The Central Bank of Nigeria has had a very busy 2021, combating pandemic effects, depreciation of buying power, and promoting economic growth, among other things.
To navigate this economic phenomenon, Nigeria’s central bank governor, Godwin Emefiele, implemented various innovative policies to meet the CBN’s goals.
The extension of interest rate reductions on CBN intervention facilities, the establishment of the “Naira 4 Dollar Scheme,” the acceptance of the NAFEX rate as the inter-bank benchmark rate, and the introduction of the eNaira are just a few examples.
As a result, Nairametrics has compiled a list of CBN’s primary policies aimed at achieving goals such as price stability, moderate inflation, employment, and economic growth.
Fintech policy: Issuance of the framework for regulatory sandbox operation
The regulatory sandbox framework was published on January 13, 2021, following the CBN’s release of a draft framework in July 2020.
Because it provides a formal method for corporations and start-ups to undertake live tests of any novel goods, services delivery channels, or business models, the regulatory framework sandbox allows the CBN to actualize control over innovation in the FinTech industry.
The regulatory sandbox is not only for CBN licensees but also for other Nigerian corporations and enterprises that want to test their goods but aren’t regulated by the CBN.
Regulatory framework for open banking in Nigeria
In February 2021, the CBN published its Regulatory Framework for Open Banking in Nigeria, often known as the “Open Banking Framework.” Through the establishment of a single Banking Industry Application Program Interface (API) standard, the Open Banking Framework takes a supportive approach to open banking and provides guidelines for data exchange across the banking and financial services ecosystem.
APIs are essential for accomplishing the integration of the whole banking industry, as well as the underlying philosophy of Open Banking. In addition, the framework would encourage innovation, increase competition, increase financial inclusion, and broaden the range of financial products and services available in Nigeria.
CBN on cryptocurrency
The Central Bank of Nigeria reminded DMBs, non-bank financial institutions, and other regulated financial institutions that trading in cryptocurrencies and facilitating payments for cryptocurrency exchanges are illegal. The CBN had previously published a circular titled, “Circular to Banks and Other Financial Institutions on Virtual Currency Operations in Nigeria” in January 2017, expressing reservations about the unregulated and anonymous character of virtual currencies, as well as the danger of criminal abuse.
Although the CBN did not outrightly ban cryptocurrencies, it did prevent regulated institutions from facilitating or engaging in bitcoin transactions. The apex bank also ordered all financial institutions in the country to identify and terminate any cryptocurrency traders’ and exchanges’ accounts.
Also, in a circular dated 5th February 2021 and distributed to regulated financial firms, the apex bank of Africa’s largest economy warned and reminded local financial institutions against having any transactions in crypto or facilitating payments for crypto exchanges.
The Nigerian Central Bank took further steps and locked the bank accounts of some fintech platforms, including RiseVest, in August.
Regulatory forbearance for the restructuring of credit facilities
The Bank, on March 3, 2021, extended the window for reduction of interest rate from 9 to 5 per cent per annum on its intervention facilities, to February 28, 2022, as part of measures to mitigate the impact of the COVID-19 pandemic on the economy. In addition, roll-over of moratorium on repayment of intervention facilities would be considered on a case-by-case basis.
“Naira 4 Dollar Scheme” for diaspora remittances
The Bank introduced the “Naira 4 Dollar Scheme” on March 8, 2021, to boost the inflow of diaspora remittances into the country. The Scheme serves as an incentive, as all recipients of diaspora remittances, through CBN licensed International Money Transfer Operators, would be paid N5 per US$1 received as remittance inflow. The Scheme, originally scheduled to end on May 8, 2021, was extended indefinitely by the Bank, on May 5, 2021.
Adopting the NAFEX rate as the benchmark rate
In an effort to ensure uninterrupted services to customers on Unstructured Supplementary Service Data (USSD), a meeting held on March 15, 2021 and attended by Mobile Network Operators (MNOs), Association of Licensed Telecoms Operators of Nigeria, Nigerian Communications Commission (NCC) and the CBN, deliberated on and resolved key challenges.
