominations, with significant turnover showing him singly raking the system though speculative activities on the Naira and collecting his proceeds in cash through a particular ATM in London.

    Our findings suggest the Aboki FX website was built and used purely for the purpose of foreign exchange manipulations and speculation.

    They get Naira used to purchase dollars, take a position, change the rule over a given period, sell the dollar they purchase and make a profit. This is completely illegal, and unacceptable.

    Other findings reveal that Mr Oniwinde Adedotun, the owner of Aboki FX, is between April 2020 and May 2021 had inflows and sold tens of millions of Naira in FX to several Nigerian companies. We will fine these companies as well, for contravention of our FX laws, because he is an FX dealer who directly benefits from the rates he quotes daily from his website.

    The CBN is finalizing its investigation. We must warn these companies that patronize him that they are also going to face the CBN sanctions.

    Have Nigerans asked how exactly Aboki FX collects the data he publishes on its website? How many BDCs can claim they have ever seen a staff of Aboki FX come in to ask for their daily rates? Or how many BDCs send daily returns on exchange rates to Aboki FX? How then do they determine what the rate is and post them illegally on their websites?

    In which other country is unlicensed person be the one that determines exchange rate in that country? How come Aboki FX sets exchange rates of the Nigerian currency? Why is Aboki FX not setting the exchange rates of Pounds, Dollars Rands and Cedis in UK, US, South Africa and Ghana? Why target Nigeria, even where Aboki FX’s owner is a Nigerian?

    He chooses to live in London; enjoy all the opportunities in London at the expense of all Nigerians.

    Section 2 of the CBN Act makes it clear that only the CBN can determine the value of the Naira.

    Yet, a single unscrupulous individual who lives in London continues to manipulate the rate of the Nigerian currency and make huge profits he collects in cash in London, while other Nigerians suffer the consequences of these actions.The CBN will not allow this to continue again.

    On the e-Niaira, it is scheduled for official launch on October 1, 2021. The CBN has all the approvals and mandates to do so. But it is important to understand that e-Naira is not a one-off thing, but a journey that starts on October 1.

    On that day Nigerians should be able to download the e-Naira application from either Google play store or Apple application store.
    When they have installed the application using their bank account details or with cash at a registered agent location and conduct their transactions such as transfers and purchases at merchant outlets that have onboarded.

    If a bank has, say N10billion in its account, before October 1, it can move about N2billion into an electronic wallet in the bank.

    If you are a bank customer that has, say N10million physical Naira, you can move about N2million, and for your comfort of spending, to make purchases, you can tell the bank to load N2million of your bank balance into your e-Naira wallet.

    Your bank balance of physical cash will drop to N8million, while your e-wallet will carry N2million. With that you can make purchases both within and across the country.

    There are so many variants of the e-Naira. But this is where the CBN will start.

    We are not going to pretend that there are no risks in opening the system up.

    The CBN will look at the various products, determine the risks and the best way to mitigate the risks before we decide to open it up more and more.

    But it is a journey the CBN has determined and decided to start on October 1, 2021.

    On the date, the CBN chose dates as an incorporation with our partner. In some other places, it is like they have their business or software and they earn the money.

    But we chose that they would establish that they would establish their company in Nigeria.The Federal Government of Nigeria will own majority stake in the company.

    So, it is not Emefiele’s company as people have said I went to the Caribbean to set up a company or one small unknown company.

    It is a company that would be in Nigeria and registered with the Corporate Affairs Commission and majority shareholder will be the CBN.

    As we all attempt to choose contractors, the CBN set up a rigorous vendor selection process in line with the Public Procurement Act and conducted by seven departmental directors and a deputy governor of the CBN.

    Ten companies were evaluated based on the following criteria.
    1. Technology ownership and control;
    2. Implementation timelines;
    3. Efficiency and ease of adoption;
    4. Support for anti-money laundering and war on terrorism;
    5. Platform security;
    6. Interoperability;
    7. Implementation experience.

    Bitts came first, with an average of 82.3 percent on the scoring grade. The score for the other bidders were Interstellar 76.9 percent; Zimbali 76 percent; G&G 76.3 percent and Entebs 66.4 percent.

    The CBN chose Bitts because it’s a leader in the CBN digital currency space with subject matters expertise and intersection of technology and policy.

    The company deploys its product in regulated collaborative multi-stakeholder environment include in four Caribbean countries and digital currency deployment in Barbados and Latin America.

