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Cashless policy goes Nationwide in 2020

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The Central Bank of Nigeria (CBN) yesterday announced that the full implementation of the cashless policy will become effective from March 31, 2020.

Nigerian Central Bank, Abuja, Nigeria. Image shot 2007. Exact date unknown.

This is just as the banking sector regulator has announced a review of the process for merchant settlement, which it said was to further promote a cashless economy and enhance the collection of applicable government revenues. It disclosed these in two separate circulars that were signed by the Director, Payments System Management Department at the apex bank, Mr. Sam Okojere, copies of which were posted on its website last night.
In the circular titled: “Re: Implementation of the Cashless Policy,” that was addressed to all banks, it announced the commencement of charges on deposits in addition to already existing charges on withdrawals.

According to the circular, the charges, which take effect from today, would attract three percent processing fees for withdrawals and two percent processing fees for lodgements of amounts above N500,000 for individual accounts.

Similarly, corporate accounts would attract five percent processing fees for withdrawals and three percent processing fee for lodgements of amounts above N3,000,000.
The statement, however, disclosed that for now, the charges on deposits shall apply in Lagos, Ogun, Kano, Abia, Anambra, and Rivers states as well as the Federal Capital Territory.

In a related development, the CBN in a separate circular titled: “Review of Process for Merchants Collections on Electronic Transactions,” announced that with effect from September 17, 2019, it has approved for banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulations.
The circular also announced a downward review of the Merchant Service Charge (MSC)from 0.75 percent capped at N1,200 to 0.50 percent capped at N1,000.

The CBN had in April 2017, suspended the nation-wide implementation of the cashless policy which commenced this month.
It had then stated that the existing policy before the announcement of the new policy would remain in place in Lagos, Ogun, Kano, Abia, Anambra, Rivers, and Abuja.

“You will recall that a directive was issued on the nationwide implementation of the cashless policy vide our circulars with reference numbers BPS/DIR/GEN/CIR/04/001 dated February 21 and BPS/DIR/GEN/CIR/04/002 dated March 16.

“Please note that the new withdrawal and deposit processing fee charges above the threshold, as contained in the circulars referenced above, are hereby suspended until further notice. The position of the policy shall now revert to the status quo ante.

“The new policy already applied effective April 1, 2017, as contained in the circulars in the reference above should be reversed and the old charges be applied. All necessary refunds should be made accordingly,” the CBN had explained then.

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Nigeria’s external reserves dips again

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Nigeria’s External Reserves plunged to $40.3 billion as at October 18, 2019. This is the first time in almost two years that the nation’s external reserves would decline to $40.3 billion.

According to data obtained from the CBN, Nigeria’s external reserves dropped from $45 billion in July to $40.3 billion in October 18, 2019. This suggests the country’s external reserves have depleted by $5 billion in less than four months. The CBN’s reserves is now at 21 months low.
While the decline in the country’s external reserves has coincided with recent fluctuations in global oil prices, the depletion in reserves has more to do with CBN intervention in the foreign exchange market.

For instance, Financial Expert, Walle Smith, in a recent analysis cited by Nairametrics, stated that as foreign capital flowed out of the country, the CBN had to actively intervene to keep the Nigerian Naira in line.

According to him, “Oil is no longer the biggest driver of CBN reserve inflows. In 2018, oil accounted for 26% of CBN USD inflows (Q119:23%) vs over 90% before 2015. CBN purchases at the spot and swap market are now a big driver half of non-oil FX flows.”

While providing explanations to the reason to decline in the country’s reserves, the CBN in its monthly economic report for August 2019 stated that the decrease was due, mainly, to increased foreign exchange market interventions and external debt service payments, as well as, direct payments.

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Bank CEOs disclaim MTN over USSD charges

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Chief Executive Officers (CEOs) of commercial banks have distanced themselves from the moves by MTN Nigeria to impose charges on Unstructured Supplementary Service Data (USSD) transactions.

The bank chief executives under the aegis of Body of Bank CEOs that have the MD/CEO of Access Bank Plc, Mr. Herbert Wigwe, as chairman, said in a statement yesterday that they never asked MTN to start charging customers as contained in the text message sent by the telecommunication company.

Their disavowal came a day after the federal government ordered MTN to suspend the introduction of service charge on USSD transactions, which was billed to take off yesterday.

The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, had on Sunday also directed commercial banks and other financial institutions under its regulation to shun the moves to impose charges on USSD services.

The bank CEOs said: “We wish to state as follows: That the banks did not ask MTN to start charging customers as contained in the text message. The decision on whether, and what amount, to charge a customer for accessing USSD is entirely that of the telco company, in the same way, a customer is billed for calls, SMS, and data.”
According to the CEOs, MTN remains the only telco that is yet to implement end-user billing, “which is the standard practice for customer-initiated transactions.”

