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Interbank Rates Rise as CBN Sells Treasury Bills

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  • Interbank Rates Rise as CBN Sells Treasury Bills 

The Central Bank of Nigeria (CBN) sold about N283 billion ($877.11 million) worth of treasury bills to mop up liquidity, driving up interbank lending rates, traders said on Friday.

Overnight lending rates rose to 20 per cent after the bills was sold but later dropped to 16 per cent towards the market close because the banking system was still in credit to the tune of around N17.44 billion, Reuters reported.

“We expect the market to open in the negative this week, given the volume of OMO bills sold, while the interbank lending rate is seen within the 18-20 per cent range,” one dealer said.

The bank had earlier repaid N160.64 billion worth of matured bills but sold a higher amount to drain liquidity, traders said. It sold the one-year bill on Friday at a rate of 18.5 percent.

In September, the central bank sold Open Market Operations (OMO) bills to soak up about 1.2 trillion naira, in a bid to curb speculation against the currency and shore up fixed income yields to attract investors.

The central bank has said it will keep interest rates tight to attract foreign currency and resolve a chronic dollar shortage brought on by a slump in oil prices.

The CBN Governor, Mr. Godwin Emefiele recently said the ank will pursue price stability as an anchor for economic growth as well as to attract foreign investors as the country battles recession and rising inflation. Emefiele said in an interview with The Banker Magazine.

“The CBN does not reckon that curbing inflation, attracting foreign investors and supporting growth are mutually exclusive objectives. Rather, the monetary policy committee’s decision reflects the (central bank’s) prioritisation of its core mandate of pursuing price stability as an anchor and enabler for economic growth.

“As we have consistently said, the bank will continue to ensure that its decisions not only consider price and financial system stability, but also issues of employment and growth.”

He reiterated that the reintroduction of a flexible exchange rate system has helped increase transparency in the FX market, cleared an estimated $4 billion backlog in FX demand, reduce arbitrage and speculative opportunities, and create a more predictable structure for businesses to prioritise their FX demand, we believe that this policy has been beneficial to the economy.

“This policy has led to a gradual but steady inflow of new FX into the market. All of these have largely met the bank’s expectations in the short term. We believe that these benefits will become magnified as the policy’s sustenance improves the credibility of the CBN and investors trust us more to return more forcefully as active participants in Nigeria’s FX market.

“Obviously, the reintroduction of the flexible exchange rate system
immediately led to a depreciation of the naira in the interbank market, and helped close the significant spread with the parallel market. Also, this policy encouraged movement of FX demand from the parallel to the interbank market, which also brought the two rates closer.

“Finally, new foreign portfolio inflows into the interbank market and our recent policy of allowing commercial banks to transfer some share of diaspora remittances to bureaux de change have also helped moderate rates in both markets.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

Total Currency in Circulation Increased by N56.44bn in September

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Central Bank

Currency in Circulation Rose by N56.44bn in the Month of September to N2.426 trillion

The total currency in circulation increased to N2.426 trillion in the month of September, the Central Bank of Nigeria (CBN) report has shown.

In the report released on Wednesday, the apex bank said the total currency in circulation stood at N2.369 trillion as of the end of August.

The amount then rose by N56.44 billion in September to N2.426 trillion.

A further breakdown of the report revealed that currency in circulation declined by 6 percent in the first quarter of the year to N2.29 trillion, about 7.5 percent below the same quarter of 2019.

The figure stood at N2.35 trillion in May, then rose to N2.39 trillion by the end of July.

While reserve money expanded by 5.9 percent to N12.96 trillion when compared to a 20.7 percent growth recorded in April 2020.

The report also noted that at N10.61 trillion, liabilities to other depository corporations grew 70.5 percent above the previous month’s growth rate of 59.7 percent.

The report said, “The heightened uncertain outlook due to the lockdown encouraged more cash to be held by the public.

“This was evident from the increase in currency in circulation, compared with the level in the preceding month.

