The CBN is a government institution with all its functions enshrined in the constitution. To fully understand what the CBN is, it is important to understand what it isn’t. Unlike most financial institutions that are profit driven, the apex bank does not seek to make profits, rather its budget is from a government grant determined by parliament.

New CBN cashless policy

As a part of its responsibility of setting the monetary policies in Nigeria, starting from 2023 the apex bank has announced that it would be more stringent for Nigerians to access cash, the plan is for the majority of transactions performed in the country to be digital. The main reason for this is that the CBN said cash in circulation in Nigeria is now over 50 trillion Naira and it cannot account for most of it. But where is all this money coming from if the CBN does not have control over such a huge sum of money?

Intervention loans: Part of the money in circulation in Nigeria is coming from the CBN itself in terms of intervention loans it routinely gives to stimulate the economy. Loans such as the NIRSAL loans given to farmers and small scale entrepreneurs to mitigate the effects of Covid means plenty of money pumped into the economy.

Counterfeited cash: Cash counterfeiting by criminals is a huge problem in most economies. Criminals can print large sums of money and spend it on unsuspecting members of the public, thereby tainting legitimate financial institutions. Counterfeiting is one of the main reasons why the CBN is redesigning some of the country’s naira notes to render previously hoarded and counterfeited notes useless.

Remittances: When people living abroad send money home, but the money was not remitted through a CBN-licensed remitter, such funds can become very hard for the CBN to account for. Peer-to-peer platforms and cryptos are some of the most difficult transactions for the CBN to track. People use unlicensed remitters for a variety of reasons including cheaper fees or illegal transactions.

Why the CBN wants to implement the cashless policy

Having too much cash flowing around in the economy without control is bad. Criminals like armed robbers and kidnappers rely heavily on cash, without which they will find it more difficult to extort their victims.

Tight control of the money in circulation will also enable the CBN to plan and control inflation.

FAQs

Here are some general FAQs on the activities of the CBN.

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This announcement has divided opinions among many Nigerians online. And for good reasons, this move is likely to have a positive effect on the country’s general elections scheduled for next year, at the same time, the price tag for this redesign will be staggering for a country like Nigeria that needs to make sure every penny it is spending is well optimized.

About 6 trillion naira notes are currently in circulation at the moment, of which almost 80% is estimated to be outside the banking vaults. This means that almost 80% of all naira notes in circulation are in the hands of criminal elements like kidnappers, armed robbers and drug dealers. Others are in the hands of corrupt government officials who might be hoping to influence elections with their stolen wealth, and the rest is under the grandma’s mattress and under the mattresses of other people who are uneducated or who simply don’t trust the banking system enough to keep their life’s savings with other people.

Announcing that everyone will have to make a change in such a short period will surely cause some ripple effects, and have some unintended consequences.

The Pros

Positive effect on the coming general election

The biggest pro of redesigning the naira notes this close to the general elections is perhaps the fact that it might disrupt vote buying. In Nigerian elections, votes usually go to the highest bidder, politicians who have been hoarding money to buy votes will find it more difficult now as they will not be able to have access to large amounts of cash without declaring what they intend to use it for. Furthermore, those who already hoard cash at home will not be able to deposit the money at the bank without answering where they got the money from.

Might have a positive effect on inflation

One thing that will be visible in bank branches over the next couple of weeks, will be the fact that lots of individuals and businesses will be depositing high volumes of cash. This will give the banks more money to give out as loans. If individuals and businesses can access loans a little easier, it will boost economic activities that will create wealth and reduce inflation.

Effect on crime

One thing criminals like kidnappers, armed robbers and drug dealers cannot do is open a bank account or have any sort of transaction that can be traced. These criminals rely on cash only, and with the old naira notes becoming obsolete by January 31, this means they have a very short time window to launder all the cash in their possession. Some might, out of desperation decide to walk into a legitimate financial institution to exchange their cash, the authorities should be waiting for them when they do.

Better adoption of digital payment

If the naira will soon become obsolete, some businesses will begin to demand that customers pay them through POS, bank transfer or other digital means. This will be good for the economy because it will lead to more efficient bookkeeping and better tax collection by the government.

