Tag Archives: #CBN

Cryptocurrency: On Central Bank of Nigeria (CBN) Circular To Commercial Banks

This afternoon, a Central Bank of Nigeria (CBN) circular sent to commercial banks and other financial institutions surfaced online. Here is a thread explaining what the circular means and why the CBN issued it.

Cryptocurrencies have gained popularity since bitcoin, the most valuable crypto, rose significantly four years ago. The coin went from $900 in January 2017 to almost $20,000 by the end of that year.

While cryptocurrencies are known for people making (or losing) money from trading, they have many use cases, including making cross-border payments, remittances or storing wealth (protected from inflation or exchange rate depreciation).

In countries where the official fiat currency is less reliable, cryptocurrencies have gained significant popularity: cue Nigeria and its ever-weakening naira.

For many in Africa’s largest country, cryptocurrencies were a breakthrough, and in 2017, we started to see a rise in bitcoin volumes. According to one estimate, local bitcoin trades hit $1 million in a single week.

At the same time, startups started to emerge—providing different financial solutions using cryptocurrencies and their technology. One of Nigeria’s largest cryptocurrency exchanges, BuyCoins, was founded in 2017.

It wasn’t all good news, though. Bitcoin was also very popular for individuals who wanted to get involved in a Ponzi scheme called MMM (Mavrodi Mondial Moneybox).

This connection, coupled with a few fraud causes, made African governments and regulators slightly cautious. For central banks, though, the rise of cryptocurrencies was a potentially scary movement.

The idea of digital currencies that central banks have no control over were seen as a threat to conducting monetary policy.

Putting all of this together, the CBN made several warnings in 2017 about the use of cryptocurrencies. They released a circular saying that the likes of bitcoin, “ripples”, litecoin, and other cryptos were not legal tenders.

The CBN said that these cryptos were mostly used for terrorism and money laundering activities. A year later, in 2018, they “warned” Nigerians again that we would not be able to get legal help if the cryptocurrency space crumbles.

Since then, the CBN has been relatively quiet on the matter. In fact, the global cryptocurrency scene hit a rough patch in 2019 as prices crashed.

That all changed in 2020 when prices started to pick up. The world looked at crypto again, but this time, there was a more formal acceptance. Large corporations began to buy bitcoin and also invest in crypto-related startups.

In Nigeria, businesses and individuals found that cryptocurrencies could solve their woes with the naira and help them transfer money in and out of the country. Bitcoin volumes started to rise significantly.

Last year, estimates from BuyCoins showed that total volumes of bitcoin traded in Nigeria stood at $200 million per month. That’s more than what was traded on the Nigerian Stock Exchange ($131 million) in Q2’2020.

This activity boosted the space, and the gatekeepers of these volumes were the cryptocurrency exchanges. Nigerians moved from exchanging bitcoin on WhatsApp groups to more formal exchanges like Bundle and Binance.

The increase in trading activity caught the eye of financial regulator, the Securities and Exchange Commission (SEC), who announced that all crypto assets fall under its remit. It formalised cryptocurrencies as “securities” in a statement released in September 2020.

Fast forward to today, four months later, and the CBN is doing something almost contradictory to the SEC’s move. While one regulator was working on laws to formalise crypto assets, the other (CBN) is going in the other direction.

According to the circular, which was sent to banks, the apex bank said that dealing in cryptocurrencies is “prohibited”. They then asked commercial banks and financial institutions to identify and close the accounts of anyone involved in cryptocurrency exchange.

It’s not clear if this order includes individuals who use these exchanges or if it’s restricted to the owner of the exchanges. Nonetheless, the move is a blow to Nigeria’s burgeoning crypto market.

It’s early to say what the impact would be. In Nigeria, announcements like this can either be implemented instantly or quickly retracted. The worst-case scenario is that both individuals and exchanges will no longer engage in transactions using a Nigerian bank account.

The exchanges would also have to find another way of storing their cash.

��s traded over $141M worth of bitcoin on BuyCoins alone last year, and the CBN seems to be clamping down on this activity.

This will also harm the startups across Nigeria’s crypto landscape (not just the exchanges). Investors will have more reasons to be worried.

It’s very similar to how Lagos state unexpectedly banned Okadas last year.

What we have here is another policy that is trying to strangle a sector that has just started to find its feet and grow.

So why is the CBN doing this?

As we have repeated many times before, foreign exchange drives most of the CBN’s moves. This case is no different.

As the crypto market has boomed since late last year and early 2021, more and more Nigerians are exchanging their naira for cryptocurrencies ranging from bitcoin to dogecoin. What does that have to do with the CBN?

Well, individuals deposit naira on exchanges and buy these coins directly. However, these companies need to acquire dollars from mainly the parallel market to buy these cryptocurrencies on the international market.

