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Editorial

Government must address lingering currency crisis

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The ongoing currency crisis caused by a shortage of new naira notes amid several challenges Nigerians struggle with on a daily basis. Just like the suffering caused by fuel scarcity many Nigerians now spend hours queueing for cash from ATMs across the country.

The currency crisis has become a burden to many Nigerians as the lack of cash in ATMs, Point of Sale (PoS) and other agents further heightens Nigeria’s economic challenges.

Despite the Central Bank Governor announcing a 10-day extension to the deadline to phase out the old currency, Nigerians continue to decry the scarcity of the new naira notes.

The Jigawa State Government had raised concerns over the scarcity of new naira notes, saying residents of the state are sleeping at Automated Teller Machines (ATM) stands.

The State’s Commissioner of Finance and Economic Development, Babangida Gantsa, said during his visits to several commercial banks in the state on Wednesday, no fewer than 250 customers queued at ATM stands for cash withdrawals.

Gantsa explained that the unavailability of naira notes in circulation had paralyzed economic activities and other social lives in Jigawa.

A similar situation is ongoing in FCT, Lagos EDO, Delta, Nasarawa, Niger and Nationwide.

The glaring reality is that the new notes are scarce. Therefore, the CBN, which insists that the new notes are available, is not truthful. A new polling by NOI Poll commencing on January 9 stated that over 40 per cent of adult Nigerians had not seen the new notes since they were first issued mid-December. Nigerians are being exploited by PoS operators, who are charging as high as N200 to withdraw N1,000!The policy is just compounding the suffering of the masses.

The chaos began in December when business owners started rejecting the old notes. The reaction of the CBN to this was to state that the new notes were available at the banks. This is difficult to believe as the ATMs had none. The faulty implementation, especially with the short time given to actualise it, is turning it into an organised perplexity.

For now, the policy is breeding disorder. There were reports that some customers threatened physical assault against bank officials because they could not get cash. Not only that, crooked bank officials are exploiting the gaps as they allegedly sell the new notes to politicians at premium. Originally, the policy was targeted at preventing politicians from using money to buy votes and influence elections. The threats by Emefiele to sanction the banks for sabotaging the policy seem like an empty threat. So, the CBN needs to walk its talk.

In the rural areas, where financial exclusion is very high, the deadline might wreck more havoc on livelihoods. In December, the World Bank warned that the timing and short transition period of the policy could negatively affect small and medium-sized businesses and the poor, 133 million overall. NGO Inclusion for All Initiative said 54.4 per cent of the rural population might lose their savings to the policy.

According to CBN the policy wants to recover the N2.73 trillion outside the banking system. As of October, currency in circulation was N3.23 trillion, the CBN says. Of that, only N500 billion was traceable in the banking system. That is a huge gap. Emefiele said, “So far and since the commencement of this programme, we have collected about N1.9 trillion, leaving us with about N900 billion.”

But in Nigeria, the informal sector sustains the economy. London-based World Economics says Nigeria’s informal economy is 57.7 per cent of GDP. World Bank data states that 80.4 per cent of all employment in Nigeria is in that sector.

Unfortunately, the economy is deteriorating. For the second time in three months, Moody, a global credit rating agency, downgraded Nigeria from (P)Caa1 to Caa1 (junk) at the weekend. This is Nigeria’s lowest since 2006, a period of 17 years.

On these counts, the policy, which elevates cashless above cash transactions, is precipitated. It will constrain the economy further, as for now, the informal sector is still largely dependent on cash transactions.  Nigerian NewsDirect in this editorial urged the CBN to seriously consider averting a deteriorating breakdown of Nigeria’s economy.

Again, the cashless policy, good as it is, would continue to evolve. In Nigeria, the available internet infrastructure cannot yet support a brisk online economy the CBN wants to build. For instance, the recent reliance on internet banking has resulted in a breakdown, Nigerians can no longer carry out transactions on the space.

