Finance
NDIC can’t supervise banks, CBN tells Senate
ABUJA-The Central Bank of Nigeria on Monday rejected some of the proposed amendments to the Nigeria Deposit Insurance Corporation Act.
The central bank insisted that some provisions in the document were targeted at usurping some of its core mandates, especially the supervision of the banks.
The CBN Governor, Mr. Godwin Emefiele, stated this at a one-day public hearing on the ‘NDIC Act 2006, Cap N102 LFN 2012 (repeal and re-enactment) Bill 2015’ organised by the Senate Committee on Banking, Insurance and other Financial Institutions in Abuja.
Represented by one of his deputies, Mr. Sulieman Barau, the CBN boss said the amendments being sought to the NDIC Act should be rejected because they were capable of causing chaos and anarchy in the financial sector.
He explained that some of the proposed amendments sought to confer coordinate functions and powers on the NDIC.
The governor argued that the NDIC, being the undertaker, could not be a judge and a prosecutor in its own case.
“The implications of the proposed amendment to the NDIC Act enactment will make the NDIC a parallel or a coordinate regulator for banks as the CBN,” Emefiele said.
He added that the controversial bill was also seeking to confer conflicting supervisory functions and powers on the NDIC over banks and create overlapping regulatory responsibilities for the two agencies.
Emefiele also stated that the powers that the NDIC was seeking and the consequences were analysed to include among others, power to license and supervise banks without reference to the CBN.
He also noted that the power to determine the licences of banks and to appoint itself as a liquidator were contained in the proposed NDIC Act.
Emefiele said, “It is pertinent to mention that all the above powers, which the NDIC seeks to assume and exercise, are ostensibly to ensure that it carries out its function as a risk minimiser and that depositors of distressed banks and other deposit-taking financial institutions are paid in good time to avoid delays.
“While the CBN supports the desire to pay depositors of distressed institutions in good time, the proposal to make the NDIC the judge and juror in cases involving banks is fraught with dangers and is a recipe for financial instability. It is indeed the ingredient for chaos and anarchy, and is not practised in any financial system in the world.
“There is also the moral hazard of the NDIC as a deposit insurer that charges premium on the basis of the riskiness of an institution, which it supervises without recourse to the CBN to rate such institutions as riskier than they actually are in order to enhance the premium charged to bolster the deposit insurance fund.
“Consequently, it is essential that the NDIC must flow from its primary function, which is the basis for its establishment; that is, deposit insurance.
“Then, and only then, will its role in the financial system as it relates to banks and other deposit-taking financial institutions be properly defined.”
However, the Managing Director, NDIC, Alhaji Umaru Ibrahim, in his presentation, said even though disagreements existed between the corporation and the central bank, the NDIC was not seeking any role outside its lawful mandate.
Ibrahim said the NDIC was seeking the amendments to its Act in order to ensure safety and soundness in the banking system.
He added that the corporation was not in competition with the CBN but cherished its operational independence and mandate as provided by its Act.
The NDIC boss said, “We may have disagreements here and there, we are not reinventing the wheel. I noticed from the presentation of the CBN governor that apparently he may not be aware of the fact that a lot of these have been resolved and will be resolved.
“We are for collaboration, we are for the safety and soundness of the system. We are not in competition with the CBN. At the same time, we cherish our own operational independence and we cherish our mandate as provided by our Act.”
Senate President, David Mark, while declaring the public hearing open, said the exercise was aimed at obtaining authentic information from various interest groups to guide the Senate in its legislative action.
Mark, represented by the Senate Leader, Victor Ndoma-Egba, said, “It is hoped that this exercise, if successfully completed, will produce results that are acceptable to the generality of our citizenry.”
Business
Nigeria pays US$4.9 billion on petrol subsidy in 2024- NNPCL
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
Yemie ADEOYE
INSPITE of the official position of the Nigerian government that the controversial petrol subsidy is gone for good as announced by the President on assumption of office, the state owned Nigerian National Petroleum Corporation Limited, NNPCL has disclosed that petrol subsidy is still fully operational in Nigeria, although, under a different identity.
Umar Ajiya, Chief Financial Officer at the NNPCL, disclosed that it cost the company a staggering N7.8 trillion (US$4.9) to cover this price gap in the first seven months of 2024.