The Cons

High cost

Nigeria is broke, the cost of redesigning and printing trillions of naira that will go into circulation will be staggering. But it might be worth it in the long run if the government does it efficiently.

might further crash the naira against the dollar

Naira has fallen by over N190/$1 year to date from an average of N565/$1 recorded as of 31st December 2021, currently trading as high as N760/$1 and still rising. This fall might be exacerbated over the next few weeks if those who have hoard the naira decided to buy dollars with their money. Too much naira chasing a few supplies of dollars will crash the exchange rate at the black market.

Overcrowding at the bank

Visiting any bank branch over the next few weeks is sure to be an unpleasant experience. Lots of people will be out to make deposits before January 31 deadline, which will lead to massive crowds at the banks. When India tried a similar scheme last year, it went horribly wrong when millions couldn’t access the bank to a deposit before the deadline date.

If you have your money in the bank, do not panic. It is unlikely that you will even notice any changes as the transition occurs. Currency as a percentage of money supply is less than seven percent, the vast amount of the Nigerian naira is digital. For now, avoid going to the bank as much as possible and do not make deposits for strangers to avoid being caught in a money laundering scheme.

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With the persistent FX scarcity plaguing Nigeria, and the security challenges the country is facing, the government is taking several measures aimed at controlling both the exchange rate as well as items coming into the country.

Just like the CBN uses Form A to directly sell FX to Nigerian travellers going out of the country at its official rate, it uses Form M to keep an official record of all items imported into the country as well as sell FX to the importers at the official rate.

Form M saves importers the trouble of sourcing for their own forex, which is increasingly becoming difficult to do with the crisis rocking the Nigerian economy. It is also a document that helps the government keep track of who is importing what and at what price.

What is e-Form M

The e-Form M is an online document, a declaration of intention to import physical goods into Nigeria. The document is issued and controlled by the CBN in conjunction with other government agencies including the FIRS, Nigerian custom, and other regulatory agencies depending on the items being imported.

Form M was created in a bid to monitor the safety and quality of all the items that are being imported into Nigeria, as well as enable the government’s collection of due import duties. Form M also serves the importer in that they get to access FX at the government regulated rate which can be almost #200/$ lower compared to the black market rate.

How to download the Form M and registration procedures

Form M is exclusively for importers who want to import items into Nigeria. The first step if you are an importer is to go to The Nigeria Single Window Trade Portal and register as an importer. The portal is a cross-government website through which the services of several government agencies can be accessed and all necessary documents submitted. Register on the Trade portal with your company Tax Identification Number and any valid email address.

The portal is secured for submitting your documents, you can even make payments with your debit card and quickly reference important information on different government agencies involved in trade matters.

For your application to be processed successfully some of the documents you need will include; Tax Identification Number TIN from FIRS, Certificate of Incorporation of your company from CAC, Insurance certificate, Import Permit from the regulatory agency related to your industry eg;

• SON Product Certificate (for new items)
• NAFDAC certificate for all edibles, chemicals, and Pharmaceuticals
• End User Certificate for explosives, fireworks, fertilizers, arms, and ammunition, treated vehicles, private security gadgets, etc.
• Ministry of Agriculture, Department of Fisheries permit for the importation of fish
• Pharmaceutical Certificate and Certificate of Retention of premises for the importation of medicinal drugs.
• NESREA for used items
• Department of Petroleum Resources (DPR) Permit for petroleum oil products
• PHCN permit for Generating Sets

After your Form M has been processed successfully and items you want to import are deemed eligible. The next step is for the CBN to provide the forex at its official rate. Depending on your bank, you can download the Form M Forex form online or go to any branch to obtain one.

Download e-Form M data form for Guaranty Trust Bank Ltd customers. Other banks’ customers can also obtain a similar form from their banks.

Step-by-step Procedure on How to Use e-Form ‘M’

FAQs

The post Form M Explained: What it is, Download and Registration appeared first on AFRICA EXPLAINED.

The Central Bank of Nigeria (CBN) has postponed the official launch of its controversial digital currency, the eNaira.

According to the CBN spokesperson, Mr Osita Nwanisobi, the decision to postpone the unveiling of the E-naira, scheduled for October the 1st, was made to avoid any distractions from the country’s 61st Independence Day celebration.

Nevertheless, the CBN has assured Nigerians that the bank and other partners are working to ensure a seamless process for the benefit of all.

The eNaira is a central bank digital currency (CBDC) issued by Nigeria’s Apex bank. It is supposed to run on blockchain – the technology that powers most crypto currencies including Bitcoin.

