By Babajide Komolafe
The Nigerian banking industry experienced some seismic shocks in 2018 triggered by major development as listed below.
The MTN’s $8.1 billion dividend repatriation saga
The MTN saga shook the banking industry like a storm. In August 2018 the Central Bank of Nigeria, CBN, announced sanction of N5.87 billion on four banks namely Standard Chartered Bank Limited, Stanbic IBTC Bank Plc, Diamond Bank Plc and Citi Bank Nigeria Limited. The banks were accused of authorising remittances of foreign exchange with irregular Certificates of Capital Importation, CCI, issued on behalf of some offshore investors of MTN Nigeria Communications Limited. The CBN, therefore, asked the managements of the banks and MTN Nigeria Communications Limited to immediately refund $8.1 billion illegally repatriated by the company to the coffers of the apex bank.
The sanction, however, generated public outcry especially from the investment community which claimed the decision of the apex bank will undermine foreign investors’ confidence in Nigeria. On its part, MTN instituted legal action to challenge the sanction of the apex bank.
In response, the CBN decided to review the case and seek amicable settlement with MTN. The saga was laid to rest on Monday, December 24, 2018, when the apex bank issued a statement announcing the matter has been resolved amicably.
Consequent upon the above, MTN Nigeria, led by its Nigerian shareholders, held intensive engagements with the CBN in the course of which it supplied additional material information, not previously offered to the Bank, satisfactorily clarifying its remittances. Having now reviewed the additional documentation provided by the company, the CBN has concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders.
‘‘However, the CBN identified that the proceeds from the preference shares in MTN Nigeria’s private placement remittances of 2008 were irregular having been based on CCIs that were issued without the final approval of CBN”, the apex bank said in a statement.
SKYE Bank becomes Polaris Bank
It was the ghost of the 2009 financial sector crisis visiting the banking industry again. Following signs of deteriorating financial conditions, and inability of its owners to inject required capital to revive the bank, the license of Skye Bank, which acquired the Mainstreet Bank Limited, a nationalised bank, was revoked by CBN while its assets were assumed by a newly created banking entity licensed by the apex bank called Polaris Bank.
Announcing the decision in a joint press conference, the CBN and the NDIC said: “The result of our examinations and forensic audit of the bank has, however, revealed that Skye Bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN. The shareholders of the bank have been unable to recapitalize it. As a responsible and responsive regulator and in consultation with the Nigerian Deposit Insurance Corporation (NDIC), we have decided to establish a bridge bank, Polaris Bank, to assume the assets and liabilities of Skye bank. The strategy is for the Asset Management Company of Nigeria (AMCON) to capitalize the Bridge Bank and begin the process of sourcing investors to buy out AMCON. By this decision, the licence of the defunct Skye Bank is hereby revoked.”
The directors of the defunct Skye Bank are now in the process of prosecution by the regulatory authorities in conjunction with anti-graft agencies.
Access Bank swallows Diamond Bank
Nobody saw it coming. It was first dismissed as rumours. But on Monday December 17, 2018, it officially became true. The managements of Access Bank and Diamond Bank admitted that the later would be absorbed into the former following a Scheme of Merger. The new bank, in addition to becoming the largest bank in Nigeria in assets base, will become the largest bank in Africa in terms of customer base.
SANNEF drives financial inclusion
On March 27, the Central Bank of Nigeria, CBN, deposit money banks, licensed mobile money operators and super agents announced an ambitious initiative to extend financial services to 60 million Nigerians and hence expedite Nigeria’s quest to achieve 80percent financial inclusion by 2020.
Known as the Shared Agent Network Expansion Facilities, SANEF, the initiative entails an aggressive roll out of 500,000 agent network to offer basic financial services, such as Cash-in, Cash-out, funds transfer, bill payments, airtime purchase, government disbursements as well as remote enrolment on BMS Infrastructure (BVN) to an estimated 50 million Nigerians that are currently under-banked.
Limits to USSD banking
On April 17, 2018, the CBN unveiled the framework for USSD banking services, which among other things imposed limit of N100,000 per day per account, and two factor authentication for transactions above N20,000.
According to the apex bank, “The vast applications of the USSD technology, in terms of available services have raised the issue of the risks inherent in the channel. In this regard, concerns have been expressed on the likely exposure of CBN approved entities to the possible breaching of the USSD accessed financial services in view of likely vulnerabilities in the technology and the ever growing threats.
Furthermore, the implementation in Nigeria has created multiple USSD channels to customers, thereby increasing their exposure to risk, without a common standard for all. This framework, therefore, seeks to establish the rules and risk mitigation considerations when implementing USSD for financial services offering in Nigeria.
CURRENCY SWAP: Naira/Yuan
On June 9, 2018, Nigeria became the second African country, to enter into a Bilateral Currency Swap Agreement (BCSA) with China. This follows the execution of a BCSA between CBN and the Peoples Bank of China involving the exchange of a maximum of 15 billion Chinese Yuan for N720 billion during a three year tenor. The purpose of the swap agreement includes financing trade and direct investment between China and Nigeria; maintaining financial stability as well as other purposes that both countries may agree upon.
Increased Dollar sales to BDCs
The priority for monetary policy of the CBN in 2018 was exchange rate stability which was largely achieved via increased injection of dollars into the foreign exchange market especially the bureaux de change segment. On two occasions, namely May 28 and in November, the CBN increased dollar sales to BDCs to checkmate rising demand.
On May 28, the CBN increased weekly dollar sales to each BDCs by 50 percent to $60,000 from $40,000. Also on November 29, 2018, the CBN introduced special intervention dollar sales of additional $15,000 per BDCs in order to absorb increased dollar demands due to the yuletide season. This brings the total weekly sale to each BDCs to $75,000. The increased dollar sales helped in keeping the parallel market exchange rate below N363 per dollar for most part of the year.
Suspension of BTA/PTA charges
In response to rising exchange rate in the parallel market, the CBN introduced some measures to encourage forex users to patronise banks for purchase of the forex needs. Consequently the CBN on February 12 2018, cancelled bank charges on all retail foreign exchange transactions such as foreign purchase for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA).
The CBN also ordered banks to sell dollars to all forex end users, customers and non customers, across the counter.
CBN now invests in Corporate Bonds
In a bid to enhance credit flow to the real sector and thus expedite recovery from economic recession, the CBN on July 24 announced its decision to invest in Long Term bonds issued by Triple A-rated corporate entities. This was followed up on August 24, with the release of the guidelines for the programme, known as, Corporate Bond Funding Programme.
According to the guidelines, the tenor and the moratorium would be specified in the prospectus by the issuing corporate while the maximum facility shall be N10 billion per project and facilities were to be administered at an all-in interest rate/charge of nine per cent per annum.
160 Microfinance, Mortgage Banks axed
In the other financial institutions subsector, the CBN revoked the operating licences of 160 institutions comprising 154 microfinance banks and six primary mortgage banks.
Explaining the rationale for the regulatory hammer, Managing Director/Chief Executive, NDIC, Alhaji Umaru Ibrahim said: “The affected institutions were closed because some were found to have insufficient assets to meet their liabilities, while others had their capital to risk-weighted assets ratio and regulatory capital below the minimum prescribed by the CBN.
“Furthermore, quite a number of the banks had ceased to carry on the type of banking business for which their licenses were issued for a continuous period of more than six months while others had gone into voluntary liquidation.”