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Banking Sector

CBN Reveals Guidelines for BNCH Operations

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Godwin Emefiele - Investors King

The Central Bank of Nigeria has revealed in a statement, the new guidelines for Bank Neutral Cash Hubs operation across the country.

The apex bank revealed this update per the statement on its website which reveals that the guidelines are succinct in furtherance of its mandate to promote a sound financial system in Nigeria. The bank also said that the guideline was a collaborative effort with the Banker’s Committee to reduce cost and improve operational efficiency in the country’s cash management.

The statement on the CBN website reads in part: “The CBN, in collaboration with the Banker’s Committee, initiated the Nigerian Cash Management System, which seeks to reduce cost and improve operational efficiency in the country’s cash management value chain. One initiative towards the stated goal is the introduction of BNCH. BNCHs are cash collection centres to be established by registered processing companies or Deposit Money Banks (DMBs) based on business needs. They will be located in areas with high volumes of commercial activities and cash transactions.” 

The central bank also pointed out that these hubs would provide platforms for customers to make cash deposits and receive value irrespective of the bank with which the customers have their accounts domiciled.

“This guideline aims to provide minimum standards and requirements for BNCH registration and operations for effective supervision. The key objective is to reduce the risks and costs borne by banks, merchants and huge cash handlers in the course of cash management activities. It will also deepen financial inclusion and leverage on shared services to enhance cash management efficiency,” the bank said.

Investors King also gathered that according to the guidelines, a BNCH can carry out activities like receipt of Naira denominated deposits on behalf of financial institutions from individuals and businesses with high volumes of cash.

“It can also carry out high volume cash disbursement to members of the public on behalf of financial institutions, and any other activities that may be permitted by the CBN. But it is not permitted to carry out investing or lending activities, or receive, disburse or engage in any transaction involving foreign currency,” the statement reads.

It is quite interesting to note that this guideline is coming after an earlier request by the House of Representatives that was calling out to the Central Bank of Nigeria (CBN) to create rigid measures to regulate the use of Point of Sale (POS) business Operations hubs in Nigeria. The development by the CBN for BNCH is quite a welcomed one, however, we can only hope that close attention is paid to ensure that banks follow these laid down guidelines.

Banking Sector

Tinubu Aide Urges CBN Governor to Consider Political Impact of Economic Reforms

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Central Bank of Nigeria (CBN)

Tunde Rahman, a senior aide to Nigerian President Bola Tinubu, has said Central Bank of Nigeria (CBN) Governor Olayemi Cardoso must start factoring in the political effects of CBN’s decisions.

In his piece, titled “Navigating the Dilemma: Political Considerations in Economic Reforms,” sheds light on the complexities facing Cardoso as he seeks to stabilize Nigeria’s economy.

Rahman’s commentary shared through the Presidency’s official channels, acknowledged the challenges Cardoso confronts, particularly regarding the country’s currency devaluation and the contentious plan to relocate CBN staff from Abuja.

While Rahman refrained from direct criticism of Cardoso’s policies since his appointment by Tinubu, he underscored the necessity for the CBN governor to strike a delicate balance between economic imperatives and political sensitivities.

The upcoming meeting of the monetary policy committee presents a pivotal juncture for Cardoso, where discussions are expected to revolve around potential interest rate hikes to counter inflation and bolster the national currency.

Rahman’s insights underscore the high stakes involved in these decisions, especially given the public outcry over soaring living costs and inflation rates nearing three-decade highs.

Cardoso’s commitment to orthodox central banking, following a period marked by blurred monetary and fiscal policy lines, reflects his determination to navigate Nigeria’s economic landscape with prudence.

Nonetheless, Rahman’s op-ed serves as a reminder of the intricate interplay between economic reforms and political realities, urging Cardoso to exercise flexibility in policymaking, especially in matters with broader political implications.

As Nigeria grapples with economic challenges, the spotlight remains firmly fixed on Cardoso and the CBN’s response to the nation’s evolving financial landscape.

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Banking Sector

CBN’s New Foreign Currency Gateway Bank Raises Concerns Over Nigerian Banks’ Liquidity: Fitch Ratings

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Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN)’s announcement of a new Foreign Currency Gateway Bank has stirred concerns over the liquidity of Nigerian banks, according to recent commentary from credit rating agency Fitch Ratings.

The proposed bank, designed to centralize correspondent banking activities, has prompted Fitch to issue cautionary remarks regarding its potential impact on the banking sector’s foreign currency (FC) liquidity.

Governor of the CBN, Dr. Olayemi Cardoso, unveiled plans for the Foreign Currency Gateway Bank to streamline and centralize correspondent banking functions, currently dominated by two major banks.

The initiative is part of the CBN’s efforts to address Nigeria’s persistent forex crisis.

Fitch Ratings expressed apprehension, highlighting the potential negative effects on the banking sector’s FC liquidity.

The agency noted that the centralization of correspondent banking activities, coupled with recent measures by the CBN, might exacerbate liquidity challenges for Nigerian banks.

Furthermore, Fitch cautioned that the recent devaluation of the naira, coupled with the CBN’s circular prohibiting banks from holding net long foreign currency positions, could further strain FC liquidity.

The prohibition on net long FC positions may leave banks more vulnerable to naira depreciation, potentially affecting their capital positions.

The CBN’s move to harmonize different segments of the foreign currency market last June led to significant naira devaluation, with the local currency closing at 899/$ at the official market by the end of last year.

As of February 13, the naira experienced a second devaluation, reaching 1,516/$, marking a 40% devaluation.

While the shift away from a managed exchange rate regime aims to attract capital inflows and mitigate forex shortages, it poses short-term risks such as heightened inflation and potential strains on loan quality and capital adequacy within the banking sector, as highlighted by Fitch Ratings.

As discussions continue, stakeholders closely monitor the implications of the proposed Foreign Currency Gateway Bank on Nigeria’s financial landscape.

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Banking Sector

CBN Mandates Automated Transaction Monitoring to Combat Fraud in Nigeria

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Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN) has introduced new regulations mandating banks to implement automated transaction monitoring systems to combat the growing threat of fraud in the country’s financial sector.

Under the CBN’s latest ‘Consumer Protection Regulations’ draft, banks are required to adopt advanced measures to protect customers’ assets and prevent fraudulent activities.

These measures include multi-variant customer identification, multifactor authentication mechanisms for transactions, automated transaction monitoring, alert functions, and behavioral monitoring.

The move comes amid a significant rise in fraud cases across Nigeria, with the first half of 2023 witnessing 24,232 reported fraud cases totaling N12.33 billion.

The banking industry has seen 110 executives and junior staff members dismissed due to fraud-related offenses amounting to N82 billion over the past two years.

According to the CBN, sensitizing customers on fraud threats or scams and providing secure and simple user interfaces for digital financial services are crucial steps to minimize the risk of fraudulent activities.

The regulations emphasize the importance of continuous efforts to enhance cybersecurity and protect consumers in an increasingly digital financial landscape.

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