Nigerians are losing money and time to incomplete ATM transactions, they are being debited for transfers that fail, even with the same bank. In this situation, the cashless policy should be implemented in phases.

Lessons from other jurisdictions support those who argue that the 10-day extension period is still too short. The Bangko Sentra ng Pilipinas, which launched a redesign of its P1,000 currency from paper to polymer in April 2022, has given a timeline of one year to fully implement the policy in the Philippines. In December, the Bank of England unveiled its redesigned £5, £10, £20, and £50 banknotes that will carry the portrait of King Charles III to replace that of Queen Elizabeth II. However, the BoE said the new notes would enter circulation mid-2024. There are no sensible arguments against these timelines.

Therefore, Emefiele should adopt a more pragmatic implementation of the new naira policy. The old and new notes should be legal tender concurrently for a longer period.

In conjunction with the security agencies, the CBN should clamp down on naira abusers. It should make the banknotes available to the banks, melt severe sanctions on banks that hoard the banknotes and use technology to track the distribution of the currency.

Editorial

Tackling Nigeria’s high food prices: Strategies for mitigating soaring inflation

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Amidst the vibrant composition of global commerce, Nigeria stands as a nation grappling with formidable challenges that threaten to stifle its economic aspirations.

The latest findings from Africa’s Pulse, a prestigious biannual survey conducted by a prominent global lending institution, cast a spotlight on Nigeria’s enduring struggle with exorbitant trade costs.

With trade expenses in Nigeria towering four to five times higher than those in the United States, the report paints a portrait of a nation hamstrung by systemic barriers to economic growth and development.

The primary culprits behind these exorbitant trade costs are identified as steep transportation expenses, inadequate road infrastructure, and pervasive insecurity. Addressing these entrenched issues demands urgent and concerted efforts from President Bola Tinubu, his economic team, and security authorities.

It’s worth noting that many of these challenges were inherited by Tinubu’s administration.

Insecurity, for instance, has long plagued the nation, with farmers abandoning their fields due to the threats posed by various forms of violence, including terrorism, banditry, and clashes with herdsmen.

The toll of this insecurity is staggering, with tens of thousands losing their lives and many more falling victim to kidnappings and displacement.

Coupled with Nigeria’s daunting infrastructure deficit, estimated at a staggering $100 billion annually over three decades, the consequences are dire, particularly reflected in soaring food prices.

Currently, food inflation stands at a staggering 37.2 percent, a sharp contrast to the modest 2.20 percent recorded in the United States during March.

Addressing these systemic challenges demands decisive action and innovative solutions to enhance Nigeria’s competitiveness on the global stage and unlock its full economic potential.

While grappling with longstanding trade challenges, President Bola Tinubu’s policies have inadvertently exacerbated the situation. Initiatives such as the removal of petrol subsidies and the floating of the naira, introduced shortly after his inauguration, have catapulted business costs, prices, and inflation to unprecedented heights.

The recent decision to eliminate subsidies for Band A electricity consumers further compounds the issue, with consumers facing a staggering increase from N68 to N225 per kilowatt hour, despite expectations of consistent power supply.

These policy shifts have cascading effects, significantly inflating the cost of production for both domestic and imported goods. Diesel prices, crucial for manufacturing due to unreliable electricity, have surged to an average of N1,600 per litre in the first quarter.

Meanwhile, the impending rise in petrol prices, post-subsidy removal, threatens to push costs even higher, amplifying the financial strain on businesses and consumers alike.

Compounding these challenges is the absence of a robust railway system to alleviate transportation burdens. Hindered by political constraints centralized at the federal level, the railway network remains underdeveloped, leaving a critical gap in Nigeria’s infrastructure landscape.

As the nation grapples with these complex dynamics, finding sustainable solutions demands a holistic approach that addresses both policy missteps and systemic deficiencies. Only through decisive action and strategic investment can Nigeria hope to chart a course towards economic resilience and prosperity.

