CBN reveals new rules guiding Domiciliary accounts

In a statement, CBN Director, Corporate Communications, Isaac Okorafor, said the apex bank has not prohibited the acceptance of foreign currency cash deposits by Deposit Money Banks (DMBs).

He further explained that "Only electronic fund transfers into Domiciliary accounts can be transferred from such accounts while cash deposits into such accounts can only be withdrawn in cash also.

He urged stakeholders and other interested parties to always endeavour to seek clarification on issues and avoid speculative tendencies which are detrimental to the financial system.

Analyzing the state of the economy and foreign exchange market, a member of the CBN-led Monetary Policy Committee, Prof. Adeola Adenikinju, had expressed fears over inflation persistence, the continuous decline in foreign reserves, the liquidity surfeit in the economy, the negative current account balance, the poor state of the fiscal sector, fall in prices of financial assets, and the bearish outlook for the oil sector.

He said the foreign exchange markets were generally stable aided by the foreign exchange interventions of the CBN.

Foreign reserves fell from $41.54 billion in December 2018 to $38.07 billion in December 2019. Also, the current account balance by third quarter, 2019 was -2.24 per cent of Gross Domestic Product (GDP). This was better than -3.27 per cent in second quarter, 2019.

However, capital importation in December 2019, went largely into the purchase of shares, finance, banking and trading. The non- financial sectors of the economy attracted only insignificant share of total capital imports. The fiscal side continues to pose significant challenge in my view.

He said the the rising debt level and high fiscal deficit pose significant challenge to effective economic management.

Between January and September 2019, actual revenue stood at 52 per cent below budgeted revenue, whereas actual expenditure exceeded planned expenditure over same period. Capital expenditure, which is expected to drive economic growth, as expected underperformed.

The MPC should not ignore the inflation threat. The primary responsibility of the CBN remains price stability.

"The fall in interest rates across financial market instruments is suggestive of liquidity surfeit in the system. The CBN policy to increase lending to the real sector is a good policy to boost the supply side of the economy and relax constraints to domestic food and agricultural supply. This policy is in order and CBN should maintain it. Several analyses have shown that among the policies available to control liquidity in the Nigerian economy, the Cash Reserve Requirement is the most potent,ÔÇØ he said.

Also, CBN Deputy Governor, Financial System Stability, Mrs. Aishah Ahmad, said that despite the renewed confidence in the economy, crude oil price volatility remains a key headwind for Nigeria, given its disproportionate impact on fiscal revenues, reserves accretion, price and monetary stability.

"Bonny light rose from $66.11/barrel in November to US$70.37/barrel in December 2019, and dropped to $69.87/barrel in January 2020, due to geopolitical tensions- US, Iran, China, Middle East, among others which appear to be prevalent in the short to medium term,ÔÇØ she said.

For her, the fiscal and monetary authorities must be vigilant for any sudden shocks that may set off a weakening of the external sector, given its impact on external reserves and exchange rate stability. Fiscal consolidation remains paramount and the passage of the Finance Bill is a step in the right direction.