Rather than simply referring to these claims as subsidies, he stated that the company is merely managing the price difference in petrol imports on behalf of the federation, stressing that this should not be misconstrued as a return to subsidy payments.
This revelation has reignited discussions on whether the NNPC is indirectly offering subsidies, a concept typically defined as selling a product below its cost price.
Documents reviewed by Biztellers.com.ng showed that the term “subsidy” was used extensively in official correspondence between the NNPCL and the presidency, particularly in reference to the “shortfall.”
Recall that President Bola Tinubu reportedly approved NNPC’s request to utilize the 2023 final dividends due to the federation to offset these costs.
However, during a media briefing on Monday about the company’s 2023 audited financial statements, Ajiya refuted claims that the NNPC is involved in any subsidy scheme.
Ajiya further disclosed that the Nigerian government owes the NNPC N7.8 trillion ($4.9 billion) in subsidy-related debts for the period from January to July 2024.
In furtherance of his clarification to the News Agency of Nigeria (NAN), Ajiya insisted that no subsidy payments have been made to any marketer in the last nine years, citing the NNPC’s role as the sole importer of petrol under supply contracts.
He said, “In the last eight to nine years, NNPC Ltd. has not paid anyone a dime as a subsidy; no kobo has been disbursed by NNPC Ltd. in the name of subsidy. No marketer has received any payment from us for subsidy.”
“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price. So the difference between the landing price and that half price is a shortfall.
“And the deal is between the Federation and NNPC Ltd., to reconcile, sometimes they give us money, so there is no money exchanging hands with any marketer in the name of subsidy.”
Ajiya remained silent on how much of the $4.9 billion could have been remitted to the federation account if the NNPC had not been covering the “shortfall.”
It was however noted by Biztellers.com.ng, that although subsidy is back in effect, the main reason for that is the increasingly weak state of the Naira and the country’s extreme dependence on products importation. Also unlike the previous subsidy era, where several oil marketers were getting free subsidy refunds for unverified product importation, this subsidy era is witnessing only one importer, the NNPCL, which in effect is the sole receiver of government subsidies.
Banking
CBN Denies Currency Devaluation
The Central Bank of Nigeria (CBN) has refuted claims of devaluing the.
Earlier reports suggested that the CBN had devalued the Naira, lowering its exchange rate from N631 to the dollar, compared to the previous day’s rate of N461.60 at the Importers and Exporters (I&E) window.
However, the Central Bank of Nigeria (CBN) released a statement on Thursday through its Acting Head of Corporate Communications, Dr. Isa Abdulmumin, categorizing the report as false information.
In the statement titled ‘CBN Has Not Devalued The Naira’, he said the attention of the apex bank was drawn to the news report by an Abuja based newspaper edition of June 1, 2023, titled “CB Devalues Naira To 630/51”.
However, the CBN stated categorically that the news report was replete with outright FALSEHOODS and destabilizing innuendos, ‘reflecting potentially willful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.’
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters (I&E) window traded this morning (June 1, 2023) at N465/USS1 and has been stable around this rate for a while.
“The public is hereby advised to ignore the news report by Daily Trust in its entirety, as it is speculative and calculated at causing panic in the market,” the CBN spokesman added.
He, therefore, advised media practitioners to verify their facts from the Central Bank of Nigeria before publishing in order not to misinform the public.
Banking
BREAKING: CBN Increases Interest Rate By 0.5%
The interest rate in Nigeria has been raised to 18.5 percent, up by 0.5 percent, from 18 percent where it was pegged in March 2023.
The Central Banks of Nigeria’s (CBN) Monetary Policy Committee (MPC) resolved to this effect at its third meeting of 2023 in Abuja, on Wednesday.
Governor, CBN, Godwin Emefiele, made the disclosure in the communiqué of the MPC’s meeting, thereafter.
While engaging the media at the end of the two-day meeting, Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
In the view of the MPC, rising inflation rate is traceable to the high energy cost and challenges around the supply chain, among others, which lie outside the corridors of the CBN.
Emefiele said, “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Biztellers reports that the CBN had effected six consecutive interest rate increases, which has seen the rate move from 11.5 percent in March 2022 to 18.5 percent in May 2023.