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Nigeria: Registration Requirements For Commodity Exchanges, CBN Guidelines On Large Exposures (LEX)

By
Emmanuel Ifeanyi Ogbuka
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0

Registration Requirements For Commodity Exchanges in Nigeria.

A commodity exchange is an exchange or market where various commodities are traded. Most Commodity markets usually deal in raw materials and agricultural products, with trading involving derivative contracts based on these commodities in the form of forwards, futures and options as well as spot trades. A good example of a commodity exchange is the Nigerian Commodity Exchange. 

Registration of commodity exchanges in Nigeria is governed by the Securities and Exchange Commission (SEC) and its requirements will be the focus of this article .

Registration requirements for commodity exchanges are grouped into:-

– Payment requirements

– Sponsored Individuals & Director requirements

– Applicant Company requirements

Payment Requirements

  1. Evidence of payment of a filing/application fee of 50 Thousand Naira.
  1. Evidence of payment of a processing fee of 200 Thousand Naira.
  1. Evidence of payment of a registration fee of 1Million Naira.
  1. Evidence of payment of a sponsored individual fee of 50 Thousand Naira per sponsored individual.
  1. A minimum paid up capital of 500 Thousand Naira.
  1. A current fidelity insurance bond covering at least 25% of the minimum paid-up capital as stipulated by the SEC rules and regulations.

Sponsored Individuals & Directors

  1. A minimum of 4 sponsored individuals, one of whom shall be a compliance officer.
  1. The managing director of the company is to be among the sponsored individuals.
  1. Full postal addresses of immediate previous employers, bankers (with current account numbers) and nominated referees of sponsored individuals.
  1. Detailed CVs of sponsored individuals and directors which should include dates & details of activities arranged from secondary school to date .
  1. Copies of credentials of sponsored individuals including secondary school and NYSC certificates with originals for sighting purposes.
  1. Evidence of having the minimum 4(Four) years post-graduation experience needed to perform the function as stipulated by SEC rules and regulations. 
  2. Police clearance reports for each sponsored individual. Each sponsored individual is to report at the SEC Head office or Lagos xonsl office with 2 recent passport photographs for the process.
  1. Valid means of identification.

Applicant Company Requirements

  1. A profile of the company.
  1. The names of addresses of the company’s subsidiaries and percentage holdings as well the type/nature of the businesses.
  1. Evidence of payment of shares allotted to the shareholders.
  1. Information relating to its market trading facilities.
  1. A copy of the form for the general undertaking of members.
  1. Operational manual and organizational chart of the company. 
  1. A business plan.
  1. Bank statements for accounts operated by the company for the last 6 months. 
  1. Copies of the company’s certificate of incorporation.
  1. A copy of the company’s memorandum/articles of association.
  1. Corporate Affairs Commission (CAC) forms showing statement of share capital, return of allotment and particulars of directors with originals to be presented for sighting. 
  1. A notarized sworn undertaking to abide by SEC Rules and Regulations as well as the Investment & Securities Act (ISA).
  1. A notarized sworn undertaking by members of the company on its board of directors and who also have interests in companies whose commodities are being traded or could be traded on the exchange.
  1. A sworn undertaking signed by a director of the company or its company secretary to comply with and to enforce compliance by its members with the ISA  & SEC Regulations.

 The CBN Guidelines On Large Exposures (LEX)

The Central Bank of Nigeria (CBN) released in September 2021, a set of guidelines aimed at aligning its supervisory role in Nigeria with the expectation of the Basel Committee on Banking Supervision (BCBS) standards on Large Exposures (LEXs or LEs) & ensuring a more consistent supervisory approach to dealing with large exposures in Nigeria.

This article will be looking at the provisions of the guidelines and their implications.

Are the guidelines to operate alone as a supervisory mechanism of the CBN?

No, the guidelines are designed to compliment existing guidelines on Risk-Based capital requirements.

What are the objectives of the guidelines?