The resolutions were: USSD services for financial transactions conducted at DMBs and all CBN – licensed institutions would be charged a flat fee of N6.98 per transaction effective March 16, 2021. In order to enhance convergence of exchange rates in Nigeria, the Bank, on May 24, 2021, adopted the NAFEX rate as the benchmark rate in the inter-bank market.
Ban of forex sale to BDCs
The CBN outlawed the sale of foreign exchange (forex) to Bureaux De Change (BDC) operators in July 2021. The governor of the CBN, Godwin Emefiele made this known while addressing the press during the MPC briefing, 27th July 2021.
The central bank also confirmed that it will no longer license new BDC operations in the country and have also halted all current processes for new licenses.
The governor noted that this act by the BDC is in contrast to the understanding with the apex bank, which highlights that the BDCs are allowed to make a small margin from the sales of the US dollar allocated to them by the CBN. However, he opined that they have become somewhat, greedy, by taking abnormal profit, which has further affected the exchange rate of the country.
BDC Operators are now relying more than ever on peer to peer transactions to fund their dollar supplies amidst the CBN dollar sale ban. Those with stronger networks of buyers and sellers are able to attract more business while those without, struggle with volume.
However, exchange rates are still transacted at exorbitant black market rates rather than the rates preferred by the central bank.
eNaira, Nigeria’s first digital currency
In October, the Central Bank of Nigeria (CBN) rolled out eNaira, the country’s first digital currency. eNaira serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. The apex bank partnered with Bitt Inc., a Barbados-based company, to launch the digital currency operations.
The eNaira, Africa’s first digital currency made its debut on the 25th of October 2021 and successfully completed N46.3 million worth of transactions in less than two weeks of launch.
CBN’s technical partner, Bitt Inc has announced plans to roll out a new mobile application that allows the unbanked population to access eNaira.
100 for 100 policy
The CBN announced the launch of its new financial instrument, dubbed “The 100 for 100 PPP Policy on Production and Productivity,” on October 25, 2021.
The 100 for 100 PPP is a program that will provide financial support to 100 designated private sector enterprises every 100 days. Under this scheme, businesses can apply for up to N5 billion in funding. Any payment exceeding N5 billion would require CBN management’s special permission.
However, the scheme’s selection criteria confine the instrument to new projects exclusively, and it does not cover refinancing of existing facilities. The project, according to the CBN, is a long-term loan for the purchase of plant and machinery as well as working capital.
The Central Bank of Nigeria (CBN) has introduced the Tertiary Institutions Entrepreneurship Scheme (TIES), at the tail end of the year. TIES provides undergraduates and graduates with a platform to access loans.
The TIES’ underlying aim is to provide access to capital for Nigerian undergraduates and graduates with innovative entrepreneurial and technological ideas from polytechnics and universities.
TIES intends to shift undergraduates and graduates away from white-collar job pursuits and towards a culture of entrepreneurship development for economic development and job creation.
CBN agriculture focus policies
According to the CBN, the scheme will assist over 150,000 farmers and will first be implemented in 15 states across the country.
Earlier in 2021, the CBN launched the country’s first-ever rain-fed wheat program, with the goal of reducing wheat imports by 60% and saving $2 billion in foreign money yearly. According to the CBN, the scheme will assist over 150,000 farmers and will first be implemented in 15 states across the country.
The CBN has also put aside approximately N5.7 billion in loans for 10,000 farmers in Bauchi State to support dry season wheat farming, with 4,500 farmers benefiting so far.
Between September and October 2021, the bank disbursed N43.19 billion through the Anchor Borrowers’ Program to support the cultivation of 250,000 hectares of maize, sorghum, soya beans, and rice during the 2021 dry season farming season, as well as N5.88 billion to finance six large-scale agricultural projects through the commercial agricultural agri-business scheme.