Omodele Adigun
The re-appointment of the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, for a second term; the Finance Bill passed into law by the National Assembly as well as the N499 billion fines imposed on 12 banks for breaching the Loan -to-Deposit- Ratio (LDR) guidelines were among the top events that shaped the banking industry in 2019.
Others notable happenings within the year included the Unstructured Supplementary Service Data (USSD) controversy between the banks and telecom operators, dualisation of the Bank Verification Number (BVN) , the reintroduction of cashless policy and downward review of bank charges among others.
Emefiele’s re-appointment
President Muhammadu Buhari last May made history by reappointing the central bank Governor, Godwin Emefiele, for a second five-year term, making him the first President to renew the contract of monetary-policy chief since the end of military rule 20 years ago. In similar vein, the President refused to renew the tenure of Mr Babatunde Fowler which ended on December 9 , replacing him with Muhammad Nami as the Executive Chairman of Federal Inland Revenue Service (FIRS).
Finance bill
Just last month, precisely, November 21, the Senate passed the Finance Bill in which 56 amendments to seven tax bills sought by President Muhammadu Buhari were approved.
One of the amendments, for instance, was for an upward review of Value Added Tax (VAT) from five per cent to 7.5 per cent. Another requires evidence of tax payment as a condition for opening and operating a bank account.
Loan-to-Deposit- Ratio (LDR)
For breaching its guidelines on lending to the real sector of the economy, the CBN on the last day of September fined 12 major banks N499.1billion.
According to an approved debit instruction, the affected banks and the fines were: Citibank, N100,743,055, 321; First Bank of Nigeria (N74,668,880,480; FBNQuest Merchant Bank, N2, 697,456,144; First City Monument Bank (FCMB),N14, 371,064, 742 and Guaranty Trust Bank, N25, 147, 933, 628.Others are Jaiz Bank N7, 525, 165,552; Keystone Bank N4, 162, 938, 879; Rand Merchant Bank, N2, 823,177,399; Standard Chartered Bank, N30,027,137,984; SunTrust Bank, N1,703,205,427; United Bank for Africa, N99,676,181,916 and Zenith Bank, N135,629,337,625.
The amounts were to be deducted at source from their Cash Reserve Requirement (CRR) with the CBN.The CRR is a portion of the banks’ deposits kept with the CBN for regulatory reasons.
The apex bank had on July 3, 2019, directed banks to maintain a minimum Loan Deposit Ratio (LDR) of 60 per cent by September 30, 2019.The LDR, which was being reviewed quarterly to improve lending to the real sector, was 58.5 per cent as at May.It has now been raised to 65 per cent for the last quarter of the year.
USSD controversy
The move by telecommunications companies to implement new charge for Unstructured Supplementary Service Data (USSD) transactions ran into troubled waters last October. MTN had opened the Pandora box in October 20, 2019 when it sent notices to their customers to intimate them of the new charge.
“Please note that from Oct 21, we will charge N4 per 20 seconds for USSD access to banking services. Thank you,” MTN notification to customers read.
Following the public criticism of the move, Body of Bank Chief Executive Officers (CEOs) the next day came out to denounce it, saying the banks did not mandate MTN to start charging customers for USSD transactions directly. Banking services were introduced on USSD channels to ensure easier access to financial services. Before now, banks charged customers per USSD session.The Minister of Communications and Digital Economy, Dr. Isa Pantami, immediately ordered the network operators to shelve the idea. Also , the CBN Governor, Mr. Godwin Emefiele, directed commercial banks and other financial institutions under its regulation to shun the move by the telecommunication companies to impose charges on USSD services.
Dualisation of BVN
The Bankers Committee yesterday introduced a classification of the Biometric Verification Number (BVN), namely BVN Premium and BVN Lite, in order to fast track the achievement of the financial inclusion goal of 20 per cent by 2020.
The CBN Governor, Godwin Emefiele , who disclosed this at a press briefing at the end of the 11th annual Bankers Committee retreat held in Ogere, Ogun State, said:
“We now have about 40 million people on the BVN platform. We think that because of the benefits of the BVN to bank customers and the economy there is a need to consolidate and move BVN to a new level, something like 2.0. This entails, for instance, to reclassify and segregate transactions that could be done on BVN. We have two classifications. The existing BVN that we have in the system has about 18 lines of information. We decided that we classify into BVN premium and BVN lite. There should also be a system where people who are financially excluded can now be included. If you are on BVN Lite there is a limit to the kind of transactions you can do in terms of deposit and in terms of loans. The important thing is that we want to make you financially included where you can conduct basic banking services. There are people who are currently financially excluded, like people in our rural communities that carry phones but not having financial services. With the collaboration of NCC, we are putting this BVN arrangement to allow them to conduct minimal financial services.
It should be possible for us to migrate this person into the BVN Lite arrangement where they can conduct minimal financial services, not just banking services, but minimal financial services, insurance and whatever you want to conduct in terms of finance, whether electronic payment or anything, you can do it with the aid of your phone. Now as you bring them into the financial system, what it will do is that it will help to increase our rate of financial inclusion and reduce the exclusion rate.”
Predatory borrowing
Customers who move from one bank to another to borrow and refuse to pay may now lose their deposits in other banks.
The Deputy Governor of the CBN on Financial Sector Surveillance, Mrs. Aisha Ahmad, who disclosed this at a press briefing following the Bankers’ Committee meeting in Lagos, said:
“Now we are not unaware of some of the challenges or the reasons why credit have not been growing. Part of that was the appetite of banks to lend especially when you have customers that wilfully refuse to repay their loans. And so in this respect, we have come up with a new clause that will be included in the offer letters that will be granted going forward.
“In addition to that pronouncement, we are looking at what are the challenges or factors that are affecting banks’ ability or willingness to lend? This is going to be more or less a credit protection clause that will be in all offer letters going forward. Basically, it will contain the Biometric Verification Number (BVN) details of customers and the Tax Identification Number (TIN) of the customers and more or less, it will be a commitment or covenant by the customers that by taking a loan, you agree and promise to repay the loan and that you also agree that should you default on the loan that the total amount of asset or the total amount of deposits you have across the banking industry would be applied towards repaying the loan.
“Now this is not uncommon because banks already have something we call Rights of Set-off within a bank. That is if you take a loan, the bank usually have a clause in the letter that allows it to repay your loan from all the assets you have in the bank and so this is just extending it across the industry. We think that there are very honest Nigerians out there that are willing to take loans and repay their loans; however, the few that wilfully not pay are usually affecting others to have access to this credit. And we are very optimistic that this will enable the banks to lend more with more confidence, enable more Nigerians to get access to credit, particularly those in the Small and Medium Enterprises (SMEs) retail sector.”
Cashless policy reintroduced
The Central Bank of Nigeria (CBN) on Wednesday, September 18, re-introduced charges on the deposit and withdrawals of sums above N500,000 to promote a cashless economy. In a circular released on Tuesday, all deposit money banks in the country were directed to charge three per cent processing fees for withdrawals and two per cent for deposits of amounts above N500,000 for individual accounts. Corporate account holders will be charged five per cent processing fees for withdrawals and 3% for deposits of amounts above N3 million.
Bank charges slashed
In furtherance of its quest to make financial services more accessible and affordable to various stakeholders in the economy, the Central Bank of Nigeria (CBN) has reviewed downward most charges and fees for banking services as contained in the new Guide to Charges by Banks, Other Financial, and Non-bank Financial Institutions, with effect from January 1, 2020.