CBN’s Cashless Policy Faced Challenges as Digital Banking Channels Prove Unreliable
The Central Bank of Nigeria’s (CBN) cashless policy, which aims to reduce the amount of cash in circulation, has faced challenges due to unreliable digital banking channels.
The Fintech Association of Nigeria has warned that the policy could damage customers’ trust in the banking system due to challenges with execution, such as merchants still requesting cash payments despite digital channels being available, and Point of Sale (PoS) merchants whose charges have increased to nearly 50 percent.
The policy was meant to bring ease of transaction for citizens but has been plagued by challenges. Due to the policy, many Nigerians have turned to digital banking channels, which have seen them face issues such as network problems, failed transactions, and fraudulent attacks.
According to reports, seven out of ten people in customer service queues at some major Nigerian banks are there because of a failed transaction or an unauthorized fraudulent transaction, particularly when using electronic banking channels.
Customers have expressed discomfort with electronic transactions due to their high risk and exposure to cybercriminals. Failed transactions are another concern for most customers who are reluctant to use electronic banking channels. Sometimes, failed transactions can take weeks or months to be resolved, forcing customers to give up on the cash, which is usually associated with a technical error.
Bank customers have raised concerns about fraud and inefficiency in electronic banking channels and are urging for them to be addressed before the cashless policy can be pushed forward.
Despite claims by Nigerian banks that they have invested over N100 billion in setting up and maintaining cutting-edge electronic channels over the past few years, the policy is still plagued by various challenges.
A cashless economy does not seem like a bad policy in itself, but it must be executed correctly and with the safety and convenience of customers in mind. Therefore, it is essential for the Nigerian banking system to address the challenges associated with the policy’s implementation, such as fraudulent attacks, failed transactions, and technical errors. By doing so, the banking system can ensure that customers can use digital banking channels with confidence and the cashless policy can be successfully implemented.
Demola Sogunle Increases Stake in Stanbic IBTC
Dr. Demola Sogunle, the Chief Executive Officer of Stanbic IBTC Holdings Plc has expanded his stake in the bank by 1,521,117 shares.
This was made known in a statement signed by Chidi Okezie, Company Secretary, Stanbic IBTC and made available to investing public.
The bank chief acquired the shares between 21 March and 24 March 2023 at N37.05 a unit. Meaning, he paid a total sum of N56.357 million for the acquisition.
Sogunle held 3.41 million indirect shares before acquiring more shares in Stanbic IBTC as of December 31, 2022. In 2021, he held 2.41 million indirect shares, which he increased to 3.41 million last year.
Sogunle remained the second-largest shareholder in Stanbic IBTC after Ifeoma Esiri, who holds 40.38 million direct shares and 3.11 million indirect shares valued at N1.63 billion as of December 2022.
During the financial period of 2022, Stanbic IBTC reported a gross turnover of N287.53 million, surpassing the N206.64 million generated in the previous year. The financial institution also recorded growth in its net interest income, which increased to N113.11 billion in 2022 from N75.37 billion in 2021.
In addition, Stanbic IBTC closed the year with N80.81 billion in net profit, an improvement on the N56.96 billion profit after tax earned in the corresponding period of 2021.
Stanbic IBTC Holdings’ Gross Earnings Reach a Decade High in 2022 With 131% Growth in Trading Revenue
Stanbic IBTC Holdings reported its highest gross earnings in a decade, aided by a 131% growth in trading revenue in 2022, according to data released by the Nigerian Exchange Group (NGX).
Gross earnings grew by 39.15% to N287.54 billion in 2022 compared to N206.64 billion in 2021, while trading revenue for the period surged to N34.69 billion in 2022 from N13.29 billion in 2021.
The growth in interest income was driven by an increase in the volume of risk assets and growth in average yield due to a higher interest rate environment, analysts at CSL Stockbrokers Limited said in a note.
The bank declared earnings per share of N603 per share in 2022 from N420 per share in 2021, and proposed a final dividend of N2.00 per ordinary share.
Further checks by Investors King showed that the bank’s interest expense rose by 34.62 percent to N39.55 billion in 2022 compared to N29.38 billion in 2021. This was driven by a significant increase of 124 percent in interest generated from savings accounts and a 62.36 percent increase in interest from borrowed funds.
The bank’s fees and commission revenue also grew by 8.77 percent to N96.07 billion in 2022, up from N88.32 billion in 2021. However, its fees and commission expenses decreased by 8.05 percent from N5.44 billion in 2021 to N5.01 billion in 2022.
Despite the profit growth, the bank’s activities are not generating cash as net cash flow from operating activities amounted to N-84.23 billion in 2022.
The bank’s return on equity for the full year period of 2022 increased by 470 basis points to 19.82 percent compared to 15.12 percent in 2021.
Nigeria Raises Interest Rate by 50 Basis Points to 18%
The Central Bank of Nigeria (CBN) led monetary policy committee has raised the nation’s borrowing cost by another 50 basis points following a 500 basis points increase in 2022 to 18%.
The committee attributed its decision to the rising inflation rate and the need to contain price development around expectations of subsidy removal and other energy sources.
“These in the view of members, provides a compelling argument for an upward adjustment of the policy rate, albeit, less aggressively. The Committee, however, noted that the naira redesign and cash withdrawal limit policies have resulted in a sizeable reduction in Currency-Outside-Banks, indicating an expected improvement in the potency of monetary policy tools,” the minutes stated.
Another factor considered was the drop in capital importation and the impact of exchange rate pressure on domestic price levels.
The committee, therefore, called for policies to attract both portfolio and foreign direct investment to Nigeria.
It maintained optimism that, the continued progress made with the RT200 FX programme, Naira-4-dollar and
other policies targeted at attracting diaspora remittances, would continue to help improve accretion to the external reserves and improve liquidity in the foreign exchange market.
Members, however, remained aware of the ongoing challenges associated with the limits imposed on cash withdrawals in the face of frequent downtime in bank electronic transaction channels. The Committee thus called on Other Depository Corporations, online payment platforms, and other stakeholders to ensure that the prevailing incidence of network failures is overcome in the immediate and short term.
This would ensure that the Naira Redesign and Cash Withdrawal Limit Policies lead to an improved in-road of the CBN Cashless program and efficiency of the transmission mechanism of monetary policy.
Members, therefore, agreed to raise Monetary Policy Rate by 50 basis points, with ten members voting to raise the MPR by 50 basis points while one member voted to raise the MPR by 25 basis points and one member voted to hold the MPR. All members voted to keep all other parameters constant.
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