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Reps call for probe into commercial banks’ non-compliance with CBN’s directives

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By Sodiq Adelakun

The House of Representatives has instructed its Committees on Banking Regulations and Banking Institutions to hold an investigative hearing regarding the failure of commercial banks and financial institutions to comply with the Central Bank of Nigeria’s (CBN) directives on Net Open Position (NOP) Limits.

In a circular dated January 31, 2024, the CBN, through its Director of Trade and Exchange, Hassan Mahmud, and Rita Sike on behalf of the Director of Banking Supervision, directed all banks to ensure that their NOP limit does not exceed 20 percent short or 0 percent long of shareholders’ funds unimpaired by losses, using the Gross Aggregate Method.

The circular also stated that banks with a current NOP exceeding 20 percent short or 0 percent long of their shareholders’ funds unimpaired by losses must bring them within prudential limits by February 1, 2024. The House of Representatives has taken this matter seriously and has tasked its committees to investigate the non-compliance of commercial banks and financial institutions with the CBN’s directives.

The purpose of the investigative hearing is to determine the reasons behind the non-compliance and to ensure that the banks adhere to the prescribed limits.

This move by the House of Representatives highlights the importance of financial institutions following regulatory guidelines set by the CBN to maintain stability and transparency in the banking sector.

At a plenary session presided over by Speaker Tajudeen Abbas  on Wednesday, the House adopted a motion of matter of urgent national importance on the need for banks to implement CBN’s policies on holding excess long foreign exchange and NOP limits brought on the floor of the House by member representing Ikorodu Federal Constituency, Babajimi Benson.

The lawmaker noted that the CBN is saddled with the responsibility of regulating the monetary policies of the country as provided for by the CBN Act, stressing that “in the performance of this duty, the CBN is empowered to make regulations and give directives for commercial banks and certain financial institutions to implement.”

This is just as he also noted that Section 8 (4) and (5) of the CBN Act require that the CBN Governor “is expected to brief the relevant Committees of the National Assembly during the semi-annual hearings as well as provide periodic reports on the performance of the economy to the National Assembly.

“There has been a steady rise in the rate of the dollar in comparison to the naira. It rose to N1,520 to the dollar in the last week. This astronomical rise has been caused by diverse market forces and certain economic policies adopted by the government, including the liberalisation of the dollar.

“The House of Representatives on Tuesday mandated its Committees on Banking Regulations and Banking Institutions to conduct an investigative hearing on the non-compliance by commercial banks and financial institutions with the Central Bank of Nigeria’s directives on the Net Open Position Limits. Certain financial institutions in Nigeria usually hold back a large part of forex they obtain either through purchase, borrowing or allocation from the CBN rather than lending to their customers with a view to selling it when the exchange rate is high.”

According to him, the speculative activity by commercial banks and certain financial institutions “has further exacerbated the harsh economic situation in the country and led to difficulty by legitimate businesses to obtain forex for their business transactions.

“The CBN has intervened by introducing new monetary policies to check the rise in the rate of dollar among which are the Net Open Position Limits and holding excess long foreign exchange.”

Benson noted that commercial banks and some financial entities have been hesitant to adopt the monetary policies established by the central bank aimed at curbing harmful financial activities.

He contended that without strong legislative action to ensure these policies are carried out, the nation will persistently face severe economic impacts resulting from an ongoing increase in foreign exchange rates.

After a collective agreement on the issue, the House directed its Committee on Legislative Compliance to guarantee the complete execution of these measures.

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FG urges NIPSS members on creative solutions to national challenge

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The Minister of Budget and Economic Planning, Atiku Bagudu, has urged members of the National Institute for Policy and Strategic Studies (NIPSS), to devise creative solutions to Nigeria’s social and economic challenges.

Bagudu received  participants of the Senior Executive Course 46 of the institute in his office on Monday in Abuja.

According to him, some of the issues confronting Nigeria  as a nation might require out of the box solutions.

“The NIPSS was created in the wisdom of our forefathers, to train senior management personnel that can bring unusual solutions to problems confronting us,” he said.

He urged the participants to eschew self-interest and make decisions that can assist the nation to make better choices.

Bagudu  said that the national planning function of the ministry comes from the National Planning Commission.

He said that the digital economy is one area that the ministry was looking at for mass youth engagement and economic prosperity.

“Digital economy is an evolving process.which the country will have to leverage digital for overall growth and development.

“It is a new reality. Today trading platforms are closing shop and increasingly going digital.

“Nigeria needs to respond positively and reap benefits from the digital economy. But we have to make the space safe through effective regulation.

“Some countries have data protection laws which enable them to check and regulate excesses in the digital space,” he said.

The Minister commended the law enforcement agencies for promptly going after digital platforms like Binance, which was used to disrupt the foreign exchange market and to weaken the Naira.

He also commended the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, for his various monetary policy decisions that restored confidence in the Nigerian economy.

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Cardoso to speaks at IMF meeting on FX reforms

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The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso will speak on foreign exchange (FX) market reforms at the ongoing International Monetary Fund (IMF) Spring Meetings on Wednesday in Washington D.C.

The meetings of the Boards of Governors of the IMF and the World Bank Group (WBG) bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organisations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.

Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system

Cardoso assumed office as the Governor of the CBN in September 2023. Since then he has introduced some new FX policies and adjusted some existing ones to ensure the stability of the naira.

According to Cardoso, the exchange rate in Nigeria has increased/depreciated due to the simultaneous occurrence of two factors: a decline in the supply of US Dollars coinciding with a surge in the demand for US dollars.

He said in February 2023 that the foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply due to non-remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.

To address exchange rate volatility, he said a comprehensive strategy has been initiated to enhance liquidity in the FX markets.

This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs, enforcing the Net Open Position limit, and adjusting the remunerable Standing Deposit Facility cap.

As part of measures to control inflation and stabilise the naira, the CBN last month raised its benchmark interest rate, known as the Monetary Policy Rate (MPR) by 200 basis points to 24.75 percent from 22.75 percent in February 2024.

In her second term message, Kristalina Georgieva, IMF managing director, who was recently reappointed by the executive board of the IMF, said, “I am deeply grateful for the trust and support of the Fund’s Executive Board, representing our 190 members, and honoured to continue to lead the IMF as managing director for a second five-year term.”

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PenCom recovers N12.45bn from erring employers

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The National Pension Commission (PenCom) said it has recovered N12.45 billion from employers that failed to contribute towards their employees retirement.

The recovery would indeed help in wealth creation for the workers, thereby securing them against old age poverty in retirement.

PenCom in its 4th quarter 2024 report, said it has maintained the services of Recovery Agents (RAs) for the recovery of unremitted pension contributions and penalties from defaulting employers.

It submitted that during the quarter, the sum of N319,468,587.45 comprising principal contributions N128,176,029.95 and penalties N191,292,557.50 was recovered from 32 defaulting employers.

It noted that meanwhile, the Commission Secretariat/Legal Advisory Services Department had been requested to take legal action against 4 defaulting employers.

The pension industry regulator maintained that from the commencement of the recovery exercise in June 2012 to 31 December 2023, a total sum of N25,447,085,186.71 comprising of principal contributions N12,929,415,445.52 and penalties N12,517,669,741.19 was recovered from defaulting employers.

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