CBN Denies Exemption Of NNPC, FMBN, Others From TSA | Independent Newspapers Limited
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CBN Denies Exemption Of NNPC, FMBN, Others From TSA

Posted: Sep 23, 2015 at 12:50 am   /   by   /   comments (0)

Cuts CRR To 25%, Retains MPR At 13%  Says Nigeria On Road To Recession In 2016 Unless

By Sola Alabadan


The Governor, Central Bank of Nigeria (CBN), Godwin Emefiele, on Tuesday in Abuja, debunked media reports that the Federal Government has granted exemptions from the Treasury Single Account (TSA) to 13 state-owned agencies.

According to media reports on Tuesday, the exemption was granted to those agencies described as profit-oriented government business entities, which pay dividends to the Federal Government, via a circular from the Office of the Accountant-General of the Federation.

The circular entitled, “Approval to Exempt Some MDAs In line With the E-Collection Mop-Up Exercise” reads in part: “Approval is hereby granted  to your bank to exempt the Accounts of 13 MDAs (Category 6) as listed below the mop-up in line with the e-Collection Circular No. HCFSF/428/S.1/120 dated 7th August 2015 as these are profit oriented government business entities that are to pay their dividends into the Treasury Single Accounts whenever they are declared.”

The circular, addressed to The Director, Banking and  Payments System  Department of the CBN, referenced FD/LP2015/C/ADC/20/1/ /DF, dated September 14, 2015, and signed by M. K, Dikwa, for the AGF, listed the exempted MDAs as Nigeria National Petroleum Corporation, Power Holding Company of Nigeria, Bank of Industry, Nigeria Railway Corporation, Federal Mortgage Bank of Nigeria, Bank of Agriculture, Niger Delta Power Holding Company /National Integrated Power Project, National Communication Satellite Limited, Galaxy Backbone Limited, Ajaokuta Steel Company Limited, Urban Development Bank, Nigerian Export-Import Bank and Transcorp Hilton Hotel.

But while reading the communique at the end of the Monetary Policy Committee (MPC) meeting number 103 and the fifth for the year, Emefiele said: “No organisation has been exempted from the TSA.”

He warned that Nigeria could slip into recession next year unless measures were taken to boost growth of the nation’s economic growth in the face of a sharp fall in oil revenues, rising public finances and the pressure on the Naira.

Rising from their two-day meeting, members of the MPC, seven of the 10 members voted to reduce CRR from 31 to 25 per cent, while members unanimously agreed to retain the  MPR at  13 per cent, the symmetric  corridor around the  MPR at 200bps and the  Liquidity Ratio (LR) at  30 per cent.                               

Experts had anticipated a reduction in the CRR of public and private sector deposits to between 15 and 26 per cent to neutralise the effects of the TSA, whose implementation as directed by the Federal Government, began on September 15.

Commenting on the CBN decisions on Tuesday via email, Managing Director, Chief Economist, Africa Global Research, Standard Chartered Bank, Razia Khan, noted few surprises such as the reduction in CRR while retaining MPR, besides the fact that “the overall  liquidity effect of the TSA becoming more operational was played down, with the CBN suggesting that there has been a ‘moderate’ impact overall, and that earlier claims of a large liquidity withdrawal from the banking system were likely exaggerated. In terms of future policy, this suggests that there is no certainty that the CRR will be eased further (with the harmonised public and private sector rate now at 25 per cent).”

The key concern, she continued, remains growth, adding that “with no change to current FX policy announced, it looks as though the CBN’s restrictions on FX for certain imports will remain in place, as will the absence of a properly functioning interbank FX market that allows for more market determination of the FX rate.

“The strategy seems to be to keep controls in place until demand adjusts to meet available FX supply.  This is a contradictory growth stance.  Demand for FX will only fall to the extent that the economy slows sufficiently.”

She maintained: “The CBN hopes that restrictions on imports will create the impetus for more domestic production. Nigeria has had substantial experience with similar import-substitution policies in the past.  Rarely have they succeeded in creating a vibrant, competitive industrial sector, with the capability of creating the level of employment growth that Nigerian demographics otherwise demand.

“For investors, there will be some disappointments that no FX market liberalisation has been announced.  Many still see an FX adjustment as inevitable, given the absence of fiscal buffers and Nigeria’s constrained economic fundamentals.  While the level of debate on these policies will create some interest – for now there is likely to be disappointment that no immediate change was forthcoming.”