The Central Bank of Nigeria (CBN) is considering various options to stem the fast dwindling confidence in the banking industry occasioned by alleged corporate governance and foreign exchange rules violations by the Deposit Money Banks, (DMBS).
From the unification of rates of both the I&E window and parallel market policy to the introduction of foreign exchange (FX) price verification system (PVS) portal as well as the release of guidelines for financial institutions concerning their top directors with debts, the industry has not witnessed respite as sharp practices in the FX market as well as some banks abound.
Worried about the rising malpractices in the industry, CBN recently involved services of the Economic and Financial Crimes Commission, EFCC regulatory to complement its off-site and on-site examination exercises for which metrobusinessnews (MBN) gathered that the revelations were mind-boggling.
It was further gathered that delays in submitting the 2023 half year results by some banks to the nation’s Stock Exchange, NGX recently were, substantially due to ‘a new approach’ by the banks occasioned by the resolve of CBN to tighten all the loose ends.
MBN further gathered that more troubles are in the offing for some bank chief executives, allegedly involved in the insider and fx related malpractices particularly, following the plea bargain option by the suspended CBN governor, Godwin Emefiele.
Further checks show that the route opted by Emefiele in resolving the legal battle might open more can of worms and compel Emefiele to embark on full disclosures.
The implication, according to insider sources, is that, besides making refunds and forfeiting property to the Government, some alleged accomplices, within and outside the industry will be identified and made to face the full weight of the law.
But some analysts say, for the sanitization exercise being contemplated by president Bola Tinubu’s administration to be meaningful, the cleansing must start from the regulatory bank itself.
However, in what appears as rat race for survival, some banks are believed to be capitalising on the volatility in the foreign exchange market, typified by inability of CBN to meet the forex demand end to embark on sharp practices.
In June 2023, the CBN announced the unification of all segments of the foreign exchange (FX) market, signalling the end of its control of the forex market.
Since the decision, which was in compliance with the federal government’s directive, the exchange rate of the local currency has been experiencing significant volatility as market forces continue to determine prices.
Recently, the naira fell to an all-time low of N950 to the dollar at the parallel market, before recovering to N890 at the black market of the FX market.
The recovery came after the CBN said it would implement new measures to stabilise the naira against the dollar, as well as Nigerian National Petroleum Corporation (NNPC) Limited, securing of a $3 billion emergency crude repayment loan to support the naira and stabilise the FX market.
The temporary respite is gradually fading away as the local currency has been showing poor outing against 5he dollars die to what some analysts regard as lack of fundamentals 5o sustain the initial appreciation of Naira.
Also, the unification of the rates policy has not been able to achieve the desired aim as it has, rather widened the gap between the markets with continued depreciation of the local currency, Naira, against other major currencies, particularly, the dollars.
Metrobusinessnews, (MBN) checks gathered that, while CBN is exploring other punitive measures to reduce menace, it will soon clamp down on some recalcitrant chief executives who seem disposable to committing infractions and paying fines, considered peanuts to the gains from the offences.
For instance, about eight banks were last week said to be told to pay various fines for late failing to file their 2022 audited financial statements and quarterly reports for the first half of 2023 as required by Nigerian Exchange.
According to Punch, the afected banks were Unity Bank, FBN Holdings, Access Holdings, Fidelity Bank, Jaiz Bank, Wema Bank, Guaranty Trust Holdings Plc and Ecobank Transnational Incorporated.
According to the NGX’s post-listing rules, quoted companies are required to submit their audited results, not later than 90 calendar days, or three months, after the expiration of the period. The rules also require quoted companies to submit interim reports not later than 30 calendar days after the end of the relevant period.
Based on the latest X – Compliance Report issued by the regulatory arm of the NGX, FBN Holdings was fined for delay in submitting its 2022 financial results and its quarter one report for 2023. The lender paid N6.3m for the former offence and paid N3.3m for the latter.
For failing to submit its 2022 results on time, Unity Bank paid N6.4m and another N3.4m for the delay in submitting its interim reports for Q1, 2023.
The report showed that Fidelity Bank, GTCO and Wema Bank paid N2.7m, N1.4m, and N1.9m, respectively as fines.
While Access Holdings paid N2m, Jaiz Bank, Ecobank, and John Holt coughed out N600,000, N3.2m and N3.2m, respectively as penalties.
Even NPF Microfinance Bank and Abbey Mortgage Bank Plc were also fined N1.6m and N1.4m, respectively.
According to an insider, “alot of the infractions relate to corporate disclosures, adding that the capital market is information-driven. There is certain information that the listed companies must disclose at the appropriate time. If a company realised that it may not be able to disclose such information, the company can send a request to the exchange requesting additional time.”
Specifically, some banks recently sent notification notices to NGX given reasons for the delays in filing their half-year financial statements, adducing outstanding post audit issues in the course of approval of the financial statements as part of the reasons for the delay
As part of post-listing requirements, listed companies were mandated to file their financial results at appropriate dates and when delayed to notify the NGX of the same.
According to Stanbic IBT, for instance, “This delay is occasioned by the fact that we are currently seeking the approval of our primary regulator, the Central Bank of Nigeria, for the half year audited financial statements, following which the said financial statements will then be released to the market.”
Most of the lenders expressed optimism to submit their H1 reports by September.
Moving so. E steps further, CBN also introduced a foreign exchange (FX) price verification system (PVS) portal to enable importers to access forex.
The CBN, in a statement said a price verification report from the portal is now mandatory for all Form M requests, effective from August 31, 2023.
The Form ‘M’ is a declaration of intention to import physical goods into Nigeria.
