The Central Bank of Nigeria (CBN) has threatened to sanction banks still collecting payments under the Nigerian Content Development Fund (NCDF) without remitting to the dedicated account opened for the fund.

Godwin Emefiele, CBN governor, made this statement at the stakeholders’ forum, organised by the Nigerian Content Development and Monitoring Board (NCDMB) in Lagos.

Represented by Jack Ukitefu, a deputy director at CBN, Emefiele said the bank would collaborate with the agency to identify the defaulting banks.

He warned them to close such accounts and remit the funds at their disposal to the dedicated account with the apex bank.

He said the infraction by the bank was a violation of the treasury single account (TSA) policy and promised to punish such banks, adding that the operations of the TSA began in 2015 and that all ministries, departments and agencies should have complied.

Emefiele said CBN will not hesitate to sanction any of the banks identified in the act because it is viewed as a very serious offence.

Simbi Wabote, executive secretary of the NCDMB, said the NCDF was established by section 104 of the Nigerian Oil & Gas Industry Content Development (NOGICD) Act of 2010.

Wabote said the act provided that one percent of every contract in the upstream sector of the Nigeria oil and gas industry shall be deducted at source and paid into the fund.

The act also gives the board the mandate to manage the fund and employ it for projects, programmes and activities directed at increasing Nigerian content in the Oil and Gas industry.

“The board opened up the fund for utilisation from 2013, based on the approved operating model that segmented 70 percent of the fund to finance commercial interventions and 30 percent for developmental initiatives and activities carried out by the board on behalf of the industry,” he said.

“Under commercial interventions, the fund was leveraged to provide 30 percent partial guarantee to commercial banks for loans granted to oil and gas service companies towards financing project execution.”

The Central Bank of Nigeria (CBN) says deposit money banks who borrow without adequate security will be suspended from the window for eight weeks.

In a circular released on Wednesday, the CBN announced new rules on how banks can borrow cash from fellow banks or the CBN to cover their temporary shortfalls or meet their obligations.

The regulator said that any commercial bank that fails to comply with the new directives will be suspended from its window for eight weeks.

The circular was signed by Alvan Ikoku, director, financial market of the apex bank.

“With reference to Section 10.1 of the S4 business rules and guidelines, which states among others that transaction with the CBN, any auction or two-way quote with the CBN must be settled. If it is in queue, it shall be given highest priority and when it fails to settle, the system shall generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction,” he wrote.

“Where there are no securities, the allotment shall be cancelled and the defaulter suspended from all auctions for eight weeks, effective from the date of default.

“The ILF shall be bought back or converted to Standing Lending Facility (SLF) by the participant by the close of business day, failing which it shall be automatically converted to SLF at the prevailing SLF rate plus 500 basis points.

“If any SLF is not purchased by the participant by the next business day, such participant shall not be eligible to access the CBN discount window until such outstanding obligation is settled in accordance with Section 27 of the Guidelines for the Conduct of Repurchase Transactions under the CBN Standing Facilities.

“Henceforth, all SLF must be bought back latest by 10am on the maturity date, failing which encumbered securities would be automatically rediscounted.”

With the new rules, CBN hopes to assess the quantum of liquidity in each bank and identify banks that are having liquidity challenges.

The CBN also hopes it may help banks to desist from unethical practices.

The Central Bank of Nigeria (CBN) yesterday retained the Monetary Policy Rate (MPR) at 14 per cent.It is the rate at which the CBN lends money to deposit money banks in the country.

According to the apex bank, the need to watch and re-assess the challenges that confronted the economy in 2016 and the opportunities for recovery in 2017 informed its decision against calls by some stakeholders for a cut in the rates to engender credit as a means of spurring national growth.

Accordingly, it maintained all the policy rates at their subsisting levels: MPR at 14 per cent; Cash Reserve Requirement (CRR) at 22.5 per cent; and Liquidity Ratio at 30.00 per cent. The bank retained the asymmetric corridor at +200 and -500 basis points around the MPR.

Executive Director, Corporate Finance at BGL Capital Limited, Femi Ademola, said with all the rates kept on hold, the retention would sustain the high yield in the fixed income market, which the government mostly patronises through its risk-free securities, while funds for productive activities may even go higher.

The last time there was a change in the policy rate was around July last year when the MPR was moved from 13 per cent to 14 per cent as part of tightening measures to check inflation or excess liquidity in the country.

Addressing newsmen at the end of the Monitoring Policy Committee (MPC) meeting yesterday where the decisions were taken, CBN Governor, Mr. Godwin Emefiele, who also announced that the country’s foreign reserves had grown to a new height of $28.9 billion, gave more reasons to support the committee’s decision.

“Conscious of the prevailing market sentiments in favour of a rate cut, the committee reasoned that most of its decisions in 2016 were informed by the need to address the delicate balance between price stability and growth. Noting that the pressures on consumer prices were yet to abate and even as the economy continued to be in recession despite the intervention support by the CBN, the committee stressed that it was not oblivious of the full ramifications of the economic challenges facing the country,“ he said.