The objectives of the guidelines are to :- 

– Restrict the level of exposures to a single counterparty or group of connected counterparties so as to ensure that the maximum loss in the event of a sudden default of a counterparty would not endanger a bank’s survival as a going concern.

– Reducing the vulnerability of the Nigerian Banking system to idiosyncratic risk due to large exposures to individual counterparties.

– Contributing to the stability of the Nigerian Financial System.

What is the scope of application of the guidelines?

The guidelines shall apply to all commercial, merchant & Non-Interest banks operating in Nigeria at both the entity and consolidated levels.

What is the scope of the term “counterparties” under the Guidelines and their exceptions? 

The guidelines apply to all bank exposures to single counterparties and groups of connected counterparties irrespective of their perfection or the quality of any pledged collateral, with the following exceptions :-

– exposures to the Federal Government of Nigeria and state governments guaranteed by the FGN which are eligible for a Zero percent risk weight;

– exposures to the CBN;

– exposures where the principal and interest are fully guaranteed by the FGN;

– exposures secured by financial instruments issued by the government of Nigeria;

– intra-day interbank exposures.

What exactly is a large exposure?

The guidelines define a large exposure as the sum of all exposures of a bank to a single counterparty or to a group of connected counterparties that are equal to or above 10% of shareholder’s funds unimpaired by losses.

What do the guidelines require mainly for Banks with large exposures?

The guidelines state that banks shall report their large exposures to the CBN on a monthly basis as per approved templates.

What is the limit for large exposures? 

The sum of all exposure values of a bank to a single counterparty or to a group of connected counterparties must not be higher than 20% or 50% of the bank’s shareholders fund unimpaired by losses for a commercial or merchant bank respectively.

What is an exposure value?

An exposure value is simply the accounting value of an exposure.

France Invests $3.1 Billion to Boost Chip Production

By
Samuel Nwite
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0

France is investing $3.1 billion into chip production, joining other countries seeking to expand their semiconductor industry amid growing global chip demand.

The fund will be used to build microchip factories, according to officials’ statement on Monday.

The chip industry has seen accelerated growth since the outbreak of covid-19, triggering a heated global competition in the lucrative market.

The US and China are leading the competition with tight policies aimed at boosting local production. But Europe has joined the race – passing the Chips Acts to boost investment in the sector.

Chips, which are vital for every electronic device, from smartphones to electric cars, have come to the center of an economic war between China and the US recently. The US Chips Act comes with over $50 billion in incentives to encourage local production.

In April, the European Union passed the Chips Act to reduce the bloc’s vulnerabilities and dependencies on foreign actors.

The new rules aim at “doubling the EU’s global market shares in semiconductors from 10% to at least 20% by 2030”, and are expected to “improve the EU’s security of supply, resilience and technological sovereignty in the field of chips.”

The European Chips Act is expected to unlock 43 billion euros of investment.

The European semiconductor industry is currently experiencing supply challenges due to geostrategic issues and supply chain disruptions. Supply chain has become a major priority for the world’s biggest trading blocs.

France’s economy ministry said the state aid was the biggest subsidy it had offered since 2017, and would go towards a 7.5-billion-euro project announced last year to be run by European multinational STMicroelectronics and US company GlobalFoundries, according to France24.

The French ministry said the project, in the Alpine town of Crolles near Grenoble in southeastern France, would boost European production capacity by almost six percent by 2028, per France 24.
Demand for chips skyrocketed during the pandemic as activities shifted online. The shift, which came with a shortage of chips, impacted production across many sectors and triggered the global race for the control of supply the chain.

Europe has relied on foreign supplies to keep its industries running for years, with Taiwan being the bloc’s major supplier.

The adoption of the EU Chips Act provides for the Council to pass an amendment of the Single Basic Act (SBA) for institutionalized partnerships under Horizon Europe. This is to allow the establishment of the Chips Joint Undertaking, which builds upon and renames the existing Key Digital Technologies Joint Undertaking, according to the bloc.

