CBN to quit as ‘Lender of Last Resort’ to banking system

*Central Bank of Nigeria.

*Central Bank of Nigeria.

12 September 2016, Lagos — The Central Bank of Nigeria (CBN) will soon stop performing its role as ‘lender of last resort’ to the banking system. CBN Governor, Mr. Godwin Emefiele disclosed this in Abuja at the annual Banking and Finance Conference of the Chartered Institute of Bankers of Nigeria, CIBN.

In a keynote address on the theme of the conference, “Innovation in the Financial Services Sector: Driving Nigeria’s New Economy, Emefiele said that the decision of the apex bank to cease performing the role of ‘lender of last resort’ is one of the reforms aimed at improving the nation’s financial system.

He said, “Despite the progress, we have made, I believe that this conference would help illuminate some lingering challenges and proffer durable and innovative solutions. For example, the growing menace of cybercrime and electronic payments fraud continue to challenge the payments industry globally and Nigeria must stay ahead of the curve in improving its fraud management strategy. In that vein, we are collaborating with law enforcement agencies to set up a Dedicated Electronic Payments and Card Crime Unit in the Nigeria Police.

Similarly, consultations are ongoing for the establishment of an industry fraud risk intelligence bureau and a Security Operations Centre (SOC). “Furthermore, in line with the national payments system strategy, we are addressing settlement risks in the payments system, by signaling that the Central Bank will cease its implicit role of lender last resort to the payments system.

CBN is facilitating the articulation of the framework for the adoption of “survivor pays” collateral management model, in line with the BIS/IOSCO Principles for Financial Market Infrastructure (PFMI). Nigeria is clear in its objective of being “internationally recognized” for its compliance with international best practice and standards, hence the payments infrastructure is subjected to annual PFMI compliance review.”

President, CIBN, Dc. Segun Ajibola in the welcome address explained that the theme of the conference was necessitated by the current realities of the Nigerian economy. He said, “Our economy has been overstretched, with the level of foreign exchange reserves hovering around $25billion, perhaps the lowest in recent decades and barely able to support six months import bills.

This in itself creates crises of confidence for the economy especially among the trading partners, London and Paris Clubs, international financial institutions, and comity of nations. On several occasions, the nation’s economic managers have had to result to both demand management and supply management strategies and tactics but with minimal results.

I believe this is the time the financial services sector needs to play some catalytic roles to redirect the economy to a path of recovery, growth and development. Indeed, this year’s Theme – Innovations in the Financial Services Sector: Driving Nigeria’s New Economy – has been crafted to x-ray the roles the Sector must play towards a quick recovery of the economy.

*Babajide Komolafe – Vanguard

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