The Nigerian Senate has approved the upward review of the Ways and Means loan from the Central Bank of Nigeria (CBN) to the Federal Government from five to 15 percent.

The approval for the amendment of the CBN Act follows the emergency plenary session held by the red chamber on Saturday, less than two days to the inauguration of the tenth national assembly.

The bill, which was sponsored by Senator Gobir Ibrahim Abdullahi, representing Sokoto East Senatorial District, was first introduced on Wednesday May 24, 2023.

During the plenary session which was presided over by the Senate President Ahmed Lawan, Abdullahi said the upward review of the Ways and Means was prompted by the need to help the federal government meet its financial obligations through loans from the CBN.

“The Bill seeks to amend the Central Bank of Nigeria, CBN, Act to increase the total CBN advances to the Federal Government from five percent (5%) to a Maximum of fifteen percent (15%),” he said.

“The Bill was read for the first time in this Chamber on Wednesday, 24th May, 2023.

“The very essence of this Bill my respected colleagues is to enable the Federal Government meet its immediate and future obligation in the approval of the ways and means by the National Assembly and advances to the Federal Government by the Central Bank of Nigeria.”

Most of the senators agreed with the assertion that the bill will help the federal government to execute many of its functions, including important projects that will contribute to economic growth.

Given the agreement of the majority of the senators on the floor, Lawan thanked the lawmakers and passed the bill into law.

Section 38(2) & (3) of the CBN Act stipulates “that Ways and Means shall not exceed 5% of the previous year’s revenue of the Federal Government.”

But in the past seven years, the CBN governor Godwin Emefiele has flagrantly flouted the CBN Act by lending more than N23 trillion to the President Muhammadu Buhari administration through Ways and Means.

The loan, which experts have fingered as part of the reasons the nation’s inflation has hit record high, was recently approved by the Senate to be restructured.

The illegality of the loan, which has generated a lot of criticism from many quarters – who say it further underlines the present government’s no regard for the rule of law, is believed to have inspired the amendment of the CBN Act as a parting legislative function of the ninth senate.

The amendment will now make it possible for the incoming administration to borrow more from the CBN without breaking the law. Already, the president-elect, Bola Tinubu, has hinted that his government will rely on money supplies from the central bank as Nigeria’s revenue generation dwindles.

In this video, I respond to some of the questions on the piece where I noted that more microfinance banks in Nigeria will continue to fade. And the banking institutions which will win will be technology companies which offer banking services, and NOT banks which use technology. This is the video for this article.

(In Tekedia Mini-MBA, I explained the Smiling Curve deeper with positioning implications across sectors like manufacturing, etc)

Cessation of Non-Permissible Activities of Microfinance Banks in Nigeria

• by EMMANUEL IFEANYI OGBUKA

The Central Bank of Nigeria (CBN) on the 19th of August, 2021 released a circular in response to observed activities of microfinance banks that went beyond the limits of their operating licenses.

This article will be looking at the provisions of this circular which focuses on the non-permissible activities most commonly engaged in by microfinance banks(especially digital microfinance banks), mainly wholesale banking and foreign exchange transactions. These transactions are as follows :-

– The CBN Circular is based on the consideration of comparatively low capitalization of microfinance banks dealing in FX and wholesale banking transactions which carry a huge risk for financial system stability.

– The circular is thus as a result of the need to remind Microfinance Banks (MFBs) to comply with the 2012 CBN MFB Guidelines.

– Consequently, MFBs are prohibited from FX transactions.

– MFBs are to focus on rendering services to retail clients and micro-clients.

– Microcredit and retail transaction services rendered or carried out by MFBs are limited to 500 Thousand Naira per Tier 2 unit MFB transaction and 1 Million Naira for other MFB categories.

– Microcredit facilities shall constitute a minimum of 80% of total loan portfolios for MFBs.

– A disregard or violation of the directions contained in this circular can lead to sanctions that include the revocation of an MFB license.

First released on the 22nd of February,2022, the Central Bank of Nigeria (CBN) Guidelines on Non-Oil Export Proceeds Repatriation aims to raise $200 Billion Naira in foreign exchange from Non-Oil proceeds over the next 3-5 years.

These guidelines which will form the focus of this article are anchored on a 5-point agenda and are designed to incentivize exporters in the Non-Oil export sector to encourage repatriation and the sale of export proceeds into the FX market.

The guidelines are also aimed at earning more stable and sustainable inflows of FX in order to insulate the Nigerian economy from shocks and FX shortages.

This article will be looking at :-

– The objectives of the CBN Guidelines.

– Eligibility criteria for this scheme regarding beneficiaries and transactions.

– Application procedures relevant for this scheme.

What are the objectives of the CBN Guidelines on Non-Oil Export Proceeds Repatriation?

The objectives of the guidelines are :-

1. The enhancement of FX (Foreign Exchange) inflow.

2. The diversification of the sources of FX inflow.

3. Ensuring stability and sustainability of FX inflow.

4. To encourage the increase in the level of contributions of Non-Oil exports economically.

Which government agency is in charge of administration of the scheme by virtue of the CBN Guidelines?

The CBN’s (Trade & Exchange Department) shall be responsible for the day-to-day administration of the scheme. 

What is the eligibility criteria for the scheme regarding beneficiaries?

Eligible beneficiaries for this scheme are :-

– Exporters of finished and semi-finished goods.

– Exporters shall qualify for rebate where repatriated export proceeds are sold at the Investors & Exporters (I & E) window. 

What is the eligibility criteria for this scheme regarding transactions?

Eligible criteria for transactions under this scheme by virtue of the CBN Guidelines are:-

– The transactions must involve the export of finished and semi-finished goods wholly or partly processed or manufactured in Nigeria, except otherwise stated by the CBN.

– The transactions must involve the export of goods and services (I.T & creative businesses) that are permissible and excluded under the existing export prohibition list.

– The sale of repatriated export proceeds at the I & E window.

– The completion of e-form NXP.

– Registration with the Corporate Affairs Commission (CAC) & the Nigerian Export Promotion Council (NERC). 

What are the features of the scheme?

The scheme revolves mainly around incentives in the form of :-

(i). 65 Naira for every $1 repatriated and sold at the I & E window to Authorized Dealer Banks for 3rd party use.

(ii). 35 Naira for every $1 repatriated and sold into the I & E for own use on eligible transactions only. The spread should not be more than 10 Kobo.

What is the application procedure for taking part in the scheme?

The application procedure involves the following :-

1. The submission of written requests from the exporter through the Authorized Dealer Bank (ADB)where the e-Form NXP was established. It shall be the responsibility of the ADB to authenticate all documents submitted for rebates.

This request will be accompanied by :-

a). A completed application form to be designed by the CBN & forwarded to the exporter through his ADB.

b). Documentation requirements for exports as stipulated in the FX manual.

c). Evidence of repatriation and sale of export proceeds at the I & E window.

The ADB shall forward the application within 5 days, after consummation of the export proceeds sale transaction at the I & E window.