Increased chip production in the EU is expected to reduce the influence of the US and China in the global semiconductor supply chain.

Understanding What SEC’s Security Assets are

By
Paul Ugbede Godwin
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0

The Securities and Exchange Commission (SEC) is a federal agency that regulates the securities markets in the United States. The SEC’s mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation.

One of the SEC’s responsibilities is to define and classify different types of securities, which are financial instruments that represent ownership or debt obligations in a company, a government, or another entity. Securities can be traded on exchanges or over-the-counter markets, and they can have various features and risks.

One of the categories of securities that the SEC defines is security assets. Security assets are securities that are backed by specific assets, such as mortgages, loans, receivables, or leases. Security assets can also be called asset-backed securities (ABS) or securitized products.

Security assets are created when an entity (called the originator) sells a pool of assets to another entity (called the issuer), which then issues securities that represent claims on the cash flows generated by the underlying assets. The issuer typically transfers the assets to a special purpose vehicle (SPV), which is a legal entity created solely for the purpose of holding the assets and issuing the securities.

The main benefit of security assets is that they allow the originator to raise funds by selling its assets without giving up control over them. The originator can also reduce its credit risk by transferring some or all of the default risk to the investors who buy the securities. The investors, on the other hand, can diversify their portfolios by accessing different types of assets and cash flows that may not be available otherwise.

The main risk of security assets is that they depend on the performance and quality of the underlying assets. If the borrowers or lessees fail to make their payments, or if the value of the collateral declines, the cash flows to the investors may be reduced or interrupted. The investors may also face legal or operational risks if the issuer or the SPV fails to comply with their obligations or if there are disputes over the ownership or transfer of the assets.

Security assets are subject to various regulations and disclosure requirements by the SEC and other agencies. The SEC requires issuers of security assets to register their offerings with the SEC and provide periodic reports on their financial condition and performance. The SEC also enforces anti-fraud and anti-manipulation rules to prevent misconduct and protect investors.

Security assets are an important and complex part of the securities markets. They offer benefits and risks for both originators and investors, and they require careful analysis and due diligence before investing. By understanding what SEC security assets are, you can make more informed decisions about your financial goals and strategies.

The SEC has jurisdiction over securities and securities transactions, which include stocks, bonds, mutual funds, exchange-traded funds (ETFs), and derivatives. The SEC also has authority over any digital asset that is considered a security under the securities laws.

How does the SEC determine whether a digital asset is a security or not?

The SEC does not have a specific definition of a digital asset or a cryptocurrency. Instead, it applies the same principles and tests that it uses for any other type of asset to determine whether it is a security or not.

The most common test that the SEC uses is called the Howey Test, which comes from a 1946 Supreme Court case involving orange groves. The Howey test states that an asset is a security if it involves:

An investment of money.

In a common enterprise.

With an expectation of profits.

Predominantly from the efforts of others.

The SEC has applied the Howey test to various digital assets and found that some of them are securities, while others are not. For example, the SEC has concluded that Bitcoin and Ether are not securities, because they are decentralized networks that do not rely on the efforts of a third party to generate profits for investors. However, the SEC has also concluded that many initial coin offerings (ICOs) and tokens are securities, because they involve raising money from investors who expect to profit from the development and promotion of a project by a central entity.

If a digital asset is deemed to be a security by the SEC, it means that it is subject to the same rules and regulations as any other security. This has important implications for both investors and issuers of SEC security assets.

For investors, it means that they have certain rights and protections when they buy or sell SEC security assets. For example, they have the right to receive accurate and timely information about the asset, such as its price, performance, risks, fees, and financial statements. They also have the right to sue for fraud or misrepresentation if they are misled or deceived by the issuer or any other party involved in the transaction. Additionally, they have access to various mechanisms for dispute resolution and recovery of funds if they suffer losses due to misconduct or insolvency.