In the intricate dance of trade dynamics in Nigeria, imported essentials like food, medicines, raw materials, petroleum products, and machinery have taken center stage, their prices soaring to astronomical heights. This relentless surge has dealt a heavy blow to countless organizations and small-to-medium enterprises, pushing many to the brink of closure.

At the heart of this economic opera lies the exorbitant lending rate, standing at a staggering 24.75 percent—a sharp contrast to the more modest 3.76 percent average witnessed in the Euro Area during the same period. This glaring imbalance in interest rates further amplifies the financial strain on businesses, stifling growth and innovation.

Yet, the cacophony of challenges doesn’t end there. Multiple taxation, sluggish port operations, and the stranglehold of government oversight on state-owned enterprises contribute to the symphony of woes plaguing Nigeria’s trade landscape.

Seaports have become bottlenecked corridors, with imported goods languishing in limbo as demurrage fees accumulate—a burden ultimately borne by consumers. Meanwhile, the choreography of trade is disrupted by a chorus of non-state actors, who levy tolls and extort fees from hapless owners seeking to unload their cargo.

In this tangled web of fiscal complexities, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has counted a staggering 200 taxes, a bewildering array that stifles economic vibrancy.

While the government officially collects 62 taxes—divided among federal, state, and local government authorities—another 108 informal or ‘nuisance’ taxes are levied daily by non-state entities, further entangling businesses in a web of financial burdens.

Oyedele center stage, poised to orchestrate a transformational shift towards simplicity and efficiency. With determination coursing through its veins, the committee sets its sights on streamlining the labyrinth of taxes, aiming to reduce the cacophony to a melodious single-digit harmony.

Yet, the fiscal symphony is not without its dissonance. State governments, echoing the Federal Government’s VAT collection efforts, persist in extracting consumption taxes from the same businesses—a redundant cacophony that stifles economic vibrancy.

Meanwhile, the haunting refrain of poorly managed State-Owned Enterprises (SOEs) casts a shadow over Nigeria’s economic landscape. Despite being Africa’s largest crude exporter, Nigeria finds itself importing petroleum and steel products—a paradox born of SOEs mired in a state of dormancy.

To strike a harmonious chord and alleviate the burdens weighing down Nigeria’s trade, President Tinubu must take decisive action. Accelerating efforts to streamline taxation, privatizing SOEs, and embarking on a fervent quest to rebuild infrastructure stand as imperative measures on the path to economic revitalization.

Furthermore, the melody of progress demands a deepening of electricity supply and a symphonic collaboration with sub-national governments to realize the vision of state police—a harmonious fusion of security and governance.

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Editorial

Addressing the fraudulent acts surrounding forex exchange

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It is a goodomen for recent policy introduced by the Central Bank of Nigeria (CBN) against the transaction with foreign currencies.

The apex bank has banned the use of foreign currency-denominated collaterals for naira loans. This was contained in a circular dated April 8, 2024 and directed to all banks by CBN’s Acting Director of Banking Supervision Department, Adetona Adedeji.

The apex bank official listed two exceptions to the rule as foreign currency collateral which are Eurobonds issued by the Federal Government or guarantees of foreign banks, including Standby Letters of Credit.

“The Central Bank of Nigeria has observed the prevailing situation where bank customers use Foreign Currency (FCY) as collaterals for Naira loans,” the circular partly read.

“Consequently, the current practice of using foreign currency-denominated collaterals for Naira loans is hereby prohibited, except, where the foreign currency collateral is:Eurobonds issued by the Federal Government of Nigeria; or”Guarantees of foreign banks, including Standby Letters of Credit

“In this regard, all loans currently secured with dollar-denominated collaterals other than as mentioned above should be wound down within 90 days, failing which such such exposures shall be risk-weighted 150 percent for Capital Adequacy Ratio computation, in addition to other regulatory sanctions.”

Meanwhile, the CBN, also on Monday, announced the sales of dollars to over 1, 500 Bureau De Change (BDC) operators to meet retail market demand for eligible transactions. The apex bank said it would sell $10, 000 to each of the BDCs at the rate of N1,101/$1, a move which has been seen as part of CBN’s efforts to maintain the gain of the naira over the dollar.

