As the Central Bank of Nigeria (CBN) continues with its sanitisation and recapitalisation exercises, some stakeholders have begun to weigh the unintended consequences on the economy, with advise that CBN must be vigilant and circumspect to ensure that the desired growth is not sacrificed on the alter of ‘”international competition”.
According to them, the current zeal wth which these policies are being executed should also manifest in finding solutions to the current hardship, occasioned by the policies
Specifically, in June 2023, the Bola Tinubu administration decided to remove the controversial fuel subsidy and also unified the multiple foreign exchange windows prevailing in the previous Mohammed Buhari administration.
On the whole, since the new administration government’s policy changes that have impacted either negatively or positively on the lives and living of Nigerians included the removal of fuel subsidies, naira devaluation, continuous interest rate hikes, with their attendant macroeconomic challenges.
Both exercises being pursued by CBN have brought about pains and anxiety with the recent revocation of the licence of the defunct Heritage bank, even as some others are currently under the supervision of CBN, and also significant negate impact on households and businesses, contending with survival.
However,the concerned Nigerians say government and CBN may be overlooking the negative impact on the psyche of some Nigerians and entrepreneurs whose windows of borrowings have been technically shut out due to the high lending rates by banks.
The implication, according to them is the unintended consequence of eroding over 60 percent success rate achieved in financial inclusion project, for which MBN gathered CBN expended much funds in its execution.
This is because, except for the high net-worth individuals and corporate organisations, the banking public and entrepreneurs are wary of the high interest rates the banks are charging, while paying peanuts on savings.
More worrisome,they further argue, are the various levies and charges by the banks, all in the name of either maintaining the accounts or for sending messages to the account owners even when the said accounts are in debits.
CBN) has justified the higher capital base for banks by stating that it is necessary to strengthen the banking system and prepare it for the country’s economic growth ambitions, particularly the goal of achieving a $1 trillion economy by 2026.
However, the stakeholders further argue that the current GDP, which is far from the envisioned $1 trillion, makes the justification less rational and convincing.
The higher capital base requirement may lead to reduced credit availability, as banks may need to conserve capital to meet the new requirements, which could negatively impact economic growth.
Besides, the seeming lack of symmetry between the monetary and fiscal policy measures is considered another sore area that may stand the way of achieving, fully, the desired objectives.
Aminu Gwadabe, president of the Association of Bureau De Change Operators of Nigeria, (ABCON), in recent interview with Metrobusinessnews.com (MBN) called on the government to separate price policy from the AML/CFT policies, for the reforms to achieve the desired goals.
For instance, Gwadabe queried the overlap of price policy and AML/CFT POLICIES, advising that they should be entirely independent
In essence Gwàdabe was saying that there is an overlap as well as duplication of price policy and AML/CFT policies.
While Price policy refers to government measures to control or influence prices of goods and services, such as monetary policy or price controls, the AML/CFT policies refer to Anti-Money Laundering and Combating the Financing of Terrorism policies, aimed at preventing financial crimes and terrorist financing.
The BDC boss was saying that these two policy areas should be separate and distinct, without overlap or conflict, to avoid potential contradictions or inefficiencies. In other words, economic policies (price policy) and financial regulatory policies (AML/CFT) should be designed and implemented independently to achieve their respective goals effectively.
Mukhtar Mukhtar, Chairman,of Trustee Shareholders Association of Nigeria (TSAN) told MBN recently that he wondered the zeal with which CBN has come out with the new capital base for bank as well as increasing the Monetary Policy Rates in quick succession.
“One was beginning to wonder whether CBN is on a mission or whether some banks may have stepped on powerful toes during electioneering campaign that it may have come as a payback time. How do you justify the high capital base at a time interest rates are going up and the naira has lost much of its value to depreciation. This s actually not the right time if you ask me,” he said, while speaking with MBN on telephone.
According to an analysts who pleaded for anonymity,’The timing of the recapitalization exercise amid high inflation, interest rates and economic hardship s certainly wrong, to the extent that CBN and the government may not be able to provide solutions to. This is what we are all experiencing now. But all hope s not lost, with a little bit of commitment, diligence and monitory.”
– The potential for financial exclusion as smaller banks struggle to meet the new capital requirements
Most of the stakeholders were unanimous in their submissions that there is need for CBN to be mindful on the consequential effects on banking services and accessibility in rural areas, so as to be able to distinguish between the role of regulatory bodies in balancing prudential regulations with financial inclusion goals
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