For keen watchers, the outgoing year 2024 has been challenging for the Nigerian economy, with rising inflation necessitating rate hikes.
The Central Bank of Nigeria (CBN’s) Monetary Policy Committee (MPC) in the year had to raise interest rates to 26.25% in May 2024; followed by another 50 bp increase to 26.75% in July 2024. At its September 2024 meeting, the MPC raised the MPR by 50 basis points to 27.25% and at the last meeting for 2024, it raised MPR to 27.50%.
As the year winds down, it is necessary to review the Bank’s effort at curbing inflation and strengthening the Nigerian financial system.
It is worthy of note that the apex bank had made key accomplishments and innovative strategies over the past year, reflecting the CBN Governor, Yemi Cardoso’s commitment to advancing financial integrity and resilience in Nigeria.
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In his address at the Annual Dinner of the Chartered Institute of Bankers of Nigeria (CIBN), the governor said, “The measures implemented to curb inflation coupled with foreign exchange market reforms, are bolstering Nigeria’s economic growth. In Q3 2024, the economy grew by 3.46%, compared to 2.54% in the same period in 2023. This growth was driven primarily by resilience in the services sector, particularly telecoms and financial services, which recorded a real growth of 5.17%, recovering from a 0.85% contraction in Q3 2023. Improved oil production and increased domestic refining also contributed to growth.
“However, agriculture and manufacturing continue to underperform. Targeted support to these critical sectors is vital to reducing inflation, creating jobs, and boosting overall output.
“The case for economic diversification has never been more urgent – reliance on a single sector is simply unsustainable. The consequences of neglecting diversification are clear; as the saying goes, we cannot reap where we did not sow. At the Central Bank, we are committed to collaborating with fiscal authorities to foster growth across key sectors and deliver meaningful progress for all Nigerians.”
Specific Highlights of 2024
Bank Licensing and Expansion: One bank was approved as a non-operating financial holding company; another transitioned from a merchant to a national commercial bank. Two banks received AIPs for regional commercial licenses; one for regional non-interest banking.
In the microfinance Sector, 16 new banks and re-licensed 53 previously revoked microfinance banks, while finance companies, five new approvals for operations.
On recapitalisation of banks, the bank had announced in November 2023 that banks must meet new capital thresholds by March 31, 2026. Options include equity issuance, mergers, or license adjustments. Implementation strategies are due by April 30, 2024.
For the regulatory review for Bureau de Change (BDC), there were new licensing requirements, capital standards, and a franchise model to enhance FX distribution and oversight.
There was also an improved Coordination with Regulators, while the carbon market framework was developed with the Nigerian Climate Change Council to attract sustainable finance and foreign investment.
Consumer Protection Practices
There was a comprehensive review of consumer protection regulations in February 2024 to improve standards and address emerging Fintech risks. Enhanced customer service standards and increased engagement with formal financial institutions.
Pilot Consumer Protection Risk-Based Examination was implemented to proactively identify policy gaps and improve conduct among financial institutions (FIs). This risk-based approach complements traditional compliance checks by highlighting urgent risks that could affect financial consumer protection (FCP).
Besides, the CBN has rigorously enforced sanctions to ensure compliance, deter unethical behaviour, and enhance transparency within the financial sector.
On consumer complaints resolution, the bank addressed 19,988 complaints from customers in eight months, resolving 15,306 (76.58%) and facilitated refunds totalling approximately N7.05 billion and $714,569.03 to customers disputing financial service providers, underscoring a commitment to fair treatment.
The bank also prioritised digital transformation with enhanced service delivery following the implementation of the Unified Complaints Tracking System (UCTS) and development of USSD (*959#) for verification of licensed financial institutions.
As part of partnership for financial inclusion, it launched the Women Entrepreneurs Finance Initiative (We-FI) Code on June 20, 2024, aimed at closing the 9.0% gender gap in financial inclusion by improving access to financial services for women-owned MSMEs.
The National Financial Literacy Framework was updated and benchmarked against global standards to improve financial literacy and decision-making among youth.
Financial Education Curriculum Review: Updated the Financial Education Curriculum (FEC) in Nigerian schools to align with global trends and promote financial inclusion.
On cybersecurity enhancements, it adopted ISO 27001 standards and introduced a Risk-Based Cybersecurity Framework, conducted a cyber and technology assessment to improve resilience and operational efficiency.
