Emma Ujah, Abuja Bureau Chief Nigerians will remember 2024 as a very challenging one.With inflation rate at 34.6 percent, Nigerians would love to put the year behind them, in a hurry.
The high rate of inflation had grave consequences for the socio-economic wellbeing of members of the public, including acute hunger with many families having finding it difficult to afford food.
To address the high inflation rate, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) in the year, had to raise interest rates to 26.25% in May 2024; followed by another 50 bp increase to 26.75% in July 2024. At its September 2024 meeting, the MPC, raised the MPR by 50 basis points to 27.25% and at the last meeting for 2024, it raised MPR to 27.50%.
The rates hikes were predicated on the understanding that it would curb liquidity in the system, since the interest rate is viewed as one of the critical tools of a central bank to deal high inflation rate.
As the Governor noted in his address at the Annual Dinner of the Chartered Institute of Bankers of Nigeria (CIBN), “The measures implemented to curb inflation, coupled with foreign exchange market reforms, are bolstering Nigeria’s economic growth. In Q3 2024, the economy grew by 3.46%, compared to 2.54% in the same period in 2023. This growth was driven primarily by resilience in the services sector, particularly telecoms and financial services, which recorded a real growth of 5.17%, recovering from a 0.85% contraction in Q3 2023. Improved oil production and increased domestic refining also contributed to growth. However, agriculture and manufacturing continue to underperform. The manufacturing sector is particularly affected as the cost of funds became too high to borrow for both new businesses and for expansion of existing one.
Consequently, targeted support to these critical sectors is vital to reducing inflation, creating jobs, and boosting overall output.
“The case for economic diversification has never been more urgent – reliance on a single sector is simply unsustainable. The consequences of neglecting diversification are clear; as the saying goes, we cannot reap where we did not sow. At the Central Bank, we are committed to collaborating with fiscal authorities to foster growth across key sectors and deliver meaningful progress for all Nigerians.”
Economic Confidence and Stability
The CBN boss has always said that building confidence in the financial system and the Nigerian economy is one of his goals and has been consistent in the pursuit of the goal. Under the current management, the CBN has implemented policies that foster confidence in the Nigerian economy, attracting foreign investors and encouraging business growth. The enhanced transparency has result in significant flows into the Nigeria economy from both foreign investors and Nigerians in the Diaspora.
In addition, the pace of inflation has slowed, with a notable decrease in inflation momentum.
FX Reforms
Foreign Exchange Market Reforms, especially the market unification has literally streamlined the foreign exchange (FX) market into a single framework, enhancing liquidity and reducing market distortions.
In the year under review, CBN cleared FX Forward Obligations backlog of $7 billion, stabilising the exchange rate and boosting market confidence.
The FX reforms have reduced FX volatility and increased external reserves to $44.06 billion as of end of October 2024.The Bank also announced the Electronic Foreign Exchange Matching System (EFEMS) for Foreign Exchange (FX) transactions in the Nigerian Foreign Exchange Market (NFEM) to curb speculation and market distortions.
Positive Economic Outlook
In May 2024, Fitch Ratings revised Nigeria’s economic outlook from stable to positive, reflecting improved financial stability and policy effectiveness.
The year has been marked by significant strides in financial regulation and market conduct under the guidance of the CBN Governor. From enhancing market transparency through the restriction on unearned income distribution to facilitating Nigeria’s delisting from the FATF Grey List, the CBN has demonstrated a steadfast commitment to strengthening the financial system.
The introduction of new guidelines for dormant accounts, the suspension of processing fees to encourage cash deposits, and the advanced use of Early Warning Systems further underscores the Bank’s dedication to promoting stability and trust within the financial sector. As we celebrate these accomplishments, we acknowledge the Governor’s role in driving progress and ensuring a resilient financial environment for Nigeria.
In the year under review, some of the CBN specific actions that contributed in no small measures to the stability of the economy were:
Bank Licensing and Expansion
One new bank was approved as a non-operating financial holding company; another transitioned from a merchant to a national commercial bank. Two banks received AIPs for regional commercial licenses; one for regional non-interest banking. As many as 16 new banks and re-licensed 53 previously revoked microfinance banks.
Regulatory Review for Bureau de Change (BDC)
In order to ensure that BDCs operate by the rules, new licensing requirements, capital standards, and a franchise model to enhance FX distribution and oversight were introduced.
Consumer Protection Practices
With the comprehensive review of consumer protection regulations in February 2024 to improve standards and address emerging Fintech risks, banks can no longer treat customers, as they like.
The apex bank proactively implemented identity policy gaps and improve conduct among financial institutions (FIs). This risk-based approach complements traditional compliance checks by highlighting urgent risks that could affect Financial Consumer Protection (FCP).
Cybersecurity and AML/CFT/CPF Measures
CBN enhanced its cybersecurity measures as it adopted ISO 27001 standards and introduced a Risk-Based Cybersecurity Framework and conducted a Cyber and Technology Assessment to improve resilience and operational efficiency.
Fintech Innovations and Regulatory Advancements
Promoted adherence to regulatory standards and improved disclosure practices within the Fintech sector to ensure transparency and Disclosure in the Fintech space which has become a very critical part of the nation’s financial industry.
It therefore introduced new guidelines to curb cybersecurity threats, increase diaspora remittances, and improve capital inflows.
Other Anti-Fraud Measures included the implementation of stricter KYC and AML requirements, including linking Tier 1 and wallet accounts to BVNs or NINs. It also enforced a temporary restriction on new account openings to prevent fraud and enhance industry integrity.
Financial System Regulation Reforms
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