The MPC, Emefiele explained, was concerned that the current situation was not amenable to simplistic analyses and quick fixes such as have found expression and increased attention at different fora and the media. He pointed out that the domestic economic challenges which include chronically import-dependent consumption culture, lack of competitiveness of many sectors of the economy and yawning infrastructural gap, have combined with an unfavorable external environment to complicate the macroeconomic policy environment.

But a development economist, Mr. Odilim Enwegbera flayed the inability of the CBN to cut down rates, saying the apex bank was prolonging Nigeria’s quick recovery from recession

Enwegbara said this is the time for CBN to have loosen grip on the measures, pointing out that at a time of recession, all the economic throttles should be accelerated in a way that forces the entire economy to pick up speed.

“It is by this push that all the sectors of the economy could come on board. But there is no better accelerator of the economic engine than the monetary policy of the country’s central bank. That’s why whenever modern economies are hit by recession, the two things their respective central banks do are to quickly reduce interest rates and inject more liquidity into the economy.”

Meanwhile, some civil society groups and experts have said that the expected change in the economy is yet to be realised.The verdict, which took into consideration the national budgeting processes and its implementations, according to them, has maintained the same tradition that has impinged on its performance.

At the 2017 civil society summit on federal budget in Abuja, yesterday, the Lead Director of the Centre for Social Justice, Eze Onyekpere, pointed out that budgets over the years have failed the test of physical proofs capable of lifting the economy.

Warning of its failures in connection with exchange rate benchmark, he noted that the quest for elusive foreign investments has shifted all attention away from measures needed to sustain domestic investments and businesses that are already providing jobs.

To assess the strength of the nation’s banks, the Central Bank of Nigeria (CBN) is currently conducting stress tests on them. But depositors need not worry. The tests are routine, according to stakeholders.

Top-ranking sources in the banks said yesterday: “The CBN is conducting liquidity ratio and capital adequacy tests to determine how strong the banks are.”

The sources disclosed that “examiners have been sent to all the banks to conduct the tests and the outcome will be made public in a matter of weeks.”

Depending on the outcome of the tests, they said the CBN could take a number of measures, including a takeover of the weak banks or a change of the management.

Although there was no official confirmation from the CBN, a source, who neither denied nor confirmed the tests, said “Usually such tests are done to get certain information about a bank.”

The Chief Executive, First Registrars, Mr. Bayo Olugbemi, said there would be no need for a takeover of any bank. To him, “the best the CBN could do is to intervene. This is what they did in the case of Skye Bank; they didn’t take over. They removed the former executives so that new hands can come in. No bank died and no depositor lost his funds.”

Olugbemi advised that “People should give them (CBN) the benefit of the doubt; if they say there is no problem then there is no problem. But there is still a need for them to carry out a check, to nip the issue in the bud in case there is any problem.”

The registrar added: “Liquidity ratio and capital adequacy test is a routine check and one of the responsibilities of CBN, apart from the fact that they inspect the banks on yearly basis, together with the NDIC (Nigerian Deposit Insurance Corporation). I believe what CBN is saying is that there is no bank that has liquidity issues, because they are the ones in charge.”

Also commenting, the Deputy Managing Director, Afrinvest Capital, Mr. Victor Ndukauba, noted that due to systemic exposure, “the CBN can’t just come out to say there’s an issue with one or two banks, to avoid causing panic or a run on the banks by depositors.

“CBN examinations are routine and they happen fairly often, so I wouldn’t say it is out of the ordinary. I know one of such examiners and he has a schedule that is very unpredictable. It’s a random stress check that can happen even without the examiners themselves knowing where they’re headed or when they’re headed. It’s been a common practice in the last four to five years.”

If a test shows negative, Ndukauba said that such a bank could fall back on inter-bank assistance through overnight lending on very low interest rate or fall back on its deposits with the CBN. He added that the CBN “may not be able to support the banks because chances are they may not even have the capacity to meet all those deposit obligations should they actually crystallise at once.”

According to him, what may impair a bank’s adequacy in the light of recent events in the economy is when its assets are not denominated in United States dollar but it grants loan in dollar to a borrower, which is captured in its books in naira. “There is a transmission gain in value on the basis of that loan made out. So if it has about $100 million in loans to foreign currency borrowers that it had been booking at N200 per dollar, which was the former interbank rate and therefore reflecting a N20 billion exposure, by a devaluation of say 15 or 20 per cent, automatically, the value of that loan goes up by the same margin.

“If the borrower is in a business that earns revenue in naira, there is already a dislocation of maybe 40 to 50 per cent because that business needs almost two times of the same amount in naira in order to meet up with the same obligation, where the dollar is not readily available. This can create some stress because when you’re calculating your capital adequacy ratio, your enumerator had changed and inflated by a 40 to 50 per cent factor, whereas your capital was always in naira but your denominator had expanded. That automatically lowers your capital adequacy ratio. That is one of the potential risks.”