The apex bank promoted adherence to regulatory standards and improved disclosure practices within the fintech sector as part of the fintech innovations and regulatory advancements. It introduced new guidelines to curb cybersecurity threats, increase diaspora remittances, and improve capital inflows.
On anti-fraud measures, it implemented stricter KYC and AML requirements, including linking Tier 1 and wallet accounts to BVNs or NINs and enforced a temporary restriction on new account openings to prevent fraud and enhance industry integrity.
The bank also carried out financial system regulation reforms, enhanced market conduct and transparency, facilitated Nigeria’s Delisting from the FATF Grey List and intensified AML/CFT/CPF efforts.
There were also new Guidelines on Management of Dormant Accounts and Unclaimed Balances Issued. In July 2024, the CBN introduced guidelines to improve the management of dormant accounts, unclaimed balances, and other financial assets. The objectives include: Identifying dormant accounts and unclaimed balances to reunite them with their owners holding these funds in trust for rightful owners; standardising management practices and establishing procedures for reclaiming warehoused funds.
Suspension of Processing Fees on Cash Deposits
Effective May 6, 2024, the CBN suspended processing fees on cash deposits exceeding N500,000 for individuals and N3,000,000 for corporates until September 30, 2024. Additionally, a 3-month waiver (from January 15 to April 15, 2024) was granted to Deposit Money Banks (DMBs) for depositing lower denominations (N50 and below) with the CBN at no processing cost. This initiative encourages cash deposits, strengthens financial intermediation, and aids in the effective transmission of monetary policy.
The CBN has improved its Early Warning Systems to monitor systemic risks and vulnerabilities. Key developments include: Enhanced monitoring of financial soundness indicators and net open positions. Implementation of regulatory sanctions on non-compliant banks. These measures facilitate timely intervention to manage potential contagion risks and ensure the safety and soundness of the financial sector.
Fintech Transformation
Payments System Vision (PSV): Launched in 2007, PSV 2020 spurred the growth of Nigeria’s Fintech ecosystem. PSV 2025 aims to build on these successes. Innovations such as mobile banking, online payments, and blockchain have democratised financial services, reduced costs, and enhanced efficiency, particularly benefiting underserved regions.
Consumer Protection Enhancements
Under Cardoso, consumer protection regulations have been fortified to boost confidence and safeguard against unethical practices. Increased focus on consumer protection through enhanced regulations and educational initiatives to help consumers navigate the financial system effectively.
Future Directions
There was continued emphasis on maintaining a robust regulatory framework to support economic growth and stability.
On the global positioning, the CBN under Cardoso aims to position Nigeria as a leading financial hub in Africa, driving long-term economic development and growth.
Economic Confidence and Stability
Under the current management, the CBN has implemented policies that foster confidence in the Nigerian economy, attracting foreign investors and encouraging business growth and enhanced communication and strategic actions have minimised economic uncertainties, building trust among investors and the public.
Positive Outcomes
The pace of inflation has slowed, with a notable decrease in inflation momentum from 6.02% in February 2024 to 0.71% in June 2024. Recent figures released by NBS show a reduction in headline inflation year-on-year, dropping to 32.15% in August from 33.40% in July, representing a 1.25% decline.
Foreign Exchange Market Reforms
Market Unification: the bank streamlined the foreign exchange (FX) market into a single framework, enhancing liquidity and reducing market distortions.
For FX forward obligations, it cleared a $7 billion backlog of valid FX forwards, stabilising the exchange rate and boosting market confidence and reduced FX volatility and increased external reserves to $37.9 billion as of July 2024, up from $33.6 billion in October 2023.
The Bank also announced the Electronic Foreign Exchange Matching System (EFEMS) for Foreign Exchange (FX) transactions in the Nigerian Foreign Exchange Market (NFEM) to curb speculation and market distortions.
Enhanced Monetary Policy Communication
There was a robust communication strategy with an improved communication of monetary policy decisions through strategic planning and engagement with media and stakeholders. Innovative Channels: Introduced podcasts and enhanced social media presence to provide timely updates and engage the public effectively.
The bank also ensured capacity building and technology integration staff training in 2024 as it invested in capacity-building programmes to enhance staff competencies in economic analysis and policy-making. There was also an integration of mobile technology for improved data collection and analysis.
Positive Economic Outlook
In May 2024, Fitch Ratings revised Nigeria’s economic outlook from stable to positive, reflecting improved financial stability and policy effectiveness.
The year has been marked by significant strides in financial regulation and market conduct under the guidance of the CBN Governor.
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