This, they said, was despite the fact that the banks, working with the CBN had engaged MTN for more than one year to try and bring down the cost of USSD to aid financial inclusion.

“That the banks are determined to pursue the National Financial Inclusion Strategy of the Federal Government of Nigeria and will continue to advocate that telcos identify wholeheartedly with this laudable initiative and implement transparent and low pricing model in the use of USSD access codes.

“We wish to reiterate that financial transaction charges are regulated by the CBN as stipulated in the Bankers’ Tariff and that the charges for financial transactions carried out with banks remain unchanged,” the statement added.

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Emefiele tells banks to shun MTN

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The Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday directed commercial banks and other financial institutions under its regulation to shun the move by telecommunication companies to impose charges on Unstructured Supplementary Service Data (USSD) services.

Precisely, he said banks have been directed to move their services to Telcos that are willing to offer such service at the lowest or even zero charges.
In addition, Emefiele insisted that the strategic health of the banking sector remains “very strong.”

Some telcos recently sent notices to their customers about the new charge.

For instance, MTN in a notice to its customers stated: “Please note that from October 21, we will charge N4 per 20 seconds for USSD access to banking services. Thank you.”

USSD is a Global System for Mobile (GSM) communication technology that is used to send text between a mobile phone and an application program in the network.

However, reacting to the development, Emefiele said: “You are all aware that there is a drive for us to deepen financial inclusion in Nigeria. I had made my commitments to Bill Gates Foundation as well as Queen Maxima that we would deepen financial inclusion and that by 2020 the rate of financial inclusion would have accelerated to about 80 percent.

“At this time, we are close to about 65 percent. We moved from about 42 percent to 65 percent in about 18 months and we believe that we can achieve this 80 percent if everybody, that is the bank and telecoms company, cooperates with us.

“About five months ago, I held a meeting with some telecoms companies and leading banks in Nigeria, at the CBN in Lagos and the issue on cost of USSD came up. We came to a conclusion that the use of USSD is a sunk cost, meaning that it is not an additional cost on the infrastructure of the telecoms companies. But the telecoms companies disagreed with us and said it was an additional investment in infrastructure and that for that reason, they needed to impose the charge. I appealed to them to please review this downwards and they refused.

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Nigeria rejects IMF over forex restrictions

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Nigeria has rejected the advice to reverse its policy on restriction of foreign exchange on 43 items that can be produced locally. The country disagreed with the International Monetary Fund (IMF) that the policy was making foreign capital inflow into the country difficult.


Central Bank of Nigeria (CBN) Governor Godwin Emefiele, who spoke at the end of the 2019 International Monetary Fund (IMF)/ World Bank Annual Meetings in Washington D.C. said: “If you are a foreign direct investor interested in doing business in Nigeria, I will say instead of you facilitating the import of these items into Nigeria, we want you to come and produce it in Nigeria.

“Nigeria is a market of over 200 million people. So, you do not have a choice than to come, bring your investment plans and equipment and produce that item in Nigeria so that Nigerians can consume it.

“Then, you will make your profit and take your dividend out of the country.

“So, I disagree with that position that foreign exchange restriction is hurting investment inflow into Nigeria.”

Emefiele spoke on the disagreement between telecom operators and banks on the Unstructured Supplementary Service Data (USSD) fees.

Telecom operators plan to charge N4 per 20 seconds on USSD access to banking services from October 21.

Emefiele said he appealed to the telecoms companies to reduce the proposed charge.

He said: “I understand that about three to four weeks ago, rather than reduce it, they went ahead to increase from N1500 to N4500, which is a 300 percent increase. I opposed it and I have told the banks that we would not allow this to happen.

“The banks are the people who give these businesses to the telecoms companies and I leave the banks and the telecoms companies to engage.

“I have told the banks that they have to move their business and move their traffic to a telecoms company that is ready to provide it at the lowest possible cost if not at zero cost and that is where we stand and we must achieve it.”

Emefiele said banks had done well regarding the Loan to Deposit Ratio (LDR) policy.

“Most of them have worked with us and we saw loans rising from about N15.3 trillion in the banking industry in July to, as at the last time we held the meeting, about N16.3 trillion, which is a remarkable and phenomenal increase.

“These loans are being channeled not only to agriculture, but to manufacturing, to Small and Medium Enterprises (SMEs), and consumer credit.”

Emefiele added that the banking sector remains strong, adding that the 65 percent Loan to Deposit Ratio (LDR) policy has increased industry loan position from the initial N15.3 trillion to N16.3 trillion.

On the recent banking sector stress test that showed liquidity gaps in seven commercial banks, he said: “Stress-testing has become part of our normal routine, in trying to check the strategic health of all the banks in the industry.”

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