The Central Bank of Nigeria (CBN) has retained its Medium-Term Framework ...

CBN unveils two-year monetary policy guidelines … sanctions banks for late remittance of govt revenue

The Central Bank of Nigeria (CBN) has retained its Medium-Term Framework for the conduct of monetary policy in 2014 and 2015.

The rationale for the framework and sustenance, according to the document titled: “2014/2015 Monetary, Credit, Foreign Trade and Exchange Policy Guidelines”, was anchored on the fact that it helps monetary policy to hit the ultimate goal.

CBN explained that the framework would enable it avoid over-reaction to temporary shocks and time inconsistency problems associated with frequent changes in policies.

It also said the policy direction in the document was designed to sustain the gains that the “bank has recorded in recent times with respect to its monetary policy objective of price stability.

According to the document, banks shall now remit Customs duties, Value Added Tax, and other revenue collections on behalf of the Federation and Federal Government by the next working day.

“Banks that fail to remit the collections within the specified period shall pay interest for late remittance as may be determined by the CBN,” it stated.

Perhaps, the move was to strengthen the policy objectives of sustaining the tightening of the financial system, especially Cash Reserve Requirement on public sector funds, which was raised to 75 per cent.

Meanwhile, the apex bank has unfolded plans to collaborate with other stakeholders to evolve initiatives that would facilitate the development of SMEs in 2014 and 2015.

Already, there are ongoing arrangements to establish the Secured Transaction and National Collateral Registry, which will facilitate the use of movable assets as collateral for either business or consumer credit.

This is aimed at substantially enhancing access to credit through the diversification of the scope of eligible assets for collateral purposes.

Other Small and Medium Enterprises’ initiatives include a N200 billion restructuring and refinancing facility, established to re-finance and restructure banks’ existing loan portfolios to manufacturers at seven per cent a year.

Also, the N200 billion SMEs Credit Guarantee Scheme established to encourage banks to lend to productive sectors of the economy, by providing 80 per cent guarantee on loans granted by banks to SMEs and manufacturers would be sustained in 2014 and 2015.

The Micro, Small and Medium Enterprises Development Fund- a N220 billion initiative, designed to provide wholesale facilities, refinancing and guarantee to MSMEs operators, will commence in 2014.

The Fund will also provide liquidity support to microfinance banks/microfinance institutions for on-lending to MSMEs, which 60 per cent of will be devoted to women entrepreneurs.

It also directed that banks, in the computation of their cost of funds, should employ the weighted average cost of funds framework.

By this framework, the applicable cost items include banks’ interest cost on the different types of deposit liabilities, borrowings from the inter-bank funds market, payments in respect of deposit insurance premium and costs due to reserve requirements.

However, the overhead costs associated with operations are excluded in this framework.

The apex said encouraged banks to improve their deposit mobilization efforts, in line with the financial inclusion initiative.

The development would however, necessitate banks to allow zero balances for opening new bank accounts so as to make banking services accessible to the unbanked public.

Accordingly, banks are also encouraged to develop new products that would improve access to credit and simplify their account opening processes, without compromising the Know- Your-Customer requirements.

Interest rates’ determination in 2014 and 2015 were also consigned market forces, with the level and direction being indirectly influenced by CBN’s anchor rate- Monetary Policy Rate (MPR).

However, interest rates chargeable by banks in 2014 and 2015 on current account deposits shall continue to be as negotiated, while the reducing balance method shall be employed for calculating interest charges on loans repayable instalmentally.

Also, during the period under review, a statement of account shall be rendered promptly, to each account holder, minimally, on a monthly basis free of charge, with details of interest on savings deposits, to be calculated on a customer’s account as at the end of each month.

“Banks shall continue to design their savings pass books (manual/electronic) in a way that clearly shows the applicable interest rate, savings balances on which interest calculation is based, and the period for which interest is calculated and paid.

“The CBN shall intensify efforts at enhancing the efficiency of the National Payments System. To this end, the bank shall strengthen efforts aimed at migrating the payments system from cash to electronic modes through the implementation of specific initiatives,” it said.

According to the guideline, the move aimed at discouraging the dominance of cash transactions in the economy, would sustain the cash deposit and withdrawal limits for individuals and corporate bodies.

Accordingly, for individual account holders, charges will apply when daily cumulative or single cash withdrawals/deposits are in excess of N500,000.

Also, for the corporate account holders, charges will apply when daily cumulative or single cash withdrawals/deposits are in excess of N3,000,000. – Guardian.

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