Ayodele Aminu and Kunle Aderinokun
4 November 2009
The Central Bank of Nigeria (CBN) is working on a plan to make banks report suspicious cash transactions by politically exposed persons (PEPs).
The banking watchdog boss, Mallam Sanusi Lamido Sanusi, also said yesterday at the end of the Monetary Policy Committee (MPC) meeting in Abuja that the CBN might soon start buying margin loans to boost lending.
The proposed banking regulation, which is a draft manual on anti-money laundering, published on the CBN website, will require banks to report large movements of cash between accounts by PEPs.
The banking watchdog defines "politically exposed persons" as individuals who are or have been entrusted with prominent public functions both in Nigeria and foreign countries and those associated with them.
It listed examples of PEPs to include, but not limited to, heads of state or government; governors; local government chairmen; senior politicians; senior government officials; judicial or military officials; senior executives of state-owned corporations; important political party officials; family members or close associates of PEPs; and members of royal families.
The CBN said: "Financial institutions are required, in addition to performing Customer Due Diligence (CDD) measures, to put in place appropriate risk management systems to determine whether a potential customer or existing customer or the beneficial-owner is a politically exposed person.
"Financial institutions are also required to obtain senior management approval before they establish business relationships with a PEP and to render monthly returns on their transactions with PEPs to the CBN and Nigeria Financial Intelligence Unit (NFIU).
"Where a customer has been accepted or has an ongoing relationship with the financial institution and the customer or beneficial-owner is subsequently found to be or becomes a PEP, the financial institution is required to obtain senior management approval in order to continue the business relationship.
"Financial institutions are required to take reasonable measures to establish the source of wealth and the sources of funds of customers and beneficial-owners identified as PEPs and report all anomalies immediately to the CBN and other relevant authorities."
According to the CBN, a financial institution in a business relationship with a PEP is required to conduct enhanced ongoing monitoring of that relationship.
"In the event of any transaction that is abnormal, FIs are required to flag the account and to report immediately to the CBN and other relevant authorities such as Economic and Financial Crimes Commission (EFCC)/NFIU," it said.
Many PEPs are major shareholders or directors in Nigeria's banks. Under the regulations, the identities of both individuals and corporate institutions making a transaction above N500,000 and N1,000,000 respectively must be checked.
Briefing newsmen on the outcome of the MPC meeting yesterday, Sanusi said that the proposed legislation setting up an assets management company to buy the loans is expected to be sent to legislators next week.
The purchases would "stimulate activity in the capital market" and improve banks' balance sheets, Sanusi said.
About N1 trillion of banks' cash is believed to be trapped in margin loans at the stock market, which has lost over 31 per cent of value so far this year - after losing 45.8 per cent last year.
Sanusi said there would be quantitative easing to bridge the gap currently estimated at about N500 billion between the levels of the current monetary aggregates and the benchmark levels for 2009.
He said the modalities for quantitative easing include investments in bonds is to be issued by the Asset Management Company (AMC).
"The setting up of AMC, however, is subject to the approval of the National Assembly," he noted.
The CBN governor said that the MPC had also resolved that the purchase of loans by banks under the AMC would be based on terms aimed at strengthening the balance sheets with a focus on asset quality, improving liquidity and capital adequacy as well as on reducing debt overhang relating to the stock market in order to stimulate activity in the capital market.
Sanusi also explained that given the fact that the audit of banks had been concluded and adequate provisions had been made for non-performing loans, the one per cent general provision on performing loans contained in the existing prudential guidelines had been waived for 2009 as a "countercyclical measure".
The measure, he said, was necessary "to stimulate credit growth and strengthen banks' balance sheets".
He said the MPC resolved to leave the Monetary Policy Rate (MPR) unchanged at six per cent but, however, added that an asymmetric corridor of interest rates around the MPR is introduced. The key rate was last cut by 1.75 percentage points last April.
According to him, "the rate on the standing lending facility will remain at 200 basis points above the MPR, while the rate on the standing deposit facility will be 400 basis points below the MPR. With this development, it is expected that secured borrowings and unsecured inter-bank placements will immediately slide downwards to around two per cent per annum."
In addition, he said, with effect from November 16, 2009, the temporary ban placed by the CBN on the use of Bankers' Acceptances (BAs) and Commercial Papers (CPs) would be lifted. Guidelines, on that, he said, would be issued by the CBN prior to that date.
He said: "The totality of these measures is aimed at improving system liquidity and financial stability to regenerate confidence in the Nigerian markets and to further stimulate growth."
Sanusi said the real gross domestic product (GDP) growth rate rose to 7.58 per cent at the end of the third quarter of this year. The GDP, the CBN noted, had grown from 7.22 per cent in the second quarter and 4.5 per cent in the first quarter.
The banking watchdog chief said no decision had been taken on a fixing the tenure for chief executives of commercial banks. Rather, the apex bank said it was still conducting a forensic and diagnostic audit of the banks, which is expected to be ready next week.