“Currency in circulation rose by two per cent to N2.35tn at the end of May 2020, compared with the increase of 0.5 per cent at the end of April 2020.”

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Finance

CBN Directs Banks to go After COVID-19 Financial Criminals

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Godwin Emefile

Central Bank Asks Banks to Stay Abreast Frauds and Rising COVID-19 Financial Crimes

The Central Bank of Nigeria has directed all financial institutions in Nigeria to update alert protocols in their Anti-Money Laundering/Combating the Financing of Terrorism monitoring tools, in accordance with emerging trends of rising COVID-19 related financial crimes.

In a circular titled, ‘Administrative letters to all banks and other financial institutions’ issued on Monday and signed by J.M. Gana, the Director, Financial Policy and Regulation Department, the apex bank said changes in business activities and financial transactions due to the shift caused by COVID-19 pandemic have led to the surge in financial crimes globally.

Therefore, it said financial institutions must now adapt quickly and keep abreast of the new emerging financial risks and other developments to arrest this new and emerging ML/TF.

According to the circular, this includes strategic investment in data mining and artificial intelligence software to monitor financial transactions effectively and report as quickly as possible.

The central bank said the Nigerian Financial Intelligence Unit, the central repository of suspicious transactions and other financial information, had released a comprehensive report on STRs and others.

It stated that the NFIU had identified cybercrimes, frauds, counterfeiting and substandard goods, diversion of public funds and misuse of non-government organisations funds as some of the ongoing crimes that banks across the nation need to stay abreast and report.

Other suspicious transactions and red flags identified in the report were some e-commerce companies with little or zero history or internet presence suddenly receiving multiple payments from unrelated third parties.

Similarly, it said individuals with zero or little history of financial transactions receiving multiple payments from unrelated third parties. It also noted that customers who suddenly start delaying in the supply or purchases of medical supplies and payment of goods linked to known brands, yet the beneficiary is an individual, not a corporate company should be flagged.

The measures, the apex bank said were necessary due to the rising numbers of unusual transactions from banks’ customers and unscrupulous individuals.

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Finance

Union Bank Secures US$40 Million Facility from IFC Global Trade Finance

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Union Bank Secures US$40 Million Facility from IFC Global Trade Finance

Union Bank of Nigeria Plc said it has secured a US$40,000,000 finance guarantee facility from the IFC, a member of the World Bank Group.

In a note to the Nigerian Stock Exchange, the lender said the facility would help boost access to finance for local businesses and enable increased international trade for Nigeria.

It explained that the facility “will support Union Bank to establish working partnerships with nearly 300 major international banks within the GTFP network, thereby broadening access to finance and reducing cash collateral requirements for Nigerian businesses.

“The facility will enable the continued flow of trade credit into the Nigerian market at a time when imports are critical, and the country’s exports can generate much-needed foreign exchange.

Under the IFC’s Global Trade Finance Program (GTFP) terms of the agreement, GTFP offers benefiting banks partial or full guarantees covering payment risk on Union Bank’s trade-related transactions.

Accordingly, these guarantees are transaction-specific and may vary depending on underlying instruments like letters of credit, trade-related promissory notes, guarantees, bonds, and advance payment guarantees.”

Emeka Emuwa, Chief Executive Officer of Union Bank, said, “Union Bank is pleased to join the IFC’s Global Trade Finance Program. This is a significant achievement as we continue to expand our trade financing offerings to our
customers. Even in these peculiar times, we remain focused on contributing to economic growth by developing tailored solutions that help our customers harness the teeming opportunities that still exist in the Nigerian market.

Eme Essien Lore, IFC’s Country Manager for Nigeria, said, “Keeping trade moving is essential to growth and job creation, especially during the challenging economic times we are living through today. We welcome Union Bank to IFC’s Global Trade Finance Program and value a partnership that will make a positive impact on Nigeria’s economy.

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