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CIBN: Our economic challenges are of a global dimension – Emefiele

The Governor of the Central Bank of Nigeria has said that the challenges facing Nigeria’s economy are of a global dimension.

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CBN Governor, naira

The Governor of the Central Bank of Nigeria, Godwin Emefiele has said that the challenges facing Nigeria’s economy are of a global dimension and not peculiar to Nigeria.

Emefiele said this while given his speech at the 55th Annual Bankers Dinner hosted by the Chartered Institute of Bankers of Nigeria (CIBN) 0n Friday, November 27, 2020.

In his opening address, Mr. Emefiele congratulated the CIBN for the annual event, which he was attending for the sixth time since assuming the role of CBN Governor in June 2014.

According to him, each of the dinners provided him ample opportunity to discuss with the key stakeholders in the banking and finance community on critical issues and events shaping the economy, as well as policy measures put in place by the CBN towards revamping and growing the economy.

He enumerated several issues and challenges facing the economy, which were not peculiar to Nigeria but global. Hence, nothing for the country to panic about.

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In his words, “We confess that the problem we face today is of a global dimension. The Global Economy is challenged, just like the Nigerian economy. My appeal to our media analysts is that in the course of conducting their analysis of the Nigerian economy, they should realise that their public comments, particularly if they are alarmist, could create panic in our environment.

“We cherish their counsel, but urge that they be more constructive in their pungent criticism as this could hamper our efforts to return our country and economy back to recovery. When you over dramatize a problem, you create panic that slows the process of recovery.”

According to Emefiele, the times have been challenging, as the COVID-19 pandemic completely ravaged the global economy, but it was quite reassuring that a solution would soon emerge, with the reports of developments of appropriate vaccines by several firms to tackle the dreaded disease.

Mr. Emefiele said, “Like other economies, the Nigerian economy was not immune from the COVID-19 shock in 2020. Nigeria’s gross domestic product (GDP) contracted by -3.4 percent in the third quarter, a welcome improvement from the – 6.1 percent recorded in the second quarter. The negative rate of growth was due to a series of external factors in addition to the lockdown measures, imposed in order to curtail the spread of the virus.”

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Emefiele challenged the banks to optimally harness the huge value-chain opportunities in several sectors of the economy through their intermediation functions, saying:

Let me also add that while COVID-19 has brought on several challenges to our economy and indeed the banking sector, it offers a unique opportunity for us to build a more resilient economy that is better able to contain external shocks, whilst supporting growth and wealth creation in key sectors of our economy.

“Proactive steps on the part of stakeholders in the banking and financial system in supporting the growth of sectors such as agriculture, ICT and infrastructure, will strengthen our ability to deal with the challenges that have been brought on by COVID-19, while enabling the growth of our economy in general.”

Bottom line

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With a sustained and consistent implementation of the intervention measures, the Nigerian economy is expected to rebound from recession by the first quarter of 2021 (Q1 2021).

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However, this depends to a large extent, on the full restoration of economic activities in key sectors, as well as the production of appropriate COVID vaccines that will be made available to millions of people across the world.

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Johnson is a risk management professional and banker with unbridled passion for research and writing. He graduated top of the class with B.sc Statistics from the University of Nigeria and an MBA degree with specialization in Finance from Ambrose Alli University Ekpoma, with fellowships from the Association of Enterprise Risk management Professionals(FERP) and Institute of Credit and Collections management of Nigeria (FICCM). He is currently pursuing his PhD in Risk management in one of the top-rated universities in the UK.

1 Comment

1 Comment

  1. Virtual Reader

    November 29, 2020 at 12:10 pm

    Excuse me sir, do you mean to write CBN? Because I don’t understand what you meant by CIBN and you didn’t mention the meaning in the entire article.
    Kindly correct if it’s an error.

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Debt Securities

Interest rates will remain low until the end of H1 2021 – Meristem Securities

Meristem Securities has argued that interest rates will remain low until, at least, the end of H1 2021.

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Why Emefiele’s interest rate policy is ‘great’

Meristem Securities has asserted that interest rates will remain low until, at least, the end of H1 2021.

This statement was made at the recently held webinar on Global Economy and Outlook, which the company themed: Bracing for a Different Future.

Although the company acknowledged that there is mounting pressure for upward movement in yields from several stakeholders, it appears the company concurs nothing concrete is in sight.

This line of reasoning seems to have influenced their decision to advise investors to move away from Treasury instruments.

What they are saying

Meristem advises that:

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  • “Buy and hold strategy investors seeking to generate above average returns should move away from risk free Treasury instruments and focus on investment grade commercial papers and bonds which satisfy investment objectives.”
  • “Active traders with higher risk appetite are advised to focus on high-yield short duration instruments, which would be re-invested into a higher yield environment should rate reversals occur.”

