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ABCON backs CBN’s suspension of dollar collateral for naira Loans

The Central Bank of Nigeria has released a strong affirmation of the security of cash within Nigerian banks, highlighting the country's banking sector's soundness. Amid widespread unconfirmed rumours, not originating with the CBN, raising concerns about the health of Nigerian banks, the central bank of Nigeria asked the people not to panic and to continue with their usual banking activity. To ease people's anxieties and comfort them, the CBN emphasized its readiness and capability to carry out its stated role of maintaining a stable financial system in Nigeria. This statement by the CBN responds to the concern caused by unverified information and seeks to reassure the public about the safety and stability of the country's banking industry. "The Central Bank of Nigeria has noticed reports, in certain media outlets, about a recommendation for the Federal Government to take over some CBN-supervised financial institutions," said the apex bank's acting Director, Corporate Communications, Hakama Sidi-Ali, in a statement issued on Wednesday. "To avoid any doubt, Nigerian banks are still safe and sound. The CBN advises the public to go about their daily lives without getting disturbed by reports regarding the health of Nigerian banks that have not come from the CBN. "The CBN is fully equipped to carry out its statutory duty of ensuring the stability of Nigeria's financial system. "We assure the general public and depositors that their funds are safe in Nigerian financial institutions. "Bank customers are therefore advised to proceed with their banking transactions as usual, as there is no cause for concern." This statement follows a report by the CBN's special investigator, Jim Obazee, alleging that Godwin Emefiele, the former governor of the federal bank, used proxies to establish two financial institutions. According to the report, Emefiele utilised proxies to acquire Union Bank of Nigeria for Titan Trust Bank Limited and Keystone Bank without providing any proof of payment. As a result, it recommended that the Federal Government reverse the sale and take over the banks.
    By Abdullateef Aliyu, Lagos

The Association of Bureaux De Change Operators of Nigeria (ABCON) has welcomed the decision by the Central Bank of Nigeria (CBN) to stop the use of Non Export Domiciliary Account Collateral for naira loans.

President of ABCON, Alhaji (Dr.) Aminu Gwadabe said the decision would enhance dollar liquidity, support reserves accretion and strengthen the financial services sector.

It would be recalled that the CBN had prohibited the use of foreign currency-denominated collaterals for naira loans except in cases where the collateral is in the form of Eurobonds issued by the Federal Government of Nigeria or guarantees provided by foreign banks, including Standby Letters of Credit.

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Gwadabe described the move as a welcome development, expected to put the excesses of big businesses and manufacturers putting unnecessary pressure on the forex market in check.

The BDC operators also advised the apex bank to review foreign currency holding guidelines for non-oil export domiciliary accounts proceeds and entrench maximum of 48 hours with a minimum balance of $5,000 for individuals and $50,000 for companies in holding positions as practiced in South Africa.

He said: “ABCON members are bewildered that some companies and manufacturers with billions of dollar balances in their non-oil export domiciliary accounts use it as collateral for naira loans and still source forex in the official window thereby depleting what is available for other operators”.

“The stoppage of this unprofitable practice will not only add to the dollar liquidity in the market but also help in the accretion of foreign reserves buffers,” he added.

ABCON chief further advised the CBN not to approve forex requests by manufacturers and other business applicants with billions of dollars holdings in non export oil proceeds domiciliary accounts at both the NAFEM and NAFEX window.

“We therefore urge the CBN to continue to drive and expand its operations to ensure that the best results now achieved in the last 15 years is maintained and also ensure exchange rate convergence, market calmness and confidence of the public and foreign investors,” he said.

ABCON leadership, he added, has also called for and advocated for the separation of ownership and operational structures of FMDQ Exchange. The move, he said, would ensure more transparency and effectiveness in market operations and price control mechanisms.

He further urged the CBN to allow legislative decisions on the planned reforms in the BDCs sub-sector to boost foreign investors’ confidence and guarantees in the sectoral transformation.

“We also want to pledge our continuing support to the CBN’s proactive and effective policies meant to address volatility and headwinds in the forex market. As a self-regulatory body, ABCON is currently engaging all stakeholders and players in the retail end market to deepen, liberalise, democratise and centralise the retail end segments of the market for price discovery, market efficiency, transparency, accretion of buffers and healthy balance of payments,” Gwadabe said.

 

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