So as more people buy crypto assets, more US dollars are being taken out of Nigeria. The pandemic and the resulting drop in oil prices has reduced the amount of dollars the CBN has in its reserves. And so it has been ruthless in restricting the use of foreign currency.

Last year, the government banned the use of foreign currency for food and fertiliser imports. In a similar vein, this new CBN circular is trying to achieve the same thing: stop Nigerians from demanding dollars to make purchases outside the country.

The problem with these restrictive policies is that they starve the real economy. When the CBN banned maize imports, prices shot up, and they had to turn back on the policy slightly.

This new policy has a similar effect in that it does more to reduce the welfare of Nigerians than anything else. Why ban the country from using an innovation that is solving many problems that the government itself created?

If investors had forgotten that Nigeria was a risky place to do business, this will be a very loud reminder. As much as a business, or even an entire sector, might look attractive on paper, its appeal is beholden to the whims of the Nigerian government.

This scenario is unfortunate. It seems that the government doesn’t mind alienating the startup ecosystem. But these real businesses solving real problems are instrumental for Nigeria’s long-term growth. Yet, the government is insistent on restricting their growth.

In today’s article, our Editor-in-Chief wondered why the CBN had been quiet recently. Little did we know that they were cooking up a concoction.

Source: StearsBusiness.

Link For Survival Funds Registration – Daily Watch Press

Features:
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Formalisation Support: provide free CAC Business Name registration for 250,000 new businesses.
General Grant: Support the survival of 100,000 businesses most affected by the COVID-19 pandemic with N50,000 each.
Artisan/Transport Support: provide 333,000 artisans and transport business operators with a N30,000 operations grant to reduce the effects of income loss.
Guaranteed Offtake Scheme: Bulk purchase of products from 100,000 MSMEs to protect jobs and livelihood.

MSME SURVIVAL FUND
The MSME Survival Fund is a conditional grant to support vulnerable micro and small enterprises in meeting their payroll obligations and safeguard Jobs in the MSMEs sector. The scheme is estimated to save not less than 1.3million jobs across the country and specifically impact on over 35,000 individuals per state.

Duration: The scheme will be implemented over an initial period of three months in order to provide immediate relief from the economic impact of the pandemic.
Target Beneficiaries: The scheme targets two categories of beneficiaries namely; employees of MSMEs and Self-employed individuals, both schemes have made provision for a 45% female business participation and special needs participation of 5%.

Requirements
A. Employees’ company Must be registered in Nigeria under the Corporate Affairs Commission, CAC
B. Must have BVN by company CEO
C. Must have a staff strength of no less than 3 persons
D. Must be owned by a Nigerian

Self-employed Individuals in the following categories
A. Service providers in the transportation sector, le. Bus drivers, Taxi drivers, Ride share drivers. (Uber, Bolt Taxify etc) and Mechanics
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READ: Detailed List of CBN Loans and Fund Interventions For SME Businesses and Agriculture – Plus Application Guidelines

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Duration: The duration of implementation will be same as the payroll support Target Beneficiaries: Micro and Small businesses registered in Nigeria.

Registration for Payroll Support Begins on 21st September 2020
visit www.survivalfund.ng for registration details

President Buhari Warns CBN Not To Give Foreign Exchange To Food And Fertilizer Importers

President Muhammadu Buhari has warn the Central Bank of Nigeria from giving any foreign exchange to importers of food or fertilizer into Nigeria.

The statement which was issued by Malam Garba Shehu, the Senior Special Assistant to the President on Media and Publicity reads:

“As the Federal Government rolls out the Economic Sustainability Plan and sets goal for National Food Security, President Muhammadu Buhari on Thursday ordered the Central Bank of Nigeria ”not to issue a kobo” of the country’s reserves for the importation of food items and fertilizer.

At a meeting of the National Food Security Council at the State House, Abuja, President Buhari restated his earlier verbal directive to the apex bank, saying he will pass it down in writing that ”nobody importing food should be given money.”

Emphasizing the need to boost local agriculture, the President said:

”From only three operating in the country, we have 33 fertilizer blending plants now working. We will not pay a kobo of our foreign reserves to import fertilizer. We will empower local producers.”

Furthermore, President Buhari also directed that blenders of fertilizer should convey products directly to State governments so as to skip the cartel of transporters undermining the efforts to successfully deliver the products to users at reasonable costs.

The President advised private businesses bent on food importation to source their foreign exchange independently, saying ”use your money to compete with our farmers”, instead of using foreign reserves to bring in compromised food items to divest the efforts of our farmers.

”We have a lot of able-bodied young people willing to work and agriculture is the answer. We have a lot to do to support our farmers,” President Buhari said.

The meeting, chaired by the President with other key members of the Council in attendance, was briefed on the food security situation prevailing in the country.

Notably, the Vice Chairman of the council and Governor of Kebbi State, Atiku Bagudu, the Chief of Staff to the President, Prof. Ibrahim Gambari and a Governor from each of the six geo-political zones – Jigawa, Plateau, Taraba, Ebonyi, Lagos and Kebbi, made presentations.

The Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, outlined measures introduced by the administration to tackle the unprecedented challenges from the COVID-19 pandemic on the nation as contained in the Nigerian Economic Sustainability Plan (NESP).

Among others, the Minister highlighted that the government will facilitate the cultivation of 20,000 to 100,000 hectares of new farmland in every State and support off-take of agro-processing to create millions of direct and indirect job opportunities.

She also listed the creation of 774,000 direct jobs for a minimum of 1,000 young Nigerians in each local government, the construction of 300,000 homes every year to give a boost to jobs through the construction industry, as well as the connection of 25 million new users of electricity with the installation of Solar Home System (SHS) targeting 5 million households.”

The Presidential spokesman, Garba Shehu further states that:

“Dr Ahmed also briefed on the joint investment with the World Bank to provide intervention fund to States to improve health infrastructure.

She said to ease existing financial hardships among the people, the government is also coming up with low-interest loans for mechanics, tailors, artisans, petty traders and other informal business operators.

The Minister added that the Federal Government will equally provide support to Micro, Small and Medium Enterprises (MSMEs) to help them keep their employees and boost local manufacturing.

Dr Ahmed explained that from the recently approved N2.3 trillion stimulus recommended by the NESP, there will be expansion of broadband connectivity to boost job opportunities in the digital economy, a planned expansion of the National Social Investment Programmes including increase in the number of beneficiaries such as the cash transfer beneficiaries, N-Power Volunteers, the Market Moni and Trader Moni schemes.”

“In his presentation, the Minister of Agriculture, Alhaji Sabo Nanono told the Council that the nation expects a bumper harvest of food items despite floods in the north and drought in the south.

He quoted the latest market surveys to show that the recent hike in the price of commodities is being reversed.

On his part, Mr Boss Mustapha, the Secretary to the Government of the Federation and Chairman of the Presidential Task Force on COVID-19, reported the negative impact of the pandemic on the lives and livelihood of citizens, while the Comptroller-General of Customs, Col Hameed Ali (Rtd) expressed the hope of an early reopening of the partially closed borders given the progress made with neighbouring States in joint border patrols – one of the key conditions by Nigeria for reopening of the borders.” He concluded.

Economic Recovery: CBN to Launch Non-interest Loan For Farmers

The CBN Governor, Mr. Godwin Emefiele, on Thursday hinted of plans to integrate non-interest loan window in all its intervention programmes, particularly the Anchor Borrowers Programme (ABP) and the Targeted Credit Facility (TCF) for households and Micro, Small and Medium Enterprises (MSMEs) affected by the COVID-19 pandemic This is even as it said it budgeted N432 billion to support about 1.1 million farmers in the 2020 wet season farming under its Anchor Borrowers Programme (ABP).

CBN earmarks N432bn for farmers in 2020 N50bn loan: CBN waives guarantor requirement for SMEs, households. The Bank’s Director, Development Finance Department, Yila Yusuf, made these disclosures at a stakeholders’ meeting held in Abuja to review the successes recorded so far under the ABP and the strategies for the 2020 agricultural wet season. Yusuf, who represented the apex bank governor, Godwin Emefiele, at the forum, said:

“We are advancing N432 billon, through the banks, to the famers in the 2020 wet season across nine different commodities. The commodities are rice, maize, cotton, oil palm, and cowpea. We are also doing livestock, they are: poultry and fish.”

While projecting that the impact of the investment will be phenomenal, the development finance expert pointed out that the 2020 wet season support represented the largest Anchor Borrowers Programme the bank will be doing since 2015 when the programme was launched. According to him, the bank is targeting over 1.1 million farmers, farming over 1 million hectares of land as well as a combined output of over nine different commodities of 8.32 million metric tonnes.

” Yusuf projected that the intervention should create about five million jobs down the agro-commodities value chains. On the planned non-interest loans, he said “the CBN Governor has directed we create a non interest window especially for the North West and the North East. We have received several correspondents from concerned citizens especially on the CIVID-19 funds. In the weeks to come, we will announce a policy on the non-interest loans” he stated.

In his remarks, the apex bank’s Director, Corporate Communications Department, Isaac Okorafor, said the bank in the 2020 agricultural wet season, was committed to aggressively fund its agricultural programmes and spur farmers along select crop value chains to prevent food insecurity in the country. On the Targeted Credit Facility (TCF) of the Bank which aims at alleviating the impact of the corona virus on individuals and small businesses, he restated the bank’s commitment to its disbursement to stimulate Nigeria’s speedy economic recovery. Related CBN earmarks N432bn for farmers in 2020 CBN to fund 1.6m farmers for wet season operations Anchor Borrowers: CBN to empower 11,250 wet season farmers in Adamawa