For issuers, it means that they have certain obligations and responsibilities when they offer or sell SEC security assets. For example, they have to register their securities with the SEC or qualify for an exemption from registration. They also have to comply with various disclosure, reporting, auditing, and anti-fraud requirements. They also have to follow certain rules regarding trading, custody, transfer agents, broker-dealers, exchanges, and market makers.

Fintech Company Unlimit Receives License to Operate in Kenya Two Months After Expansion in Nigeria

By
Ojukwu Emmanuel
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0

Global leading fintech and payment solutions company, Unlimit, has received its Central Bank of Kenya license, to operate in the East African country, two months after expansion in Nigeria.

Unlimit’s recent expansion solidifies the company’s recognition as a reputable provider of payment solutions within the African region.

By offering diverse payment solutions, Unlimit will cater to the preferences and support the unique requirements of local enterprises in Kenya. This milestone demonstrates Unlimit’s dedication to advancing the payment landscape in Africa and empowering businesses with cutting-edge payment solutions.

Speaking on its expansion to Kenya, Unlimit CEO Kirill Evstratov said,

“We have ambitious plans for Kenya and East Africa and are looking forward to supporting local businesses on their expansion goals. For 14 years we have successfully been aiding

companies worldwide to enter new markets and go beyond borders, strengthening their business outreach, and expanding their customer base. Now, we are bringing those years of expertise to Africa. Our unwavering ambition is to establish ourselves as the benchmark in the payments processing industry, setting the standard for excellence and innovation, and allowing companies around the globe to go borderless with their payments.”

Reports reveal that the demand for fintech solutions within Kenya has seen a rise, with figures from Statista showing that the number of people using digital payment methods is expected to amount to 39.14 million by 2027.

By expanding its operations to Kenya, Unlimit strengthens its position in the continent’s payment landscape as part of its mission to lead Africa’s payment evolution in the coming years.

Since launching in 2009, the startup is on a mission to deliver solutions that enable businesses to operate with ease both locally and internationally across EMEA, APAC, and LatAm. It also has a vision to eliminate financial borders for businesses all over the world.

The company currently boasts of one the world’s most extensive in-house payment infrastructures, encompassing payment processing services, banking as a service (BaaS), and a fiat gateway for cryptocurrencies, DeFi, and GameFi.

Being present on 4 continents, Unlimit not only helps individuals to accept and make payments but to scale their businesses with its deep tech expertise and local insights.

The startup is constantly adding new payment methods and implementing innovative solutions for ambitious businesses around the world. It provides unlimited global growth opportunities for customers, freeing them of payment constraints.

Unlimit protects businesses with passion, by implementing a high-tech anti-fraud and risk management solution that protects customer’s revenues and their reputation.  The startup security system analyzes hundreds of behavior indicators and device IDs constantly, feeding into a rule management system with best-in-class approval rates.

House of Reps Declares the Launch of Nigerian Air Fraudulent

By
Samuel Nwite
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0

The House of Representatives has declared the launch of Nigerian Air fraudulent, ordering that the national carrier project, which reportedly gulped N85 billion, be suspended immediately.

Chairman of the House Committee on Aviation, Nnolim Nnaji, made the declaration following an investigation that witnessed the major stakeholders in the deal between the Federal Government and Ethiopian Airlines denying knowledge of the launch.

As part of the investigation, the committee summoned the Permanent Secretary of the Ministry and other relevant stakeholders to present themselves and provide the necessary information.

In its response to the inquiry, the Ministry of Aviation claimed Nigeria Air was only unveiled and not launched. The committee however dismissed the response as an attempt to divert lawmakers’ attention.

Last month, after the former Minister of Aviation Hadi Sirika unveiled a plane with the name Nigerian Air, investigative journalist David Hundeyin was quick to point out that the aircraft belongs to Ethiopian Airlines, and had been fraudulently rented for the launch.

Days later, Hundeyin reported that the plane had returned to its route in service to the Ethiopian Airline.

