A recent Federal High Court decision has raised doubts as to the legality of foreign currency-denominated facilities. The Central Bank of Nigeria Act makes it clear that the naira is the currency of payment for the domestic supply of goods and services in Nigeria. However, the designation of the naira as legal tender in Nigeria does not suggest that the use of any other currency as a medium of exchange within Nigeria is prohibited.
In a bid to promote a sound financial system and enhance access to financial services for low-income earners and the unbanked segments of the Nigerian population, the Central Bank of Nigeria recently issued the Guidelines for Licensing and Regulation of Payment Service Banks (PSBs) in Nigeria. The main objective of establishing PSBs is to enable high-volume, low-value transactions in remittance, micro-saving and withdrawal services in a secured technology-driven environment.
In view of the increasing focus on cybersecurity worldwide and the rise in cyber threats both in and outside Nigeria, the Central Bank of Nigeria recently issued a draft risk-based framework and guidelines on cybersecurity for deposit money banks and payment service providers. The draft guidelines aim to complement and build on the Cybercrimes (Prohibition, Prevention) Act 2015 by promoting cybersecurity and protecting computer systems and networks and electronic communications.
The National Assembly is considering three bills to repeal and re-enact the key pieces of legislation that regulate the banking sector. Collectively, the bills provide for an increase in the Central Bank of Nigeria's autonomy and discretionary powers, an expansion of the banking regulation regime to accommodate electronic transactions and increased penalties for infractions, including the imposition of personal liability on bank officers and directors.
The Central Bank of Nigeria (CBN) has started 2017 on a bullish note by overseeing the valuation of the naira. In addition, the CBN has intervened in the foreign exchange market in an effort to narrow the significant gap between the official exchange rate and the parallel market rate. This seems to be working, but it remains to be seen how sustainable it will be in the long term.
The Central Bank of Nigeria (CBN) recently lifted its peg on the naira. Despite the CBN's decision to float the naira, which in effect is a devaluation, the foreign exchange market has experienced a high rate of volatility. As such, it remains to be seen whether the effective devaluation of the naira was the right move.
In January 2016 the Central Bank of Nigeria directed all deposit money banks to commence charging their customers N50 in stamp duty charges per eligible transaction. Many are unhappy with this, as it represents an additional charge for banking transactions, and the deposit money banks have now challenged the matter in court through an appeal to the Court of Appeal.
The foreign currency exchange controls – particularly the restriction on foreign exchange cash deposits into domiciliary accounts – imposed by the Central Bank of Nigeria (CBN) last year have been heavily criticised. Relief has now come as the CBN has lifted the ban on foreign currency cash deposits in domiciliary accounts in deposit money banks and banned the sale of foreign exchange to bureau de change operators.
At present, the Central Bank of Nigeria does not regulate virtual currencies. However, Bitcoin is bought and sold in Nigeria freely and the use of Bitcoin is becoming increasingly popular. Its users include forex traders, online investors, importers, exporters and betting sites, and there are a number of merchants in Nigeria where Bitcoin can be bought and sold using the naira.
Towards the end of 2014 and during the first quarter of 2015, the value of the Nigerian currency fell dramatically. The Central Bank of Nigeria devalued the currency for a number of reasons, including falling oil prices and the practice of using the country's foreign exchange reserves to shore up the naira. Only time will tell whether the naira will make a full recovery.
The Federal High Court has upheld the complaints of certain Nigerian companies against the procedure which the Central Bank of Nigeria has adopted for the designation of debts which they owe to Nigerian bank Ecobank as eligible assets pursuant to the Asset Management Corporation of Nigeria (AMCON) Act 2010, and the subsequent acquisition of those assets on that basis by AMCON.
The Central Bank of Nigeria has introduced a bank verification number scheme into the banking system. The scheme aims to revolutionise the country's banking and payment systems, and is intended to address issues such as ensuring the safety of depositors' funds and avoiding losses through the compromise of personal identification numbers.
The Federal High Court has granted remedies in order to create a structure for the collection or remittance of payments due to the Nigeria Postal Service (NIPOST) under the Stamp Duties Act. The case in question challenged the refusal of Nigerian banks to comply with provisions that require payment of duties by use of postage stamps. If it stands, it will be a watershed in the existence of NIPOST.
Zenith Bank recently established its global depository receipts programme on the London Stock Exchange. This transaction highlighted the increasingly vibrant nature of the Nigerian banking sector, but also revealed certain grey areas related to the regulatory framework for global depository receipts programmes and afforded the Nigerian Central Bank the opportunity to make some clarifications.
The president has suspended the introduction of the N5,000 banknote, which was due to be launched as part of a Central Bank currency restructuring exercise. The decision has led to a discussion about the legality of the president's power to approve and suspend recommendations made by the Central Bank's board of directors regarding currency denominations.
The Central Bank of Nigeria's examination of the banking sector in 2009 began a process that led to the assets and liabilities of three Nigerian banks being transferred to bridge banks. The appointment of two consortia of advisers by the Asset Management Corporation of Nigeria (AMCON) marks the first step towards AMCON's divestment of its interest in the bridge banks, as it considers its most viable exit options.
The Central Bank of Nigeria's policy on cash-based transactions in banks is aimed at reducing the amount of physical cash circulating in the economy, thereby encouraging more electronic-based transactions. As a result of the implementation of this policy, the adequacy of laws regulating electronic banking and data protection issues must be considered.
The Nigerian Deposit Insurance Company (NDIC) recently announced that it was exercising its statutory powers to establish three bridge banks to assume the deposits and liabilities of Afribank Plc, Spring Bank Plc and Bank PHB. According to the NDIC, the deposits and liabilities of the failing institutions were being assumed in order to ensure the interest of depositors and to prevent liquidation.
As part of continuing efforts by the government and the Central Bank of Nigeria to clean up the banking sector and manage the impact of the global financial crisis in Nigeria, the National Assembly has passed an act creating the Asset Management Corporation. This corporation is designed to resolve liquidity problems in the financial sector and revive the vital credit role of deposit banks and financial institutions.
The Central Bank of Nigeria has recently reduced the up-country clearing cycle for payment instructions. The bank has also granted provisional licences to 76 finance companies in order to carry out finance company business in Nigeria.