By Ajibola Bello Esq.
The arrest, detention and prosecution of the suspended Central Bank of Nigeria (CBN) Governor, Godwin Emefiele by the Department of State Securities (DSS) upon the installation of the new civil government in Nigeria came as no surprise to many Nigerians. This is owing to the fact that the hardship and suffering invoked on Nigerians through the politically-motivated naira redesign which was initiated and implemented rather crudely by the suspended Governor is still fresh in the minds of many Nigerians.
Some are in fact yet to get over the negative impact the myopic policy had on their lives in terms of loss of life, loss of earnings and the total collapse of their hitherto struggling businesses.
While it must be quickly said that the prosecution of Emefiele is, according to DSS, for “criminal infractions”, one can say for sure that ordinary Nigerians do not care what the charge is, as long as his prosecution can be viewed as a sort of deserving nemesis catching up with him. In that light and notwithstanding the charge, it should be noted aforehand, that the prosecution of the suspended Governor will barely have a direct implication on remedying or improving the financial and economic distortions that were created during the tenure of the suspended Governor.
Upon the suspension of Godwin Emefiele, Folashodun Shonubi, a Deputy Governor (Operations Directorate), was directed by President Bola Tinubu to oversee the affairs of the apex bank. Mr. Shonubi upon assumption of office, albeit in acting capacity has abolished the segmentation in the foreign exchange (FX) market and collapsed all rates into the Investors and Exporters (I&E) window and also announced the cessation of the RT200 Rebate and Naira4Dollar Remittance Schemes, with effect from June 30.
These are quick actions which excited investors on large-scale financial operations and same is quite commendable.
However, the purpose of this write-up is to call attention to the financial and banking regulations and practices that affect every Nigerian in the face of the current economic situation that the country finds itself and in relation to the adjustments following the implementation of cashless policies and removal of fuel subsidy.
To put it more poignantly, the Acting CBN Governor needs to, as a matter of priority, pay attention to the following:
HARMONIZATION OF LEGAL FRAMEWORKS FOR FINTECH SERVICES:
While the conventional banking has always been on the floor of the banking premises, the introduction of mobile banking, backed by Information Communication Technology (ICT) brought about financial technology-oriented banks simply called Fintechs.
The Fintechs comprise of mobile money operators, online payment platforms and other online financial services. With the proliferation of Fintech services, more financial transactions have become susceptible to fraud in the face of unsecured loans issued by some Fintech entities. It is noteworthy that while Payment Service Banks (PSBs) that are set up for financial inclusions are precluded from issuing credit facilities, Fintech providers such as Palmpay and Opay are by their licence allowed to issue credit facilities which has triggered a new form of financial crime and data insecurity. Bearing in mind the risks presented by Fintechs, it is imperative to have a holistic and harmonized legal framework for their operations.
REVIEW OF REQUIREMENTS FOR PAYMENT SERVICE BANKS (PSBS):
Since the introduction of Payment Service Banks as one of the means of providing financial services in the country with the intention of increasing financial inclusion, particularly for the benefit of those in rural areas, it is noteworthy that there are only five licensed PSBs in the financial ecosystem of Nigeria. This is owing to the stringent requirements and restrictions placed on the operation of the PSB which makes it unattractive and less favourable to rural dwellers. For instance, the capital requirement for PSB is N5 billion while that of Mobile Money Operators is N2 billion. Also, PSBs are restricted from giving credit or loan facilities. With this feature, rural dwellers who have the capacity to engage in farming and mini-industrialization but need financing from banks are automatically precluded from a relevant financial service as they have limited options.
This makes banking unattractive to the said rural dwellers and comes with the effect of rendering the effort at financial inclusion counter-productive.
ENGAGING BANKS AND TELCOS ON EFFICIENT ELECTRONIC SERVICE:
The greatest test for Nigeria’s cashless policy came when the suspended Governor Emefiele announced a deadline for the use of the old N200, N500 and N1000 naira notes and banks were forced to disburse limited cash. During this period, Nigerians were forced to rely on financial technology by carrying out transactions digitally. The outcome was that many online-based transactions failed, owing to the incapacity of our telecommunications service and the lack of preparedness by offline banks to bear the weight of the demand placed on them.
Many of the failed transactions, much to the frustration of customers are yet to be resolved till date. Many of the second-generation banks still have their bank premises filled with customers simply because their online banking processes are unreliable and inefficient.
In this regard, it is imperative for the Acting CBN Governor to engage the Telecommunication Companies through the Nigerian Communication Commission to review and improve the capacities of the service provided while also assessing the technological facilities put in place by banks for efficient customer experience during interface.
REVIEW LIMIT ON CONTACTLESS TRANSACTIONS:
The CBN on the 27th of June 2023 issued a circular pegging the limit of contactless transactions at N15,000 and the daily cumulative limit at N50,000. Although the limit was pegged due to the risk associated with contactless transactions, it is imperative to note that with the recent removal of fuel subsidy, the monetary values of everyday commodities which would be the object of contactless transactions have increased drastically.
Upon the removal of fuel subsidy and the attendant increase in the pump price of fuel, the cost of filling the tank of vehicles with petrol now ranges between N30,000 to N50,000 depending on the vehicle and where the internet service is poor, the only means of payment becomes contactless transaction.
Accordingly, it is important to take into cognizance these realities in the implementation of monetary policies else, the implementation of the cashless policy will yield no result.
CONSISTENCY IN THE POLICY ON FOREX:
There is no gainsaying that the disposition of the current administration is to reintroduce the liberalization of the foreign exchange market and thereby allow market forces to determine the value of naira in comparison to other currencies particularly the US dollar, Euro and Pounds. The disposition is well thought-out and economists tend to appraise the fact that the move will eradicate multiple exchange rates while closing the gap between the official and unofficial rates. It is also considered that the liberalization will boost investor confidence and bring about macro-economic stability. In the face of the appraisal, it is instructive to call the attention of the CBN and federal government to the fact that previous attempts at liberalization failed particularly in the year 2016.
For the instant attempt, the new decision to remove fuel subsidy which has liberalized the market and which would have an impact on the foreign exchange must be taken into account. This is more so as 90% of Nigeria’s foreign exchange earnings come from the oil and gas sector. In the light of the foregoing, it should be borne in mind that the economy will suffer a hard hit through the policy on foreign exchange and the CBN along with the Federal Government need to stay consistent so that the anticipated changes can fall in place.
Bearing the foregoing in mind, the Federal Government, following the suspension of one Governor and the appointment of another in acting capacity, must work in harmony with the Acting CBN Governor in terms of economic policies with the intent to put the Nigerian Banking sector and its operations in proper stead.
Ajibola Bello is a Legal Practitioner and Deputy Managing Partner at Law Corridor, Abuja.