The Central Bank of Nigeria (CBN) has indicated its readiness to sack chairmen and chief executives of deposit money banks (DMBs) who failed to publish their banks’ annual accounts 12 months after the end of each financial year.
This hint was contained in the apex bank’s latest Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2018/2019.
It stated that this measure was in accordance with the provisions of the Bank and Other Financial Institutions Act (BOFIA) 1991 (as amended in 1997, 1998, 1999 and 2002).
The Act states that banks are required, subject to the written approval of the CBN, to publish said it would hold the board chairman and CEO of any defaulting bank directly responsible for any breach.
The CBN stated that appropriate sanctions would also be imposed on the erring banks which could include, barring the chief executive officer or his/her nominee from participation at the Bankers’ Committee and disclosing the reason for such suspension; suspension of the foreign exchange dealership licence of the bank; and its name sent to the Nigerian Stock Exchange (in the case of a public quoted company).
Under the latest guidelines, the banks are expected to seek profitability by driving down costs and charging competitive rates instead of charging excessive rates of interest.
The apex bank stated: “Therefore, banks shall develop and implement a risk-based pricing model in line with the provisions of CBN circular referenced BSD/DIR/GEN/RPN/04/120 on ‘the need for banks to develop and implement a risk-based pricing model’, issued in October 2011.
“Furthermore, to ensure that the Monetary Policy Rate (MPR) is an effective tool for driving lending rates, banks shall disclose their prime and maximum lending rates as a fixed spread over the MPR. As part of its effort towards promoting greater financial inclusion in the country, the Bank shall continue to encourage banks to intensify deposit mobilisation during the 2018/2019 fiscal years.
“Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer (KYC) requirements. Banks are also encouraged to develop new products that would provide greater access to credit,” the apex bank added.
The guidelines also require that ways and means advances would continue to be available to the Federal Government, to finance deficits in its budgetary operations to a maximum of five per cent of the previous year’s actual collected revenue.
According to the CBN, such advances shall be liquidated as soon as possible, and shall, in any event, be repayable at the end of the year in which it was granted.
The guidelines also require that: “Consistent with the banking arrangement of Treasury Single Account (TSA), Ways and Means Advances would now be determined after recognising the sub-accounts of the various MDAs, which are now linked or connected to the Consolidated Revenue Fund (CRF) to arrive at the FGN consolidated cash position. This would continue in the 2018/2019 fiscal years.”
In addition, the guidelines also require that the aggregate foreign currency borrowing of a bank, excluding intergroup and interbank (Nigerian banks) borrowing shall not exceed 125 per cent of shareholders’ funds unimpaired by losses.
This is even as it stipulated that banks are also expected to adopt risk mitigation strategies.
On Nigeria’s economic outlook, the guidelines remain optimistic, projecting that the growth trajectory recorded in the second quarter of 2017 is expected to persist into 2018/2019.
The CBN forecasts in the guidelines that: “Government efforts in the real sector are expected to spur growth and improve economic performance in the medium-term.
“Specifically, the implementation of the Economic Recovery and Growth Plan (ERGP), sustained CBN interventions and improved supply of foreign exchange are expected to stimulate growth in the non-oil sector, particularly in agriculture and manufacturing.
“The agricultural sector is expected to drive growth in 2018/2019 through increased production, which is a key objective of the ERGP,” it stated.
This is even as it predicted that effective implementation of the ERGP, coupled with the resolution of the crises in the North-east and favourable climatic conditions, were expected to boost agriculture production and dampen inflationary pressure.
According to the apex bank, “the MPR will continue to be the anchor rate for short-term interest rates. The Monetary Policy Committee (MPC) will regularly review the rate in response to prevailing liquidity conditions and other developments in the economy.
“The major instrument for managing system liquidity will continue to be Open Market Operations (OMO). This will be complemented by cash reserve requirements, discount window operations and foreign exchange interventions,” the apex bank stated.