In a bid to stabilize the foreign exchange market and ensure efficient management of excess foreign currency, the Central Bank of Nigeria (CBN) has introduced new guidelines for Deposit Money Banks (DMBs) regarding the deposit of foreign currency notes.

The directive, detailed in a circular issued by the Director of Currency Operations, Mohammed Solaja, was published on the CBN’s website on Friday.

Under the new regulations, each bank is permitted a maximum daily deposit of $10 million in USD 100 and USD 50 notes. These deposits can only be made at the CBN branches in Abuja and Lagos.

For smaller denominations, such as $20 notes and below, the maximum daily deposit is set at $1 million.

The circular, referenced as COD/DIR/INT/CIR/001/016, specifies that DMBs must notify the CBN in writing of their intention to make such deposits at least three working days in advance.

This measure aims to facilitate proper planning and efficient handling of foreign currency deposits.

“To deepen the foreign exchange market, boost liquidity, and attain convergence in the exchange rates of the parallel and official markets, the Central Bank of Nigeria (CBN) has approved that DMBs may deposit their excess foreign currency notes with Lagos and Abuja branches of the bank,” the circular stated.

“The approval is a response to the increasing demand by DMBs to deposit their forex cash with CBN for onward credit to their offshore accounts with correspondent banks.”

The CBN’s move comes amid growing concerns over the volatility of the naira and the need for more robust management of foreign currency reserves.

By capping daily deposits and requiring advance notification, the CBN aims to better monitor and control the inflow of foreign currency into the banking system.

Industry analysts have welcomed the new guidelines, noting that they could help reduce pressure on the naira and contribute to a more stable foreign exchange market.

However, some have also expressed concerns about the potential impact on banks’ operational efficiency, especially for those handling large volumes of foreign currency transactions.

The new rules are part of broader efforts by the CBN to enhance liquidity and achieve exchange rate stability.

The central bank has been implementing various measures to address the challenges in the foreign exchange market, including interventions in the forex market and policy adjustments to attract foreign investment.

The Federal Government, through the Central Bank of Nigeria, is set to commence the disbursement of N150 billion in loans to micro, small, and medium enterprises (MSMEs) and manufacturers by the end of July.

This initiative aims to bolster the nation’s economy amidst ongoing economic challenges.

Doris Uzoka-Anite, the Minister of Industry, Trade, and Investment, revealed this significant development on Thursday through her official X handle.

She stated that the government has dedicated N75 billion to support MSMEs and another N75 billion to the manufacturing sector.

The disbursement process is in its final stages, with applications still open for interested businesses.

The Presidential Conditional Grant Scheme, part of the broader Presidential Palliatives Programme, was unveiled in December 2023.

This scheme is designed to help businesses navigate the economic pressures resulting from recent government policies, such as foreign exchange market harmonisation and fuel subsidy removal.

“To all applicants of the Presidential Conditional Grant Scheme who are yet to be paid, thank you for your continued patience. The disbursement process is still ongoing, and we have allocated about 60 percent of the 1 million grants,” Uzoka-Anite noted.

The scheme has already provided financial grants of N50,000 each to 60 percent of the proposed one million beneficiaries across Nigeria’s 774 local government areas.

In response to complaints from applicants who have not yet received their grants, the minister clarified that the selection process was not based on who applied first but rather on a random computer-generated selection.

She acknowledged the delays in the disbursement process, attributing them to issues such as incorrect or missing data, duplicate applications, and spurious entries.

“Almost 4 million Nigerians applied for the Palliative grant of 50k, but only 1 million beneficiaries can be accommodated. This means not all applicants will receive the grant,” she explained.

Uzoka-Anite emphasized that the government is committed to ensuring fairness and accuracy in the disbursement process.

Last month, the government disbursed a total sum of N20.11 billion to 402,283 beneficiaries through their bank accounts, verified by their Bank Verification Numbers (BVNs).

The minister expressed her gratitude to the applicants for their patience and urged them to provide constructive feedback without resorting to abuse or bigotry.

“Personal insults and hate speech are not likely to aid your applications and will not be tolerated. Together, we can build a more prosperous Nigeria,” she added.

Nigeria’s fiscal landscape is facing unprecedented challenges as debt repayments now exceed both recurrent and capital expenditures.

Tilewa Adebajo, CEO of The CFG Advisory, stated these pressing issues during his presentation on “Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening” at the Finance Correspondents Association of Nigeria (FICAN) bi-monthly forum in Lagos.

According to Adebajo, Nigeria’s debt burden has surged to $130 billion, with 95% of the country’s revenue now allocated to debt servicing.

This development raises concerns about the sustainability of the nation’s fiscal policies and the potential for a debt default akin to those seen in Ghana, Zambia, and Ethiopia.

The National Bureau of Statistics (NBS) reported that Nigeria’s public debt stock soared from N97.34 trillion in December 2023 to N121.67 trillion in March 2024.

Despite allocating N8.7 trillion for capital expenditure in the 2024 budget, only N1.32 trillion is directed towards infrastructure development, highlighting the severe underfunding of critical sectors.

“The current debt levels are unsustainable,” Adebajo warned. “With an additional $10 billion from the 2024 budget deficit, we must commence discussions on restructuring both domestic and external debt to avoid severe economic repercussions.”

Nigeria’s economic indicators paint a grim picture. The country remains in stagflation, grappling with high inflation and stagnant growth.

The introduction of the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the removal of fuel subsidies have boosted the Federation Account Allocation Committee (FAAC) revenues by 130% from May to November 2023, yet these measures have not sufficed to stabilize the economy.

Foreign Direct Investment has plummeted to under $1 billion, the lowest in history. Power transmission and distribution infrastructure remains poor, stifling industrial growth and economic productivity.

The macroeconomic situation has deteriorated over the last seven years, with GDP shrinking by an estimated $180-200 billion, now standing at $390 billion.

Adebajo emphasized the dire need for structural reforms. “Nigeria requires a GDP growth rate of 8-10% to sustain its population of 200 million. Current growth at 3% is insufficient, with 135 million Nigerians trapped in poverty and 40% unemployment,” he noted.

“Dwindling reserves and increasing credit default swap premiums have led to a Caa1 junk bond rating status.”

Despite these challenges, Adebajo expressed cautious optimism. “The fundamentals of the Nigerian economy remain sound. However, poor economic leadership has stifled growth. With a new, highly rated economic management team in place, there is hope for significant improvement if reform policies are implemented sincerely and effectively.”

Adebajo proposed several solutions to address the economic crisis:

1. Debt Restructuring: Engage creditors to restructure and extend debt maturities, allowing for manageable repayments and reduced interest rates.
2. Fiscal Discipline: Reduce non-essential government spending, eliminate wasteful subsidies, and enhance public service efficiency.
3. Revenue Expansion: Broaden the tax base, improve collection, and introduce new revenue streams such as value-added tax (VAT) and property taxes.
4. Transparency: Increase transparency and accountability in government spending to build public trust and attract foreign investment.
5. Monetary Policy: Maintain tight monetary policies to combat inflation and attract foreign investment.
6. Competitive Exchange Rate: Stimulate exports and reduce import reliance by maintaining a competitive exchange rate.
7. International Collaboration: Leverage regional and international partnerships for financial assistance, expertise, and market opportunities.
8. Public Engagement: Engage with the public, businesses, and civil society to garner support for economic reforms.

Adebajo concluded with a call for action, stressing the importance of commitment from the new economic management team to drive the necessary reforms and steer Nigeria out of its current economic quagmire.

“The success or failure of our economy hinges on their ability to deliver on reform policies and achieve sustainable GDP growth targets,” he asserted.