Updated: CBN to introduce new forex guidelines

The Central Bank of Nigeria (CBN)  Mr says it will soon introduce a new set of foreign exchange laws and guidelines to address naira depreciation.

Governor of the CBN, Mr Yemi Cardoso, said on Friday the measure would help Nigeria achieve exchange rate stability.

The CBN, according to him, will also conduct a new recapitalisation exercise for the banking industry.

He said thus would be done by directing banks to increase their minimum capital base to a level sufficient to support the vision of a $1trillion economy.

Cardoso disclosed this in Lagos in a keynote speech at the 2023 Annual Bankers Dinner of the Chartered Institute of Bankers of Nigeria.

He also said that the CBN would introduce a new licensing framework for fintechs and payment banks, warning that operators found engaging in activities outside their licenses will be sanctioned.

He cited the need to curtail the challenge of rising inflation, adding that the apex bank would further tighten money supply for the next two quarters.

To further reduce excess cash in the banking system, he said the management of the CBN would soon conduct another round of liquidity mop up via issuance of Open Market Operations, treasury bills.

He said, “Our monetary policies will aim to achieve price stability, foster sustainable economic growth, stabilize the exchange rate of the naira, and reduce interest rates to facilitate borrowing and investments in the real sector.

“In order to ensure the proper functioning of domestic and foreign currency markets, clear, transparent, and harmonized rules governing market operations are essential.

“New foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new requirements.

“Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy.

“It is not just about the stability of the financial system in the present moment, as we have already established that the current assessment shows stability.

“However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1.0 trillion economy in the near future? In my opinion, the answer is No, unless we take action.
“Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital.”
On new licensing framework for fintechs, Cardoso said, “Technology will continue to play a critical role in delivering financial services and enhancing financial inclusion. “However, recent developments in the payment services landscape have raised concerns regarding the use of technology and the existing licensing and regulatory framework.

“We have observed that some licensees are operating outside the approved activities, breaching the boundaries set for them.

“Any intentional or unintended noncompliance will be subject to sanctions, as operators have the responsibility to ensure that they are licensed for the activities they undertake. “Concurrently, as we conduct a comprehensive review of the licensing framework for payment services, we will engage in extensive consultations to develop a new regulatory and compliance framework that is suitable for the technology-driven payment services sector.”