THE Central Bank (CBN) Governor, Prof. Charles Soludo, at the weekend alerted that the CBN has been hit by cash crunch. He did not, however, state the liquidity position of the organisation.
It has also been learnt that the apex bank may review the cancellation of funds recently raised by a number of banks at the stock market.
Soludo made the revelation about the parlous state of the CBN's finances while addressing a conference of the Bank's Branch Controllers in Abuja.
He attributed the development to some of the monetary policies released by the apex bank early this year as well as that of the Federal Government's fiscal policies. Early this year, the CBN reduced its Minimum Rediscount Rate (MRR) from about 26 per cent to 13 per cent as a way of forcing down interest rates.
The MRR is the instrument with which the CBN lends credits to commercial banks and is one major source of revenue generation for the apex bank.
The Federal Government's fiscal policy that has also affected its liquidity situation, according to Soludo, is the abolition of the "Ways and Means" strategy by the Federal Ministry of Finance in raising budgetary funds from the CBN and other banks at high interest rates.
The CBN, according to Soludo, has reaped a "zero revenue" under this revenue sub- head since the policy came into effect about three years ago.
Soludo told the Controllers that the apex bank had equally adopted a zero tolerance on fraud activities and would not hesitate to appropriately deal with the management of any branch found to be culpable.
He highlighted the apex bank's 13-point agenda for the consolidation programme, which according to him, include: re-structuring of departments, staff selection, and deployment process, as well as the take-over and re-structuring of the Nigerian Security Printing and Minting Company (NSPM) by the CBN. The rest are: reform in security services, reform in budget and procurement processes, training programmes, reform in health sector, review of staff salaries and allowances and the challenges ahead.
It was also learnt that the days of anguish may soon be over for some banks whose recently raised funds have been cancelled by the CBN.
To meet the N25 billion capitalisation target, several banks have gone to the Nigerian Stock Exchange (NSE). During verification, CBN officials cancelled a large chunk of the funds on the suspicion that they were from illicit sources and were being laundered into the economy.
The apex bank has, however, resolved to review the cancellation so that any bank that can provide proof on the authenticity of its funds would have it revalidated.
The Guardian learnt that the apex bank took the decision following a persistent clamour by affected banks.
The CBN had late last year questioned the source of funds of most investors that subscribed to banks' public offer.
The apex bank had also beamed its searchlight on such funds suspected to have been borrowed from one bank to invest in another.
It equally questioned the investment mode by some state governments, which were indebted to some other financial institutions, mostly government owned.
But, more worrisome to the apex bank, The Guardian learnt, is the possibility of "hot money" entering the nation's financial system.
Following the apex bank's verification activities, most banks that had concluded their offer since last six months are yet to announce their offer results.
A large chunk of those that have declared have been questioned by the CBN.
But the banks have pleaded with the CBN to look into the issue again.
A source told The Guardian at the weekend that once` any of the affected banks provides succinct proofs, in form of document to authenticate the source of funding, it would be revalidated.
Giving an instance, a source said: "Some banks will say: 'We have some £1 million worth of subscription without providing the back up evidence on who invested what, or the subscriber's means of livelihood that led to his possessing such an amount.'" Sources said that the CBN had decided that so long as the banks could provide the required proof, the cancelled subscription would be released to them.
The Guardian learnt that at present, almost all the affected banks are making frantic efforts to provide the required evidence to enable the apex bank reinstate their withheld funds.
The worst hit are the banks that came to the capital market from January this year.
This is because, when they came, the policy was already in force thereby making the banks to be extra careful with the type of investors they sold their shares to.
This, ultimately, The Guardian learnt, will affect their offer target.
Immediately after the announcement of the N25 billion minimum capitalisation for banks by the CBN in July, last year, most banks had headed for the capital market to source for funds.
The thinking in the banking industry being that, it is only when a bank is effectively capitalised that it can engage in serious merger talks so as not to become a junior partner.
The urge to record massive success in their offers led many banks that went to the capital market to engage in practices considered unwholesome.
The CBN, however, did not spot this immediately, prompting it to embark on capital verification.
Currently, it is being speculated that about N50 billion worth of public offer applications, resulting from certified laundered money and dollar denominated applications have been disqualified by the apex bank.
At the end of the Branch Controllers' Conference, the following 12 resolutions were adopted as a way of improving service delivery in the industry:
* the consolidation programme introduced by the management in July 2004 should be sustained in the interest of the financial sector and the economy in general;
* the take-over of Mint by the CBN is commendable, and the immediate re-structuring and re-organisation of the company should be vigorously pursued to meet the challenges ahead especially in currency management, production and distribution as well as production of other security documents;
* for efficient and effective customer service delivery, the Bank should evolve a "Charter" to guide it in achieving the desired objective;
* outsourcing of some non-core functions is desirable to enable the Bank concentrate on the "core functions". However, outsourcing the security system of the Bank to private organisations should be considered with caution, in view of the nature of the services and operations offered by the Bank.
* as one of the four core-values of the bank customer focus must be given proper attention to enable the Bank satisfy the yearnings of its customers;
* in view of the problems plaguing the Federal Government revenue collections namely: unremitted funds, un-transferred funds, outright diversion of funds and integrity of collection data, regular meetings with FIRS, collecting banks, banking operation department and CBN branches should be introduced to discuss and iron out issues;
* urgent remedial maintenance steps should be taken in the branches that have problems of leaking water in their treasury offices. Immediate provision of effective and efficient communication equipment for the purpose of currency movements;
* the policy of maintaining clean currency notes should be sustained; and
* Branch Operations Manual should be reviewed to meet the current challenges and re-engineering process of the Bank.
The Conference commended the effort of the management in evolving the new Security Master Plan (SMP) for the Bank, and recommended that implementation should be accelerated in view of the gross inadequacy of the existing security arrangement in the branches.
For effective and efficient service delivery, there is need for co-operation and co-ordination between branches and head office. There was therefore the need for regular meetings between branch controllers and core departmental directors where issues would be highlighted and discussed.`
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