â€¢ Mulls regulatory framework for fintechs
By Obinna Chima
The Central Bank of Nigeria (CBN) has injected a total of $18.067Â billion into the interbank segment of the foreign exchange (FX) market since it started its forays into the market in FebruaryÂ lastÂ year, figures compiled by THISDAY have shown.
According to the weekly FX sales by the central bank between February 21, 2017,Â andÂ March 23, 2018,Â compiled by THISDAY, the CBN sold the greenback to authorised dealers inÂ a total of 76Â sessions.
A breakdown of the dollar sales showedÂ in 2017 alone, the bank intervened with a total of $15.043 billion.
Also,Â between January 12 and March 23, 2018, it has offered a total of $3.024 billion through wholesale forwards and retail Secondary Market Intervention Sales (SMIS).
Â Market analysts stated thatÂ the interventions by the central bank have helped in eliminating the pressure on the FX market, ensured exchange rate stability and eliminated currency speculators.
The naira exchange rate has remained stableÂ since last year when the central bank commenced the FX sales.
In April 2017, the CBN introduced a new exchange rate window, the Nigerian Autonomous Foreign Exchange Fixing Mechanism (NAFEX), commonly known as the Investorsâ€™Â and Exportersâ€™ (I &E) window.
TheÂ I & EÂ windowÂ and theÂ interbank market haveÂ been seen as theÂ Â main exchange rate windows utilised in foreign currency trading.
The interbank market window trades at around N326-N345Â to $1Â while theÂ I & E windowÂ trades around N360/$1.
The aggressive interventions, notwithstanding, Nigeriaâ€™s external reservesÂ recentlyÂ hit a five-year high of $46 billion,Â Â representing an increase of 18 per cent or $7 billion over the countryâ€™s reserves figure of $38.912 billion as of January 2, 2018.
It has also significantly surpassed the $40 billion target for 2018 announced by theÂ CBN Governor, Mr. Godwin Emefiele, last November, and is expected to inch up to $50 billion in the next few months.
CBN spokesman, Isaac OkoraforÂ recently pointed out that theÂ Â interventions in the FX window helped to moderate the pressure on the forex reserves by sustaining liquidity in the market and boosting production and trade.Â
Okorafor also noted that the CBN policy restricting access to FX from Nigeriaâ€™s foreign exchange market to importers of some 41 items had made a huge impact on the status of Nigeriaâ€™s reserves and boosted the supply of local substitutes for imported goods, created jobs at home, and enhanced the incomes of farmers and local manufacturers.
Meanwhile, as part of efforts to encourage start-ups that are financial technology (fintech) companies, the CBN at the weekend disclosed plan to develop a regulatory framework for operators in the sub-sector.
TheÂ Deputy Director, Payment System Department, CBN, Mr. Musa Jimoh, who revealed this during the launch of theÂ Association of Financial Service Innovators inÂ Lagos, also said a regulatory sandbox would be developed for members of the association.
AÂ sandboxÂ is a security mechanism for separating running programmes, usually to mitigate system failures or software vulnerabilities from spreading.
According to Jimoh, the regulatory framework would be out before the middle of the year.
â€œOne of the things we have done now is to start the process of introducing a regulatory sandbox that would lower the barrier for entry.
â€œWe (CBN) are actually working in partnership with Bill and Melinda Gates Foundation. They are the ones giving us technical assistance in developing the framework,â€ he explained.
He pointed out that the objective of the association was to empower start-ups, innovators, technology companies and young Nigerians that have great ideas, but lack the financial wherewithal to bring out their products or even integrate with the banks.
â€œWe donâ€™t want those ideas to just die off. So, what the CBN and the Nigeria Interbank Settlement System did was to bring all these start-ups together and try to understand their pains and constrains and see how we can give them helping hands.
â€œOur believe is that if we give them helping hands, we are basically building the economy.Â Â We are bringing a new categorisation of companies called fintechs.
â€œSo, the essence of this association is so that they can come with one voice to tell the regulators and the banking community how we can support them and how we can leverage on some of the digital services that they have.
â€œOverall, their contribution would lower the barrier for financial inclusion. There is this global understanding that digital technology would aid financial inclusion because it would be able to provide tools that from your house, your homes and the gadgets you carry, you are able to access financial services,â€ he added.