The advice regarding shunning Treasury instruments appears to be in order, considering that treasury bill rate has been declining, with the latest figure — November 2020 — 0.03% as per the CBN monthly interest rate data.

Further checks from the Debt Management Office website, indicates that the latest figures for Eurobonds and Diaspora bond fall short of the fixed yield at issue for all the different categories of bonds in issue.

What you should know

Latest figures from the CBN’s monthly interest rate indicate that:

  • Treasury bill rate has been on a steady decline for six months, down to 0.03% since the last rise (2.47%) in May 2020.
  • Fixed deposit rates (one, three, six and twelve months) have also been declining – the latest figures for these indicate that in November 2020, one-month deposit rate was 1.92%, 2.9% for three months, 2.84% for six months, and 4.89% for 12 months.
  • Compared with the corresponding period in 2019, the figures indicate that these rates fell by 75%, 66%, 71% and 49% respectively.

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Financial Services

CBN issues framework for QR payments

CBN has issued a framework that would guide Quick response (QR) code payments in Nigeria.

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The Central Bank of Nigeria has issued the framework that would guide Quick Response (QR) Code Payments in Nigeria.

This is a proactive move by the Apex bank towards ensuring the safety and stability of the Nigerian Financial System, as well as promoting the use and adoption of electronic payments and foster innovation in the payments system.

READ: Over 1 million people took loans from banks below 20% interest rate in 1 year- CBN

Quick Response (QR) Codes are matrix barcodes representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by an imaging device, processed and transmitted by appropriate technology.

The codes are used to present, capture and transmit payments information across payments infrastructure and further enable the mobile channel to facilitate payments and present another avenue for promoting electronic payments for micro and small enterprises.

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READ: Binance offers DeFi coders $100,000; DeFi market value hits $8 billion

What you should know

  • Quick Response (QR) codes are two-dimensional bar codes. QR code payments allow merchants to receive payments from customers simply by scanning generated QR codes using a smartphone camera. The QR code payments carry the purchase transaction information to the mobile device of the buyer/customer.
  • Making payments via QR codes is very secure. It is because the QR code is nothing but just a tool that is used to exchange information. Any data which is transferred via QR codes is encrypted, thus making the payment secure.
  • The Participants in QR Code Payment in Nigeria include Merchants, Customers, Issuers (Banks, MMOs and Other Financial Institutions), Acquirers (Banks, MMOs and Other Financial Institutions) and Payments Service Providers.
  • QR payments are increasingly becoming a popular means of payments in Nigeria, and some industry players would see the framework as a perfect way of regulating the sector.
  • QR codes are capable of storing lots of data. But no matter how much they contain, when scanned, the QR code should allow the user to access information instantly. It can be used for payments, sharing contacts and Wi-Fi passwords and lots more.
  • The popular and common argument is that since POS machines are expensive, cheaper options such as QR scanners should be pushed forward to local traders.

READ: Telecoms, FSI to hugely boost Nigerian Economy in 2021 – CWG’s Business Director

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Financial Services

CBN unveils framework for regulatory sandbox operations

CBN has issued a regulatory Sandbox framework towards engaging with the operators in the Fintech space.

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diaspora remittances, Total credit to the economy rose to N19.54trillion – CBN Governor, CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

The Central Bank of Nigeria has taken proactive steps towards ensuring more flexible ways of engaging with operators in the payment solutions/fintech space, in a bid to tacitly regulate how operators churn out their new products and services.

To this end, CBN has introduced Regulatory Sandbox which is a formal process for firms to carry out live tests of new, innovative products, services, delivery channels, or business models in a controlled environment, with regulatory oversight, subject to appropriate conditions and safeguards.

It is expected that the CBN would stay abreast of innovations while promoting a safe, reliable and efficient Payments System to foster innovation, without compromising the delivery of its mandate.

What you should know

  • A regulatory sandbox is a framework set up by a regulator that allows FinTech start-ups and other innovators to conduct live experiments in a controlled environment under a regulator’s supervision. It encourages innovation that can improve the design and delivery of payment services.
  • No doubt, regulations around Fintech are still emerging and developing, there is still a high entry barrier for new entrants and it is expected that Sandboxes would present them with a safe testing environment and ease regulatory onboarding.
  • Sandbox is quite suited for new products, services or solutions that are either not contemplated under the prevailing laws and regulations, or do not precisely align with existing regulations.
  • Sandbox is intended to promote effective competition, embrace new technology, encourage financial inclusion and improve customer experience, with a view to engendering public confidence in the financial system.
  • The framework provides guidance on the establishment, the applicable rules and operations of a Regulatory Sandbox for the Nigerian Payments System, as well as providing standards for the operations of a Regulatory Sandbox, prescribes the processes and procedures for analysing, collecting, updating, integrating, and storing consumer data and information.

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