    The Bitts CDMC for Eastern Caribbean Banks were rated by IMF and World Bank. The deployment in the Caribbean countries were driven by the social impact, including financial inclusion, slow special features, and accessible agency networks.

    The owners of the company are a 20 year old public trading company, with over $200million investments in blockchain technology related businesses and a 35 year old venture capital company managing OSTK investments outside Nigeria.

    Bitts is the first company to digitize a national currency on a blockchain, thus creating the first synthetic CBDC with support of the Central Bank of Barbados governor and the Ministry of Finance. That system is still in operation today and is integrated into the largest payment processor in that country.

    On the National Arts Theatre project, this is a treasured asset of the country. The first time the asset was used was in FESTAC ’77 (Festival of Arts and Culture 1977) when Nigeria hosted the festival of arts and culture.

    Different people from different parts of the world came. After that festival. Different global concerts were held inside that main bowl, which can seat 7,500 people at a go.

    But unfortunately, due to bad maintenance standards we allowed the edifice to rot.

    In an attempt to find an international convention centre for the country, I dare say that if well managed and well run, the National Arts Theatre can withstand any international convention and host any summit of even heads of States from different parts of the world. But we allowed that edifice to rot.

    The Bankers Committee, about three years ago, as part of its retreat in Ijebu Ode, took on the initiative with the creative industry, particularly the youth involved in music.

    With that, great ideas came up, and we thought of how we can engage our Nigerian youth in music or movie and preventing them from going abroad to shoot their films or record their music.

    Nigerian youth with creative talents in fashion and music cannot afford to be travelling abroad to produce their clothes and music and bring them home to sell.

    That is how we came about setting up four hubs around the National Arts Theatre to create economic activity around the magnificent edifice.

    The Bankers Committee on its own decided that it would fund that initiative. The first aspect of that work, which has been awarded to G. Cappa, started in March this year and work is ongoing.

    Aside from that, contract has also been awarded for the establishment of four strategic hubs for music, movie, IT software developers and fashion.

    This is also going to be funded by the Bankers Committee, not the CBN or the Federal Government. Tens of billions of Naira would be spent as contribution of the banking industry to support the youth in this country.

    We are hoping that by November 2022, the magnificent edifice would come alive, with a lot of security around it and 24 hours electricity, to create economic activity, reduce the incidence of our people going abroad to conduct simple creative activities that could be created in Nigeria and unleash the creative talent of our youth and our people.

    That is the idea. And we believe that by God’s grace President Buhari will launch that Centre.

    On INFRACO, this is another project that the President recently gave approval for the CBN and Nigeria Sovereign Investment Authority (NSIA) as well as African Finance Corporation (AFC) to act as equity stakeholders.

    The first phase of the plan is to put in place equity of N1trillion and then N14 trillion as debt. The essence of this is for the partners to raise N15trillion to fund the Nigeria infrastructure.

    From what has been done so far, at least 50 percent of that sum is already existing within the banking industry in Nigeria. All we are saying is that we don’t need to encumber a balance sheet as the federal government is already encumbered.

    With the instrumentality of INFRACO, the infrastructure of this country can be developed again. N15trillion we are talking about we dare say is very small, but we want to start with it.

    There are a couple of projects that we have talked about. But before we go into projects execution mode, we have approved and appointed transactional advisers.

    After that we have appointed four asset managers that went through a rigorous process of vetting. Over 100 of them indicated interest to the asset managers, out of which we chose four.

    Some of the projects being contemplated upon at this time have to do with the Lagos-Ibadan express road, second Niger Bridge completion, Abuja-Kano -Kaduna narrow gauge railway.

    These are projects that are currently receiving funding under the PIDA under the NSIA, which is part of INFRACO. Both can work together to unleash this kind of funding on the infrastructure of Nigeria. We think this will be good for our country.

    We are also hoping that by October 2, its Board would be constituted, with 11 persons, comprising two members selected from the CBN, one each from AFC and NSIA, DG of Debt Management Office, representative of the Federal Ministry of Finance, one representative of the Nigerian Governors Forum, one representative of the North, South, and members of the international community.
    There will be a small management team of about five people who would act as superintendents to the asset managers and run the funding in a way that is transparent and the whole world will know that Nigeria is truly ready for business and development of these infrastructure.

    On the Commodities Exchange, I like to report that the technical team has been on leave since January of this year.

    We are hoping that by the end of this year, we should begin to move into the project execution mode.

