Banking & Finance Regulatory Update – July 2024

This is an update on the circulars and regulations released by the Central Bank of Nigeria (the “CBN”) in July 2024. We have also provided a report of market updates relevant to the financial services sector that occurred within the month of July 2024.

SYNOPSIS

CBN REGULATORY UPDATES

THE CBN ISSUES CIRCULAR ON THE REJECTION OF OLD/LOWER DENOMINATION OF UNITED STATES DOLLAR BY DEPOSIT MONEY BANKS

The CBN on 27 June 2024, issued a circular referencing its previous directive in 2021 prohibiting the selective acceptance of United States Dollar (USD) notes by Deposit Money Banks (DMBs). This circular was issued following a consumer market intelligence carried out by the CBN which revealed that DMBs and other authorised foreign exchange dealers have continued the rejection of old series and lower denominations of USD notes from their customers.

THE CBN ISSUES CIRCULAR ON PENALTIES OVER THE REJECTION OF OVER-CIRCULATED BANKNOTES BY DMBs

On 28 June 2024, the CBN issued a circular addressing reports of the rejection of dirty or mutilated Naira banknotes by DMBs. The circular referenced a CBN circular dated 2 July 2019, which imposes penalties for the rejection of Naira banknotes and stated that the referenced circular is still enforceable and binding on defaulting DMBs.

CBN ISSUES REVISED GUIDELINES ON THE MANAGEMENT OF DORMANT ACCOUNTS, UNCLAIMED BALANCES AND OTHER FINANCIAL ASSETS IN BANKS AND OTHER FINANCIAL INSTITUTIONS IN NIGERIA.

The CBN on 19 July 2024, issued revised guidelines on the Management of Dormant Accounts, Unclaimed Balances and Other Financial Assets in Banks and Other Financial Institutions. The revised guidelines establish standardised procedures for managing dormant accounts, unclaimed balances and financial assets.

MARKET UPDATES

CBN SELLS US$122.67 MILLION TO 46 AUTHORISED FOREIGN EXCHANGE DEALERS

The CBN as part of efforts to stabilise the foreign exchange market announced the sale of US $122,671,000.00 (One Hundred and Twenty-Two Million, Six Hundred and Seventy-One Thousand United States Dollars) to forty-six (46) authorised dealers using two-way quotes.

CBN HAS APPROVED THE SALE OF FOREIGN EXCHANGE TO BDC OPERATORS AT ₦1450 PER US DOLLAR.

On 18 July 2024, the CBN in a circular issued to all Bureau De Change operators (BDCs) and the general public, approved the sale of foreign exchange of a total sum of US$20,000 (Twenty Thousand United States Dollars) to be sold to each BDC operator at the rate of N1,450/US$1 to meet the demand for invisible transactions.

CAC ANNOUNCES ITS INTENTIONS TO CANCEL REGISTRATION CERTIFICATES OF BUREAU DE CHANGE (BDC) OPERATORS WHOSE LICENCES HAVE BEEN REVOKED

Following the CBN’s revocation of licenses of 4,173 BDC operators in February 2024 due to non-compliance with regulatory guidelines, the Corporate Affairs Commission issued a notice on its website advising the affected companies to change their names and objects within three months.

CBN RAISES INTEREST RATE BY 50 BASIS POINTS TO 26.75%

The Monetary Policy Committee (MPC) of the CBN held its 296^th meeting on 22 and 23 July 2024 to review recent economic and financial developments in Nigeria.

The MPC decided as follows:

to raise the Monetary Policy Rate (MPR) by 50 basis points to 26.75% from 26.25%;
adjust the asymmetric corridor around the MPR to +500/-100 from +100/- 300 basis points;
retain the cash reserve ratio (CRR) of DMBs at 45.00% and merchant banks at 14%; and
retain the liquidity ratio at 30.00%.

SENATE REJECTS FOREIGN EXCHANGE CONTROL AND MONITORING BILL

The Senate on 11 July 2024, rejected a bill seeking to amend the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F34, LFN 2004 to enhance the control, monitoring, and supervision of foreign exchange market transactions in Nigeria.

THE SENATE HAS PASSED A BILL SEEKING TO AMEND THE FINANCE ACT 2023 TO IMPOSE A WINDFALL LEVY ON BANKS’ FOREIGN EXCHANGE GAINS

Based on media reports, the Senate has passed a bill to impose a windfall tax on banks’ foreign exchange gains, to generate revenue for crucial national projects. The bill, which passed its third reading during the plenary on 23 July 2024, is part of the amendments to the Finance Act, 2023 and seeks to fund infrastructure, education, healthcare, and public welfare.

STAKEHOLDERS DIVIDED OVER PROPOSED NDIC AMENDMENT BILL

Based on media reports, critical stakeholders in the banking, financial, and insurance sectors have raised opposing views and concerns over a bill to amend the Nigeria Deposit Insurance Corporation Act, 2023.

SENATE AMENDS CBN ACT, INCREASES WAYS AND MEANS ADVANCES TO FG FROM 5 TO 10%

Based on media reports, the Senate has passed a bill to amend section 38 of the CBN Act to increase the CBN’s total ways and means advances to the federal government from 5% to a maximum of 10%.

CAC ISSUES GUIDELINES FOR THE RECAPITALISATION OF BANKS AND OTHER FINANCIAL INSTITUTIONS.

The Corporate Affairs Commission has introduced new guidelines for the recapitalisation of banks and other financial institutions in Nigeria. The guidelines were issued to simplify the recapitalisation process and it addressed four key areas; new incorporations, share capital increases, mergers, and the upgrading or downgrading of license authorisations.

NGX UPDATES

NGX GROUP LAUNCHES “NGX INVEST”: A WEB APPLICATION TO STREAMLINE CAPITAL-RAISING PROCESSES.

On 12 July 2024, the Nigerian Exchange Group Plc (NGX Group) launched ‘NGX Invest’: a new web application designed to streamline the equity capital-raising process, by allowing users to invest in shares of publicly traded companies directly from their devices.

NGX GROUP ANNOUNCES JUDE CHIEMEKA AS CHIEF EXECUTIVE OFFICER OF NGX LIMITED.

On 4 July 2024, the NGX Group announced the appointment of Mr. Jude Chiemeka as the Chief Executive Officer of the Nigerian Exchange Limited effective from 1 July 2024.

SEC UPDATES

SEC LAUNCHES THE REVAMPED E-DIVIDEND MANDATE MANAGEMENT SYSTEM PORTAL

On 2 July 2024, the Securities and Exchange Commission announced the launch of its revamped e-Dividend Mandate Management System Portal which will allow investors to apply to mandate their accounts for e-dividend virtually, without visiting a registrar or a bank.

SEC SEEKS TO PARTNER WITH THE AFRICAN DEVELOPMENT BANK TO BOOST GREEN FINANCE

On 14 July 2024, the Securities and Exchange Commission announced its intention to partner with the African Development Bank to support green finance in Nigeria.