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Nigeria expects inflow of $400 mln from S/Africa’s Standard Bank this week, says Emefiele

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Nigeria is expected to receive a $400 million inflow from Standard Bank by the end of this week, according to the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele.

Emefiele dropped this hint at the opening of the 2023 African Central Bank Conference held at the Global Leadership Center in Johannesburg, South Africa on Wednesday.

According to the regulatory bank governor, the inflow would “help boost our funding and financing needs in Nigeria.”

He, however, did not provide clarity on what the money from South Africa’s largest bank by assets is meant for.

Nigeria has been struggling with a foreign exchange shortage since 2020, leading the rationing of dollars to businesses and individuals who need it to meet their foreign obligations.

On Tuesday some banks extended the processing period for international school fees and upkeep requests through Form A to 120 days from the previous 60 days and slashed the amount to be disbursed to customers.

For instance, in an email to customers, First Bank, the country’s oldest lender, attributed the latest decision to the “limited foreign exchange supply in the industry.”

Aside from the school fees and upkeep for students studying abroad, the bank has also slashed Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) to a maximum of twice annually per applicant, to the tune of $2,000 per application.

Both BTA and PTA are used to be a maximum of $5,000 per application and can be obtained four times a year.

The local unit of Standard Bank, Stanbic IBTC is among the top six contributors to Africa Regions headline earnings of South Africa’s lender.

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Meanwhile, Emefiele has advised central bankers and regulators across the world to be vigilant and guard against failures of financial institutions in their jurisdictions.

The move followed the closure of New York-based Signature Bank on Sunday by regulators, two days after they shut down Silicon Valley Bank in a collapse that stranded billions in deposits.

Emefiele advised governors of central banks and other African financial sector regulators to improve their supervisory roles to forestall any run on financial institutions in their countries.

He advised central banks on the continent to draw lessons from the recent failures of Silicon Valley Bank and Signature Bank in the United States of America by putting in place regulations that will prevent any run on banks in their countries.

“A major reason that contributes to bank failures is when the bank is unable to meet depositors’ demands for their money. This usually results in a run. There is a need for regulators to insulate the banking system from collapse,” he added.

He noted the “devastation to lives and livelihoods that was caused by COVID-19 globally.”

“And after COVID-19, we started seeing economies develop again; the numbers were good, and financial market conditions were better, but suddenly, in 2022, another crisis came: the war between Russia and Ukraine, which has unfortunately created problems for the global economy.

“All the forecasts made by the IMF and World Bank have begun to go south, and inflationary pressure has begun to climb,” Emefiele added.
He highlighted measures the CBN took after the subprime mortgage crisis that led to the collapse of global financial institutions in order to avoid contagion effects on banks in the country.

Emefiele, while sharing Nigeria’s experience in regulating banks, noted that the threats posed to the financial system necessitated the release of new guidelines and regulations to tackle potential infringements and, in the process, protect depositors’ funds as well as promote greater transparency in the sector.

According to him, regulators must be alive to their responsibilities by ensuring that banks under their regulatory watch are financially healthy and do not suffer a similar fate as the Silicon Valley Bank, which, until its collapse recently, catered to many of the world’s most powerful tech investors.

Emefiele told his audience that “regulators must be prepared for what I call the rainy day. What umbrella have you built to ensure that depositors don’t face the risk of losing their deposits? That should be a lesson to regulators globally.

“People have always said that the Nigerian banking system is one of the most regulated. We are not saying there are no cases where banks have crises in Nigeria, but we try as much as possible to ensure that we insulate the banking system from serious occurrences.

“It is only in Nigeria and very few other countries in the world that you would hear that if a bank collects, for instance, $100 from a customer as a deposit, today $32.5 of that must be kept at the CBN.

“It is to keep that fund to make sure in this kind of situation where they are in crisis; we also maintain that banks would maintain a specified liquidity ratio, and it is only in Nigeria that we insist that banks must have a minimum level of capital adequacy ratio.

“It is in Nigeria and some other countries in the world that if you are a young bank, after declaring profit, we insist that 25 percent be held in a statutory reserve fund to boost your retained earnings and capital adequacy ratio.

“These are the kinds of things regulators need to begin looking at more often. So, as a regulator, you need to begin thinking about how to insulate your banking industry. Regulators must begin to be much more responsible.

“We have often said that in Nigeria, we believe that when there is a crisis, we make sure that depositors are protected and that no depositor loses their money.”

He stressed that bad loans are major factors that kill financial institutions, reiterating the need for regulators to be more responsible.

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