“Following the successful conduct of the pilot run and various trainings held with all the banks, the Central Bank of Nigeria hereby announces the Go- Live of the Price Verification System (PVS),” the statement reads.
“All applications for Forms M shall be accompanied by a valid price verification report generated from the price verification portal.
“For the avoidance of doubt, by this circular, the price verification report has become a mandatory trade document precedent to the completion of a Form M.”
“All authorised dealers are, hereby, advised to bring this to the attention of their customers”.
CBN also said any case of infraction would be appropriately sanctioned.
“Please, ensure compliance,” the bank urged exporters.
CBN, based on its guideline, is set to sanction some top directors of banks who have taken from banks 5jey have interest bor banks availing directors of the holden companies, all amounting to insider trading.
Earlier CBN had released guidelines for financial institutions concerning their top directors with debts.
The action was based on the fact that some directors of the lenders granted executive directors and employees loans that are typically provided at below-the-market interest ratesh.
In fact the figures were contained in the banks’ financial accounts for the year ending December 31, 2022, in which the insider-related loans were given to directors, associates, and employees of the financial institutions.’
CBN’s s Circular BSD/1/2004 dated February 18, 2004, on ‘Disclosure of insider related credits in the financial statements of banks’ and the BOFIA Act 2020 bar a bank from lending more than 5% of its paid-up share capital to any of its directors or significant shareholders.
Furthermore, a bank’s aggregate exposure in lending to its directors and significant shareholders must not exceed 10% of its paid-up share capital.
The act also provides that credit extended by a bank to any of its directors or significant shareholders must be on the same terms and conditions as those prevailing at the time for comparable transactions by the bank with persons who are not directors or shareholders of the bank.
The apex bank had moved further, through another circular, where it threatened that it would henceforth remove directors with bad loans from the board of banks and blacklist them from any other financial institution.
Part of the document reads: “Any director whose credit facility or that of his/her related interests remains non-performing in the banking subsidiary of an FHC, for more than one year, shall cease to be on the Board of the Financial Holding Company (FHC) shall be blacklisted from sitting on the Board of such banking subsidiary or that of any other financial institution under the purview of the CBN.”
It further warned banks considering debt forgiveness for a director to only do so only with its approval.
CBN said: “No loan/advance and interest thereon to a director of an FHC by the banking subsidiary shall be written-off without its prior approval.”
MBN gathered that theerecent revocation of licenses of over 170 Microfinance Banks, finance companies and Mortgage banks by CBN was based on the provisions of the circular.
The announcement was made in the official gazette of the Federal Government, which was published on the CBN’s website on Tuesday, May 23, 2023.
Amid the uncertainties Nigeria’s stock exchange is proposing to allowing dollar-denominated bond listings and potentially expanding this to stocks, with the aim of easing foreign currency access for companies in Africa’s biggest economy.
Nigerian Exchange Ltd is targeting companies operating from the country’s special economic free trade zones and those earning foreign currency, according to Chief Executive Officer Temi Popoola, according to Bloomberg.
Bourse is proposing allowing dollar debt and share issuance, on its understanding that dollar scarcity is among biggest challenge for nation’s companies
But reacting to the development, Johnson Chukwu, Managing cure tor of Cowry Asset Management Limited sees the proposal as futuristic adding that, the exchange may not be deep 3mough for such a proposal, 5jrlough he agrees of its desirability.
Chukwu, 2ho spoke on Arise Television’s Global Business program last week says the market needs a lot of liquidity as well as transparency for such an operation, adding that the extent of the nation’s foreign reserves as well as performance of her local currency a tree also major considerations 5jat could hasten the project.
According to analysts at InvestmentOne Research, and based on the quarter two 2023 GDP reading, 5he nation’s growth is underwhelming.
In its report released Monday, August 28, the company said,
“The newly released Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS) revealed that the Nigerian economy recorded growth for the thirteenth straight quarter by Q2 2023.
Precisely, Africa’s largest economy expanded in real terms by 2.51% y/y in Q2 2022, compared to 2.31% y/y in Q1 2023 and 3.54% y/y in Q2 2022.
The better growth rate in the quarter, compared to that of the preceding quarter can be traced to the ease in the severe cash scarcity that emanated from the Naira redesign policy ahead of the electioneering period.
In line with recent trend, the oil sector further contracted by 13.43% y/y in Q2 2022, worse than the 11.77% y/y and 4.21% y/y decline printed in Q2 2022 and Q1 2023, respectively.
The lacklustre performance in the oil sector can be largely attributed to the subpar oil production volume recorded in the quarter. According to the report, average daily oil production stood at 1.22 million barrels per day (mbpd), lower than the daily average output of 1.43 mbpd in the corresponding quarter of 2022 and 1.55 mbpd in the first quarter of 2023.
On the bright side, there was an improvement in the non-oil sector as growth rate stood at 3.58% y/y in real terms, relative to the 2.77% y/y recorded in previous quarter and 4.77% y/y recorded in the same quarter in 2022.
The improvement observed in comparison to the previous quarter was anticipated given the return to normalcy as regards availability of cash which affected business activities in the first quarter of the year. Moreover, the sector contributed 94.66% to GDP in real terms in the second quarter of the year, higher than 93.67% and 93.79% in Q2 2022 and Q1 2023, respectively.
Going forward, we expect economic growth to remain positive in subsequent quarters driven by further improvement in the non-oil sector. However, growth rate is envisaged to be sluggish given the current harsh macro-economic conditions facing households and businesses in Nigeria.
These challenges include unfavorably high inflation stemming from the removal of fuel subsidy and unification of the exchange rate, as well as high interest rates affecting the real sector.”
Source: Metrobusiness