Only two countries in the world have so far issued a digital version of their currency, China and the Bahamas. Nigeria was scheduled to be the third in the world, and first country in Africa to issue a digital currency.

Meanwhile, no new date has been announced for the launch.

The post eNaira: CBN Postpones Launch Of Digital Currency Indefinitely appeared first on AFRICA EXPLAINED.

The Central Bank of Nigeria (CBN) has postponed the official launch of its controversial digital currency, the eNaira.

According to the CBN spokesperson, Mr Osita Nwanisobi, the decision to postpone the unveiling of the E-naira, scheduled for October the 1st, was made to avoid any distractions from the country’s 61st Independence Day celebration.

Nevertheless, the CBN has assured Nigerians that the bank and other partners are working to ensure a seamless process for the benefit of all.

The eNaira is a central bank digital currency (CBDC) issued by Nigeria’s Apex bank. It is supposed to run on blockchain – the technology that powers most crypto currencies including Bitcoin.

Only two countries in the world have so far issued a digital version of their currency, China and the Bahamas. Nigeria was scheduled to be the third in the world, and first country in Africa to issue a digital currency.

Meanwhile, no new date has been announced for the launch.

The post eNaira: CBN Postpones Launch Of Digital Currency Indefinitely appeared first on AFRICA EXPLAINED.

Due to CBN recent policy on foreign currency, which bans Bureu De Change operators in the country from buying dollars directly from the apex bank, most Nigerians are now required to buy foreign currency from their commercial banks.

The new CBN policy claims that most BDC operators have allowed themselves to become middlemen in money laundering and therefore, will no longer be able to purchase dollars directly from the CBN which is much cheaper. The policy also directs all licensed commercial banks in the country to setup infrastructures to handle the surge of customers that will be coming their way as BDCs will no longer officially participate in Nigeria’s FX market.

If you’re looking to buy some dollars to travel abroad for school, medical treatment, business or as a tourist, this article will guide you on how to buy and the requirements/documentation you need to present at your bank.

Most commercial banks in Nigeria already buy and sell foreign currency before now, in most bank branches you can withdraw hard currency like you would the naira. But that operation is limited as most Nigerians get their FX from BDCs who are now no longer part of the system.

Banks dispense personal travel allowance (PTA) and business travel allowance (BTA) in Dollars, Pounds or Euro at most of their branches Nationwide, and they cap these at a maximum of $4000 for PTA, $5,000 for BTA or its equivalent per quarter.

How do I buy dollars from Nigerian banks?

To be eligible, you must meet the following requirements and provide the following documents:

• You must not have been paid a total of $4000 or its equivalent within the quarter
• PTA/BTA applicants must provide a duly completed Form A, a valid Nigerian Passport with a valid visa, an international return ticket with a travel date not more than 14 days from the date of PTA/BTA purchase.
• BTA applicants are required to present document of Incorporation/Registration, Letter of Invitation from a business partner abroad.
• PTA/BTA is valid for journeys of 5 hours minimum flight time originating from Nigeria. Countries within the West African Region and Cameroon are exempted from PTA/BTA
• For school fees, applicants should be Self or a parent/guardian with a valid BVN
• Admission letter, payment invoice and a duly completed Form A and Applicant’s valid ID card are required for school fees

FAQs

Where can I purchase foreign exchange?
According to the new CBN policy you should be able to buy dollar at any bank branch, but this will be subject to availability and individual banks might direct customers to a special branch if the need arises.

Do I have to own an account with a certain bank to buy foreign currency from them?
No, banks are required sell to both account holders and walk–in customers. But it does make things easier to buy from your bank.

Can a traveler buy all three currencies at the same time?
Absolutely, as long as the quarterly limit for PTA/BTA is not exceeded. The US dollar is the base currency.

Are children entitled to buy foreign exchange?
Foreign exchange can be purchased by holders of Nigerian passports who are 18 years and above

Can I still buy foreign exchange, even if I do not want up to my maximum travel allowance?
Yes you can. The minimum purchase amount is $100 or it’s equivalent in other currencies. You can buy any amount between 100 and 5,000 dollars.

Do Nigerian banks deal in all the currencies in the world?
At this time, most banks only deals with the three major world currencies, US Dollar, British Pounds and the Euro. If you’re traveling to any country outside the United States, UK and Europe, it is advisable that you buy the dollar which you can easily convert to the currency of where you are going.

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