- The Central Bank of Nigeria made several decisions in 2024
- These policies defined Nigeria’s monetary landscape in the year
- TheRadar five of these policies, including the bank recapitalisation policy, interest rate hikes, and clearing of forex backlog
The outgoing year saw the Central Bank of Nigeria (CBN) make key decisions that shaped Nigeria’s monetary landscape.
2024, which marks the one-year in office of the CBN governor, Olayemi Cardoso, also tested Cardoso’s resolve to stick to his guns, especially with policy decisions, despite pressures and disapprovals.
In light of this, TheRadar highlights five of the key policies that the CBN took in 2024.
5 key policies of the CBN in 2024
1. Bank recapitalisation policy
One of the many top policies of the CBN in 2024 is the bank recapitalisation policy. On March 28, the CBN stipulated a 24-month window, from April 1, 2024, to March 31, 2026, for commercial, merchant, and non-interest banks to upwardly review their minimum capital base depending on their licence authorisation.
The exercise came 20 years after the last bank recapitalisation in 2004 under Professor Charles Soludo as CBN governor.
Cardoso said the recapitalisation exercise is to enable banks to meet the demands of the economy, particularly in being able to provide support for manufacturers and industrialists, given that President Bola Tinubu, in his Policy Advisory Council report on the national economy, set a target of achieving a N1 trillion Gross Domestic Product (GDP) by 2030.
The recapitalisation policy requires commercial banks with international authorisation to raise their capital base to a minimum of N500 billion from N50 billion previously. Those with national authorisation will raise theirs to N200 billion from N25 billion, while those with regional authorisation are required to reach the N50 billion threshold from N10 billion.
Merchant banks with national authorisation will have to increase their capital base to N50 billion from N15 billion previously, non-interest banks with national authorisation are expected to increase theirs to N20 billion from N10 billion, while non-interest banks with regional authorisation will raise their capital base to N10 billion from N5 billion.
The CBN also said that to meet the minimum capital requirements, banks may decide to inject fresh equity capital through private placements, right issues, and/or offers for subscriptions, mergers and acquisitions, and/or upgrades or downgrades of licence authorisation.
So far, Nigerian banks have adopted some strategies to meet their recapitalisation requirement, including rights issues, public offers and mergers like that between Unity and Providus Banks.
2. Interest rate hikes
Another key decision of the CBN in 2024 is the apex bank’s stance on monetary tightening through interest rate hikes.
Cardoso has often said the Monetary Policy Committee (MPC) will continue its hawkish stance in efforts to rein in inflation. The inflation rate continued to soar, reaching a new 28-year high of 34.60 per cent in November.
At its 298th and last MPC meeting for the year, the CBN hiked the interest rate for the sixth time to 27.50 per cent, 25 basis points higher than the 27.25 per cent it voted at its 297th meeting in September.
The CBN governor maintained that the interest rate hikes consolidate the gains recorded with previous rate hikes as core inflation has remained elevated, driven primarily by rising food and energy prices.
3. Granting IMTOs and BDCs access to source naira from CBN
The Cardoso-led CBN, on Monday, June 21, granted International Money Transfer Operators (IMTOs) access to directly source naira from the CBN window or through Authorised Dealer Banks (ADBs) to settle transactions for the sale of forex in the market.
According to the apex bank, the move is part of its commitment to enhancing local currency liquidity, ensuring the smooth functioning of the forex market, and improving formal remittance channels.
Before the announcement, the CBN had told banks and IMTOs to halt dollar payments of inbound transfers to customers in Nigeria. In a revised guideline to IMTOs and banks on January 31, the CBN said all inbound money transfers to Nigeria will be paid only in naira through a bank account or in cash at the prevailing rate in the Nigerian FX market.
The CBN also granted licenced Bureaux de Change (BDC) operators access to purchase forex directly from authorised dealers to meet customers’ needs.
The CBN stated this in revised guidelines, which announced the inclusion of licenced BDCs in the official forex market to streamline Nigeria’s forex market and enable the naira to reflect its true value.
The apex bank also mandated $100,000 as minimum trade on its Electronic Foreign Exchange Matching System (EFEMS) platform in new guidelines for interbank forex transactions, effective from November 25.
4. Offsetting forex backlog
On March 20, the CBN cleared valid backlogs of forex transactions totalling $7 billion to ensure forex liquidity and stabilise the exchange rate. This, in turn, curbs imported inflation and spurs confidence in the banking system and the economy.
The CBN also cleared $831 million of the $850 million backlog of trapped funds belonging to foreign airlines.
The move led to Nigeria's exit from the list of countries blocking the repatriation of airline funds, as stated in a recent report by the International Air Transport Association (IATA).
5. Policies to stop cash scarcity, hoarding, and hawking
Among the policies made by the CBN in 2024 are those focused on halting illicit flow and hawking of the naira, hoarding, and artificial cash scarcity, despite a whopping N4.29 trillion of currency in circulation outside the banking system.
The apex bank introduced a new policy setting the daily transaction limit at N100,000 per customer for cash-out transactions conducted by Point-of-Sale (PoS) agents.
It also set each customer’s weekly cash withdrawal limit at N500,000 irrespective of channel, while each agent’s daily cumulative cash-out limit was pegged at N1.2 million
To halt the illicit flow of minted banknotes to currency hawkers and economic agents that commodify naira banknotes, the CBN announced a N150 million fine in the first instance per branch of Deposit Money Banks found guilty.
The apex bank, in a circular on November 13, 2024, announced stringent penalties for banks found culpable of hoarding or diverting cash to hawkers.
The CBN said any bank linked to cash seized from hawkers would face a fine of 10 per cent on the total value of the withdrawn funds, and subsequent violations would attract an incremental penalty of five per cent.
The bank also issued a stern warning to financial institutions over cash scarcity at Automated Teller Machines (ATMs) across the country.
The CBN governor announced that penalties would be imposed on erring banks and other financial players found culpable.
5 policies that defined Olayemi Cardoso’s one year in office
Meanwhile, TheRadar reported that Olayemi Cardoso recently marked one year as the governor of the Central Bank of Nigeria (CBN).
The one-year period is characterised by five major policies, which include the bank recapitalisation exercise, clearing of forex backlog and lifting of forex restriction on 43 items.