Aviation expert and analyst, Captain Ado Sanusi, also said in an interview with ChannelsTV then that it is practically impossible for Nigeria Air to start commercial passenger operation in two days given the rigorous process involved, upholding the Hundeyin’s report that the launch is fraudulent.

During the investigation, the Nigerian Airspace Management Agency (NAMA) told members of the committee that the aircraft bearing Nigerian colors was on a chartered flight to Nigeria. According to other stakeholders who confirmed NAMA’s disclosure, a chartered flight could be painted in any color and with any inscriptions.

In his testimony to a Senate committee on Aviation, Capt. Dapo Olumide, the Interim Managing Director of Nigerian Air, confirmed that the unveiled Nigeria Aircraft was hired. According to him, the aircraft that came and left was a legitimate chartered flight which can be done by anyone who doesn’t have a license as long as you pay for it.

At the meeting, the Chairman of the Senate Aviation Committee, Senator Biodun Olujimi had wondered why the immediate past Minister of Aviation hurriedly unveiled a national carrier on the last day of the Muhammadu Buhari administration.

Olumide, who boasts of over four decades of experience in the aviation industry, noted that for Nigeria to operate an airline, the aircraft must be registered in Nigeria.

He testified that the particular aircraft that was unveiled was not registered and came into Nigeria with a few days’ clearance from Ethiopia and was returned after use.

Nigerian Air is not licensed to fly

Following the controversy surrounding the launch of Nigerian Air and the allegation of fraud leveled against it, further investigations revealed that the airline is not fully certified to fly.

Olumide confirmed that in his testimony to the senate committee. He said that Nigeria only has airport license which is one of two licenses required for operating an airline and it does not permit one to carry out commercial service operations

He further explained that Nigeria Air needs at least three registered aircraft before it could be issued a license and approved for operation by the Nigeria Civil Aviation Authority.

The captain, who confirmed that he was appointed in February 2022, to secure the air operating certificate for Nigerian Air, disclosed that Nigeria is not at a point of operating the airline yet, as Nigeria Air does not have terminals for international operations.

He further explained that there are five phases or steps one goes through to get the needed license and Nigeria Air is still in phase one of the process.

RESOLUTION OF THE HOUSE OF REPS COMMITTEE ON AVIATION

The Committee after careful evaluation of the issues on deliberation is totally dissatisfied with the actions of the former Minister of Aviation, Sen, Hadi Sirka in going ahead to flag off the operations of Nigeria Air despite a standing Court injunction against such, and without any provision for sustaining the operations of the airline.

We are equally irked by the role played by Ethiopian Airline in this whole process. It does not speak well of the excellent brotherly relationship existing between our two nations.

A careful review of the process indicates the exercise to be highly opaque, shrouded in secrecy, shoddy and capable of ridiculing and tarnishing the image of Nigeria before the international community.

We want to put on record, that the Committee and indeed the National Assembly had no role in the purported launch of Nigeria Air or anything related thereof.

While the Committee and indeed the parliament is not opposed to Nigeria having a National Carrier, as a matter of fact having a National Carrier is highly desirable to us as a people and Nigeria, as a nation. However, such a process should be transparent and all embracing.

We, as a Committee, would not accept any attempt by any individual or group of individuals or organization to hide under the project and siphon our commonwealths.

Consequently, the Committee hereby resolves to:

  1. Direct the Federal Ministry of Aviation and its partners in the Nigeria Air project to immediately suspend flights operations and every other actions with respect to the Nigeria Air;

  2. Urge our new President, Bola Ahmed Tinubu, GCFR the President and C-in-C, to as a matter of urgency constitute a high-level Presidential Committee to undertake a holistic Review of the Processes of the whole Nigeria Air project, and advice the government on the way forward.

  3. Ensure that all individuals, or groups, or organization involved in the controversial shenanigan named “Nigeria Air Take-Off” are brought to book, prosecuted and sanctioned.

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