CBN Suspends Nationwide Cashless Policy, Creates FX Window for Investors, Exporters

Inflows from abroad drop for second consecutive year 

Forex: Banks accused of frustrating access by SMEs 

FG to embark on aggressive tax drive

By Kunle Aderinokun, Obinna Chima, Funke Olaode, Kasie Abone and Nosa Alekhuogie, in Washington DC

The Central Bank of Nigeria (CBN) has once again suspended the nation-wide implementation of the cashless policy which commenced this month.

The CBN which disclosed this in a circular titled: “Re: Circular on National Implementation of the Cashless Policy,” dated April 20, 2017, a copy of which it posted on its website yesterday, did not give any reason for its abrupt decision.

In a related development, two weeks after opening a special foreign exchange (FX) window for Small and Medium Enterprises (SMEs) to enable operators import eligible finished and semi-finished items, the CBN yesterday established a fresh widow for investors and exporters tagged: “Investors’ & Exporters’ FX Window”.

Also yesterday, the CBN said it had received complaints from small and medium scale (SME) operators eligible for accessing foreign exchange (FX) under its newly opened window that they were being frustrated by the commercial banks.

This is just as the Minister of Finance, Mrs. Kemi Adeosun said revenue mobilisation remains critical to the success of Nigeria’s economic reform agenda.

The circular suspending the nationwide implementation of the cashless policy, signed by its Director, Banking and Payment System Department, Mr. Dipo Fatokun, directed banks to revert to old charges and refund customers that they had debited.

It stated that the existing policy before the announcement of the new policy would remain in place in Lagos, Ogun, Kano, Abia, Anambra, Rivers and Abuja.

“You will recall that a directive was issued on the nationwide implementation of the cashless policy vide our circulars with reference numbers BPS/DIR/GEN/CIR/04/001 dated February 21 and BPS/DIR/GEN/CIR/04/002 dated March 16.

“Please note that the new withdrawal and deposit processing fee charges above the threshold, as contained in the circulars referenced above, are hereby suspended until further notice. The position of the policy shall now revert to the status quo ante.

“The new policy already applied effective April 1, 2017 as contained in the circulars in reference above should be reversed and the old charges be applied. All necessary refunds should be made accordingly.”

The CBN had in February announced the re-introduction of charges on cash deposits by bank customers.

It had explained that the Bankers’ Committee at its 493rd meeting held on February 8, 2017, reviewed the cashless policy charges on withdrawal and deposit and then decided that the policy be extended to the 30 remaining states of the federation.

Among other charges, the earlier circular had shown that charges on deposits and withdrawals were reviewed such that for individuals with less than N500,000 cash deposit and withdrawals, there would be no charge. In addition, for cash between N500,000 and N1 million, deposit would be 1.5 per cent charge while for withdrawals two per cent of the amount.

CBN Creates FX Window for Investors, Exporters

A circular issued by the CBN disclosed that the purpose of the fresh forex widow for investors and exporters was to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

The circular signed by the Bank’s Director in charge of Financial Markets, Dr. Alvan Ikoku, listed eligible transactions under the new window to include invisible transactions such as loan repayments, loan interest payments, Dividends/Income Remittances, Capital Repatriation, Management Service Fees and Consultancy fees.

Also on the eligible list are software subscription fees, technology transfer agreements, personal home remittances and any such other eligible transactions including ‘miscellaneous Payments’ as detailed under Memorandum 15 of the CBN Foreign Exchange Manual.

While explaining that the invisible transactions under this window excludes international airlines ticket sales’ remittances, the circular added that the window covered Bills of Collection and any other trade-related payment obligations, which are at the instance of the customer.

The circular further clarified that the permitted invisible transactions and Bills for Collection were eligible to purchase foreign currency sourced from the CBN Forex window limited to Secondary Market Intervention Sales (SMIS) Wholesale (Spot and Forwards) only.

According to the CBN, international airlines ticket sales’ remittances shall only be eligible to access the CBN FX window (SMIS-Retail and Wholesale; spot and forwards.

On participants in the new window, it disclosed that supply of foreign currency to the window shall be through portfolio investors, exporters, authorised dealers and other parties with foreign currency to exchange to naira. The CBN, it added, shall also be a market participant at the window to promote liquidity and professional market conduct.

Taking cognisance of the slow progress made by corporates in on-boarding the FMDQ OTC Securities Exchange (FMDQ) Thomson Reuters FX Trading & Auction Systems, the CBN said participants at the new window would trade via telephone until appreciable progress is made with the FX trading systems on-boarding process.

The circular therefore advised authorised dealers to promote market transparency by encouraging their corporate clients to on-board to ensure the activities of the window are operated on the forex trading systems.

To provide price discovery to the market, it said the FMDQ will be charged with polling buying and selling rates and other relevant information from the major participants in the market to provide participants with the requisite price discovery, and the CBN with the indicative market depth until the market migrates to the FX Trading systems.

As part of the operational requirements of the window, the CBN circular said the exchange rates of the transactions in the window shall be as agreed between authorised dealers and their counterparties. It also said that the CBN reserved the right to intervene as a buyer or seller, as it deems fit, in the window, adding that information on transactions between authorised dealers shall be reported to the CBN on a daily basis.