He said after the audit is concluded, views would be taken from from the Nigeria Deposit Insurance Corporation (NDIC) among other stakeholders and such views would the apex bankto make a decision on the tenure of bank's chief executives.
Also yesterday, the CBN announced that by the first quarter of 2010, it would release a New Prudential Guidelines on Loans and waived one per cent provision on performing loans contained in the existing prudential guidelines.
Sanusi also expressed delight that the foreign exchange market had been stable.
According to him, "the official exchange rate stood at an average of N149.3578 per US dollar in October 2009. The inter-bank market rate averaged N150.1252/$. There was thus a slight appreciation of the naira during the month. The spread between the rates has continued to be insignificant."
He said the external reserves rose to $43.34 billion as at the end of September 2009, representing an increase of about $ 1.64 billion over August. He attributed the increase mainly to the receipt of the SDR allocation.
By the end of October, the foreign reserves are provisionally estimated to be $43.05 billion, he said.
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I never thought that there would come a day when I would actually give Kudos to the CBN Governor. I am very impressed with Sanusi's expressed managerial skills, and a new found willingness to follow protocol by opting to invlove the National Assembly in his decision-making process.
This shows that the current crop of technocrats that surround him are dedicated professionals who are determined to clean up Nigeria's image world-wide. In other words, if one wanted to rebrand Nigeria, he needs not look any further than tapping into her intellectual prowess which has been characteristic of the nation's God-given pride in its human population.
With the measures he wants to introduce to the National Assembly, half-baked politicians who see holding a national office as a way to amass wealth will now begin to redefine their strategies for wanting to become a politician. If the they sense that the dividends that could be derived from joining the political scene would not outweigh the risk of exposure to public scrutiny and ridicule, they may want to leave politics altogether, and serve in advisory capacities as "senior citizens". The success of this experiment by Mallam Sanusi will usher into Nigeria's political scene some firebrand young individuals whose sense of patriotism and duty to the Nigerian nation would be to basically stem the tide of arrogance that foreigners mete out to Nigerians in their host countries. Whereas, older Nigerians have the propensity to tolerate these kinds of abuses from foreigners when they travel, the younger generation would not sit idly by and allow anyone to insult them to the deplorable degree that many of us have witnessed.
At most foreign airports, immigration personnel always seek out Nigerians to harass. Many Nigerians have taken these insults because we had a weak central government who could not rightly argue for the rights of its citizens while bracing the shores of these countries on a daily basis. I have to really applaud Mr. Sanusi for recognizing that the dividends of a functioning democracy lies in our ability to seek the consensus of the National Assembly whose responsibility it was, to set up a banking sub-committee to oversee the actions of its appointed officials who represent us (Nigerians) daily.
I would hope the National Assembly will look seriously at the proposals Mr. Sanusi made. Nigeria needs the passage of this proposal into law so that our young talents can be tapped into for the good of the country. In fact, if other African countries could adopt the same policy, these fools who prefer to become Presidents for Life would definitely have a re-evaluation of their intents before entering politics. In Nigeria there are more people who trade on politics than there are actual politicians who really understand the rudiments of politics. Being voted into office because of popularity and local charm, but without a definable objective as to why they entered into politics are not the same thing. Before someone would venture into seeking for an elective office, they must first consider the overall developmental objectives of their constituency. Popularity is NOT synonymous with knowledge. A chomp can be popular. But, how many of these chomps are able to draft a Bill to be presented to the National Assembly for public debates on the merits of such legislative instrument?
What Mr. Sanusi has proposed require careful scrutiny and consideration. Its passage into law would sanitize the Nigerian Political scene, and I strongly commend him for his efforts. The work of the previous CBN Governor for streamlining the banking sector, and Mr. Sanusi's determinations to clean up the banking community's dead-weights is indeed, a remarkable achievement for a country which the international community had heretofore, written off. By Mr. Sanusi's actions, he is basically informing those who thought that Nigeria was an easy-work-over, is that the law on our soil is no respecter of persons. Bravo, Mr. Sanusi.
If this exposure of corrupt politicians happens via this CBN gameplan, then Sanusi would be worthy of my respect because it is the nabbing of these rogue politicians that would sanitize the nation. As for the private sector in a capitalist society, anything goes as long as the private sector economic rogues reinvest their loot back into the economy. On the other hand, the politician, with no other means of income beside stupendous public office salary and allowances from the nations’ coffers, who, in addition, embezzle public funds and ship the loot abroad, their conduct represent double jeopardy that the nation cannot afford. If the same jail sentence that was meted out to Bode George were applied to the likes of Ibori & other corrupt politicians, with no sacred cows, then Waziri and Co would’ve earned our applause. Until then, all these traveling abroad to toot her horn like Waziri shamelessly did on Bode George and Ibori’s bribery attempt of Ribadu is nothing but playing to the gallery of buffoonish proportion that embarrasses the nation even more.