The naira has appreciated against the dollar in recent weeks, gaining over 40 percent, from about N1,900/$ to about N1,200/$1 now.

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has disclosed that the security agencies and the Economic and Financial Crimes Commission (EFCC) are currently investigating questionable foreign exchange allocations and forward contracts estimated at $2.4billion. The probe came on the heels of the forensic audit of $7billion debt reportedly inherited by the present leadership of the CBN from the previous one under Godwin Emefiele.

The Cardoso-led CBN had late last year engaged the services of Deloitte Management Consulting to unravel how the debts were incurred. Following the forensic audit report, CBN said it had provided the investigators with the relevant documents that will focus primarily on the details of the forex transactions that did not meet the standards of the regulatory agency.

Some banks’ Chief Executive Officers are expected to be invited for interrogation by the security agencies soon. It is not yet clear how long the probe will last. But the CBN said the Deloitte report revealed that a good number of the forex allocations did not meet the laid down criteria for payments, among other alleged infractions and discrepancies contained in the audit report. Let the probe of forex racketeering be transparent. It should not be used for witch-hunting.

Clearly, public confidence in the CBN went to all-time low following the ouster of the immediate past governor of the apex bank as a result of sundry allegations of abuse of office. According to the CBN governor, as of recent, all valid forex backlog amounting to $1.5billion had been cleared. Others need to be diligently verified. Undoubtedly, the credibility of the banks is very much in doubt. This makes every effort towards restoring public confidence in the banking sector very crucial. The current probe is coming after the CBN and the anti-graft agency accused the banks of series of financial malfeasance.

For instance, last month, the Chairman of EFCC, Ola Olukayode, indicted banks as being “linked to 70 per cent of the financial crimes in Nigeria.”  This is a weighty allegation that should be investigated. Speaking at the Annual Retreat and General Meeting of the Association of Chief Audit Executives of Banks, the EFCC boss, represented by the Director, Internal Audit of the commission, Mr Idowu Apajoye, claimed that the banking sector has “increasingly become a cesspool of fraudulent activities.”

He said the development has raised considerable challenges and concerns to the agency. Therefore, he calls for concerted effort of audit executives to tackle the challenges in the banking sector.

Probe of the forex racketeering in the banks is appropriate and timely. It will strengthen the regulation of the banking industry and make them comply with the extant prudential guidelines.  The banking sector is very vital in every plan to rescue the economy.

Unfortunately, the sector has witnessed fraudulent practices in recent times. Recent audit reports by the Nigeria Deposit Insurance Corporation (NDIC) have raised alarm over some infractions in the banking sector. Some of the insider abuses include outright selling of customers’ deposits or identity theft as well as unauthorised loan facility, forgery and several others.

However, those charged with the probe of forex racketeering must be patriotic in carrying out the assignment. Proper reconciliation of the banks’ accounts, with periodic checks, in accordance with accounting requirements, must be adhered to. The findings of the probe panel must be made public, and sanctions imposed on those found to have breached the relevant laws. There must be strict supervision of the banks by the apex bank. It is likely that inadequate supervision of the banks must have accounted for abuses in the sector, including the alleged forex racketeering.

While ensuring transparency in the financial services sector is part of the confidence-building process, there is a need to formulate policies that will make Nigeria’s business environment attractive to foreign investors. We advise the CBN and the federal government to meet the forex demands of the organised private sector and small-scale industrialists.

Let the CBN ensure that valid documentation of all forex allocations are kept to curb infractions such as the allocation of millions of dollars to fictitious entities, and the provisions of forex allocations without the corresponding naira value. This is one of the best ways to avoid the frequent forex racketeering.

The anti-corrupt agencies like the EFCC and ICPC are also in support by threatening to arrest and probe educational institutions that collect fees payment in dollars or other foreign currencies. It is important that stakeholders including the DSS, NFIU, should work collaboratively with the CBN to eradicate the menace surrounding forex racketeering in the country.