Banks Accused of Frustrating Access by SMEs

Meanwhile, the Acting Director, Corporate Communications Department, CBN, Mr. Isaac Okorafor, while addressing the media on the sidelines of the ongoing IMF/World Bank spring meetings, urged SME operators that had been denied access to FX by banks to come up with evidence.

Okorafor stressed that the central bank would not fail to sanction any bank or even the chief executive officer(s) of the organisation that violates its rule on FX for SMEs.

“It has become necessary that we bring to your notice the complaints from customers, especially those who operate in the SMEs segment of the market that banks are frustrating their efforts at getting FX. You could recall that recently we introduced a window to be able to give forex to SMEs, which incidentally is the engine of growth in our economy, for them to be able to obtain a small amount of forex that suits their business and we have received complaints now that banks are frustrating them.

“We have reviewed all these complaints and found out that they do not have evidence. So, we want to use this opportunity to appeal to customers of banks and the SMEs to please give us concrete evidence against these banks so that we can hold them responsible by way of sanctions.

“Get a photocopy of your Form Q, Form X, Form A or Form M. Give us the name of the bank, branch and send to us and we will deal with them as example to others. We also say to all Nigerians that the only way we can make things better for you is to call the CBN whenever you are in trouble or whenever you get frustrated. We have a number you can call or you send an email to our Consumer Protection Department. We want to urge everyone who is frustrated by banks to call and lay complaints. We assure you will get redress,” he explained.

Furthermore, in his response to the call by the IMF/World Bank that the CBN should float the naira and liberalise the market, Okorafor said it was “laughable,” citing the case of Egypt where inflation has skyrocketed.

“Yesterday (Thursday) when Madam Christine Lagarde was discussing the economy of Egypt, she lamented herself, the devastating inflation that is in that country. Egypt has half of our population and receives about $12 billion in foreign earnings and several billions in tourism.

“We are 180 million people, our infrastructure is so poor and the productive capacity cannot be fast enough to rise to benefit from massive depreciation. If you float the Naira today, and given the discoveries by security agencies, you’ll discover that our case will be terrible. Egypt today has an inflation rate of almost 31 per cent, remember Angola also has about 36 per cent inflation, ours is at 17.26 per cent.

“If we float the Naira and we allow speculators and those with corruption money and all the people who create the bubbles to launch into the market, you can yourself imagine the kind of situation we will find ourselves. Of course, you should also know that no country floats its currency; just leaving it to the dictates of the market. Our economy has its own peculiarities, and we cannot kill our people in the name of floating the naira,” the CBN spokesman said.

Continuing, Adeosun who spoke during a meeting with fellow finance ministers at a session convened by the G24 Group to discuss strategies to drive non-oil revenue growth and achieve inclusive growth at the ongoing IMF/World Bank spring meetings in Washington said data gathered by the federal government over the last year revealed the need for the government to be more aggressive in pursuing tax avoiders, both domestically and abroad.

According to her, just like some of her contemporaries in the G24 had done successfully, the government would focus more on tax in 2017, through an asset and income declaration scheme to address low tax revenue collection and ensure improved compliance, a broader tax base and more sustainable revenue.

The minister also highlighted the need for strong budget implementation and transparency to create trust and accountability in government.

Inflows from Abroad Drop for Second Consecutive Year

It has also emerged that remittance to Nigeria fell by 10 per cent in 2016, the latest edition of the Migration and Development Brief released yesterday has shown.

The report which was unveiled on the sidelines of the ongoing International Monetary Fund/World Bank spring meetings in Washington DC, also showed that it was the second consecutive year remittance into the country would decline, a trend not seen in three decades.

The development was largely attributed to slow economic growth in remittance-sending countries; decline in commodity prices, especially oil, which impacted remittance receiving countries; and diversion of remittances to informal channels due to controlled exchange rate regimes in the country.

Generally, it revealed that remittance to Nigeria and other countries in Africa declined by an estimated 6.1 per cent to $33 billion in 2016. Similarly, remittance to other major receiving countries were also estimated to have fallen last year, including Bangladesh (-11.1 percent) and Egypt (-9.5 percent).

India, while retaining its top spot as the world’s largest remittance recipient, led the decline with remittance inflows amounting to $62.7 billion last year, a decrease of 8.9 per cent over $68.9 billion in 2015.

The exceptions among major remittance recipients were Mexico and the Philippines, which saw inflows increasing by an estimated 8.8 percent and 4.9 percent, respectively, last year.

The Bank estimated that officially-recorded remittances to developing countries amounted to $429 billion in 2016, a decline of 2.4 per cent over $440 billion in 2015.

Global remittances, which include flows to high-income countries, contracted by 1.2 per cent to $575 billion in 2016, from $582 billion in 2015.

“Low oil prices and weak economic growth in the Gulf Cooperation Council (GCC) countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa. The decline in remittances, when valued in U.S. dollars, was made worse by a weaker euro, British pound and Russian ruble against the U.S. dollar.