    We are engaging all the agencies of government that are involved in this process, and before the first half of next year we will get to the stage of establishing it so that we can unlock the potentials and logistics of delivering food, from farm to market, in Nigeria.
    Nigerian International Finance Centre

    The Nigerian International Finance Corporation is a great idea. We have started to receive interest in companies that say they have land that can be designated the free trade area in Abuja and Lagos and other parts of the country.

    We are going to think about which is going to be the most efficient and better serve the Nigerian interest and the international community that this Centre is meant to serve, which they would find easy and expedient ad better for them to operate as a business that is operating outside Nigeria even though they are sited within Nigeria.

    What that does is that it helps improve economic activities in the country and boost foreign investments in the country.

    We think that there are tremendous benefits from these projects, and that Nigeria being the largest populated country in Africa deserves to have an international financial centre. We are determined to achieve this.

    GDP Growth
    On GDP improving and inflation trending downwards, the CBN is happy this is happening so fast.

    We will all recall that as a result of the COVID-19 pandemic, the world went into a lockdown, which resulted in the locking down of the global economy and supply chains.

    Nigeria, like most other economies went into a recession. In the second quarter of 2020, GDP was minus 6.1 percent, and in the third quarter minus 3.62 percent and fourth quarter, the country exited recession. First quarter 2021, we were at 0.5 percent, second quarter 2021 it was 5.01 percent.

    If we imagine the leap from minus 6.1 percent to minus 3.6 percent to 0.1 percent, to 0.5 percent and 5.0 percent, it means a lot of work has been done to bring the economy to where it is today.

    But I must say that the 5.01 percent achievement came primarily as a result of basic rates that will dissipate. That is why we are not going to make any promise that the rate of 5 percent is going to continue.
    But we will see to the fact that we end the year as the CBN estimate shows about 2.86 percent average for the year.

    We will continue to do what we are doing more aggressively that resulted in this more average GDP.

    On inflation, we have almost 21 months of persistent increase in inflation rate to about 18.7 points from about five or six months ago, when we began to see a deceleration of inflation rate, and by August 2021, it came to 17.01 percent.

    One thing that is very peculiar about the deceleration of inflation in August 2021 is that both the food and the core components were coming down.

    What that means is that some of CBN’s interventions put in place, particularly in the area of food production, are beginning to yield dividend.

    We are now entering the harvest period, and we believe inflation will decelerate further and more aggressively as we move towards the end of the year.

    CBN’s interventions
    On the output side, what monetary policy Committee said was that the objective is to primarily price above market stability that is conducive to growth.

    It’s like a difficult one. If you want to stimulate growth, then you have to spend. If you want to moderate things and achieve price stability, you have to keep liquidity tight and do other things to moderate price, improve food production and the rest of the things.

    Sometimes, we think these are objectives that are conflicting in opposite direction. That is why we are happy that things are looking good, and we will continue to do those things we have done very well.

    We have aggressively taken actions that have boosted consumption and investments expenditure in Nigeria.

    The CBN target credit facility, where loans of about N500,000 and above are given to households and small businesses to stimulate consumption and business expenditure; AGSMIES where the CBN is giving close to about 200,000 people loans to acquire business equipment for hairdressing, blockmaking, poultry farming and others like acquisition of full agricultural equipment to be doing harvesting and trenching and the rest of the activities that are boosting expenditure and accelerate output growth in the country.

    For instance, N755billion has been disbursed to over 3 million people under the Anchor Borrowers Programme cultivating over 4.7 million hectares of land.

    The CBN also released about N900billion to 256 out of our N1trillion facility; N746billion has been disbursed to over 103 healthcare projects, out of which 26 pharmaceutical and 77 are hospital projects.

    Over N318billion has been disbursed under the CBN capital projects 670,422 beneficiaries, comprising 572,000 households and 170,000 micros, medium and small enterprises.

    Under the electricity market stabilization facility, over N120billion has been granted as loans to nine DISCOs to cover their financial obligations for upstream market participants.

    Under the mass metering scheme, N36 billion has been released to nine DISCOs for the procurement and installation of 656,000 electricity meters; N252million has been disbursed to five beneficiaries awarded grants under COVID-19 and the rest of the things; N7billion has been disbursed for the procurement and disbursement of 100,000 solar businesses.

    On inflation, we will try as much as possible to manage the system liquidity in a way that the CBN would constrain the recent excess liquidity capable of creating problems for the economy, particularly those who want to deploy liquidity into non-employment generating output stimulating sectors of the economy.

    The CBN will continue to do its interventions in areas like agricultural and manufacturing sectors that would stimulate employment generation to output generating sectors of the economy.

    Leave a Reply

    Your email address will not be published. Required fields are marked *