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Editorial

Advent of PoS in Nigeria: A blessing or curse?

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When the Central Bank of Nigeria (CBN) introduced the Point Of Sales(POS) in 2013 in Nigeria, though there was initial skepticism by the citizens of the efficacy of the device, people later embraced it after a series of sensitisations.

People did not accept the POS operations wholeheartedly, until the Automated Teller Machine (ATM) and other terminal electronic transactions began to fail, with its attendant frustrations and inconveniences meted out on the users.

For example, failed transactions and incessant debit of the customers. Things got worse when ATM machines no longer bear cash as supposed to be. This ugly situation reared its head into the banking system of Nigeria, consequent upon the attempt by the former Governor of CBN, Godwin Emiefele to automatically replace the higher denominations of old Naira notes with new ones. A policy that almost collapsed the financial system of Nigeria, resulting in an all time cash crunch that forced Nigerians to buy their own money with more money from the POS operators.

The situation got so bad that a price tag of as much as N3,000 commission was placed to buy our own N5,000 from the Shylock POS operators. The heat was worsened by the last general elections in the country, where the politicians could not access money for campaigns and other logistics.

This probably made President Ahmed Bola Tinubu to fire the then CBN Governor on assumption of office. And worse still the then CBN Governor, Emiefele abortively attempted to contest for Presidency while still in office as CBN Governor.

Till date, the embattled ex-CBN Governor is still battling to wriggle himself out of the myriad of allegations of official misconduct preferred against  him by the Anti-graft Agency in the country,talking about the Economic Financial Crime Commission (EFCC).

It is a known fact that the primary reason for introducing POS and other terminal electronic transactions has been abused and defeated. According to the CBN, the basic reason for introducing the PoS is to reduce cash in circulation and the risk of carrying huge cash around. But what do we have today? ATM machines littered all over the streets of Nigeria, without cash and ironically, POS operators are buoyant with enough cash, planked on cut-throat commission.

The question now is who regulates the POS operations and where are they sourcing their funds, when virtually every ATM machine in town is empty and the banks are rationing the amount of withdrawals for their customers at the banking halls.

As if that is not enough, transaction failure is now the order of the day at the ATMs. To add salt to the injury, failed withdrawals are indiscriminately backed with debits and reversal that used to be automatic is now history. The implication is that the affected customers must now go to their respective banks and commence documentations of incidence forms and in most cases seven working days are given for reversal, which may never come.

There have been complaints from customers who waited for the elusive seven working days, which never came and they naturally lost count and hope and the money just went like that. We are no longer  talking about countless loss of manhours and its attendant inconveniences. So why are ATM machines not loaded and the POS machines are operational? Who should be held responsible for this sabotage or conspiracy?

Are bank customers no longer entitled to convenience, rights and privileges as customers? These are some of the questions begging for answers. At this juncture, it is pertinent to attempt to proffer solutions to this  macabre dance of the POS operators and the banks.

First and foremost, there is no reason why the ATM machines should not be loaded by the respective banks. In the first place, the terminal electronic transactions were introduced to discourage customers from flooding the banking halls, but the recent “no cash syndrome” at the ATMs has forced customers to start thronging banking halls for smaller transactions that would have been conveniently carried out without entering the banks. So the primary cure to this ailment is to load the ATM machines and make banking transactions seamless.

Again incessant debits  without payment at ATMs must be checked. If reversal is automatic as it used to be, customers will sweat less. Why can’t we improve in what we have started, via automatic reversal, if transactions must fail? This will save man-hours loss and stress of visiting the banks only to fill incidence/transaction failure forms. What effectively operates globally should equally work or operate in Nigeria. We don’t have any option, let it not fall under the derogatory terminology of ‘Nigerian factor’ or ‘African time’ as they call it.

The POS operations system is a beautiful concept that should not be allowed to die, provided it is done and regulated well by the CBN. We know that it is not too difficult to do the right thing, it is just a matter of determination, commitment and political will.

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