- Limits ways and means advances to FG to 5% of previous yearâ€™s revenue
By Obinna Chima
The Central Bank of Nigeria (CBN) has announced its resolve to remove the chairmen and chief executives of any commercial bank whose accounts remain unpublished for 12 months after the end of the bankâ€™s financial year.
The central bank, in its Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2018/2019 posted on its website at the weekend, said in accordance with the provisions of the Bank and Other Financial Institutions Act (BOFIA), banks are required, subject to the written approval of the CBN, to publish not later than four months after the end of each financial year, their audited financial statements (statement of financial position and statement of comprehensive income) in a national daily newspaper printed and circulated in Nigeria.
All banks, discount houses and their subsidiaries are expected to adhere to December 31 that had been set as their accounting year end, it added.Â
The CBN, in the guidelines, said it would hold the board chairman and CEO of any defaulting bank directly responsible for any breach.
It added that appropriate sanctions would also be imposed on the defaulting banks which could include barring the chief executive or his/her nominee from participation at the Bankersâ€™ 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).
The CBN pointed out that banks were expected to seek profitability by driving down costs and charging competitive rates instead of charging excessive rates of interest.
â€œTherefore, 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 â€˜the need for banks to develop and implement a risk-based pricing modelâ€™, issued in October 2011.
â€œFurthermore, 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.
â€œAs 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.
â€œAccordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer (KYC) requirements.
â€œBanks are also encouraged to develop new products that would provide greater access to credit,â€ the CBN added.
The guidelines further noted 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 yearâ€™s actual collected revenue.
Such advances, according to the CBN, 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.
â€œConsistent 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 2018/2019Â fiscal years,â€ it stated.
It reiterated that the aggregate foreign currency borrowing of a bank, excluding intergroup and interbank (Nigerian banks) borrowing shall not exceed 125 per cent of shareholdersâ€™ funds unimpaired by losses.
Banks were also expected to adopt risk mitigation strategies.
According to the guidelines, the outlook for the Nigerian economy remains optimistic, saying the momentum gained in the second quarter of 2017 was expected to persist into 2018/2019.
In addition, growth prospects were expected to follow global economic recovery, the CBN noted. â€œGovernment efforts in the real sector are expected to spur growth and improve economic performance in the medium-term.
â€œSpecifically, 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.
â€œThe agricultural sector is expected to drive growth in 2018/2019 through increased production, which is a key objective of the ERGP,â€ it stated.
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.
â€œThe 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.
â€œThe 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,â€ it stated further.