According to a statement by First Bank Holdings on Monday, the capital raise can be issued via a public offering, private placement or rights issue in the Nigerian or international capital markets or a combination of the listed methods. 

The move to shore up additional capital can be attributed to a directive by the banking regulator to all banks— commercial, merchant and non-interest banks—to increase their minimum capital requirements within 24 months, to enhance the stability of the financial system. 

Commercial banks with international spread will increase their capital by as much ₦500 billion to be licensed to operate in the country. While national and regional banks will raise ₦200 billion and ₦50 billion respectively. 

Many banks have recently had to consider raising additional capital to meet the CBN requirements, especially with a deadline at the end of April 2024 looming on their backs. Access Holdings, the parent company of Nigeria’s biggest bank by assets, previously planned to raise as much as ₦365 billion ($257 million) by selling shares to existing investors. Investors believe their capital raise is in response to this directed by the apex bank.

The revocation took effect on December 6, 2023. 

Cellulant is therefore leaving the consumer-facing mobile money market to focus on providing payment services to businesses. The company told TechCabal via email that it decided to exit the mobile money space and focus on providing solutions “as far back as 2021”. This informed its procurement of a Payment Solution Service Provider (PSSP) licence from the CBN, which has been issued and is now operational. 

“The regulator did not revoke the licence as a result of infractions or any breach. The CBN succeeded in gazetting this request in December 2023, occasioned by the time it took them to conclude the process of revoking the mobile money license as requested by Cellulant,” Cellulant said in the email.

The CBN in the aforementioned letter addressed to Cellulant said it was revoking Cellulant’s mobile money licence, “following [Cellulant’s] decision to discontinue operating the licence”.

The company, which raised $54.5 million in three funding rounds between 2014 and 2018 from investors like The Rise Fund, has hit a rough patch lately. After an out-of-court settlement of a long-drawn leadership tussle with its former co-founder, Bolaji Akinboro, Cellulant has struggled to stabilise its operations and raise new funding.

In 2023, Cellulant saw the need to restructure its business, including reducing the headcount by 20% in August. In December, the company’s CEO Akshay Grover, stepped down citing personal reasons. That exit also led to another round of layoffs in the company and the announcement of an acting CEO. 

The rate hike was expected as the body language in the last meeting signalled a reluctance to reduce borrowing costs until inflation moderates below 30%. Authorities have devalued the naira twice since June and closed the gap with the unofficial market rate, as part of reforms to attract investors. Last week, the bank claimed to have cleared a backlog of unmet foreign exchange obligations.

At least four policy experts who spoke to TechCabal expected a 100 basis point hike today. Cardoso hopes that consecutive rate hikes will address Nigeria’s inflation issues at nearly a three-decade high. However, analysts are unsure whether more hikes are needed. 

Explaining the motive for the hawkish stance, Cardoso said MPC members needed to control inflation to ensure that ordinary Nigerians’ purchasing power is restored in the short to medium term. 

“Members noted the continued rise in headline inflation was driven largely by food prices because of supply shortages and high cost of logistics distribution,” Cardoso said. According to him, addressing food insecurity is key to containing current inflationary pressures.

Experts told TechCabal that the CBN should hold the rates in the coming months, instead of further tightening interest rates. “The full effect of the last MPC meeting is yet to be felt on the economy. The practice is not to meet monthly, but once every two months. They need to weigh and measure,” said Johnson Chukwu, the CEO of Cowry Asset Management. 

The CBN must find a balance amid the massive expectations ahead of the meeting. The bank has to be wary of the impact of too-high interest rates on the economy and the sustainability of the banking sector, Samuel Oyekanmi, another financial analyst warned.

Cardoso said it was a tough decision to make but there was a consensus by the committee to progress with the tightening circle. “Key drivers of inflation remain the strong exchange rate pass through to domestic prices, rising costs of transportation, high costs of energy and other production inputs, lingering insecurity and legacy infrastructure deficit,” he added.

President Bola Tinubu’s reforms, while painful for consumers, have led the currency to gain in recent days and improved investment flows.  Foreign inflows rose to $2.3 billion in February, driven by renewed interest from foreign investors and a rise in overseas remittances. This figure in the first quarter of 2024 outperformed the $3.9 billion received for 2023. While foreign-investor portfolio trade on the Nigerian bourse increased by 18% in February 2024 from roughly half of that figure at the beginning of the year.

Headline inflation reached a 27-year high of 29.90% in January 2024. Only Zimbabwe (34.8%), Congo (42.5%), Sierra Leone (52.16%), and war-torn Sudan (63.3%) have higher inflation rates.

In a meeting in early February, Cardoso said he expects inflation to moderate to 21.4% in 2024 using CBN’s inflation-targeting policy; next week’s MPC meeting will be a stern test of the bank’s ability to match talk with action. 

Bloomberg analysts expect an interest rate increase of 500 basis points. However, Basil Abia, a co-founder at Veriv Africa and policy analyst, believes the CBN will take a more moderate path and increase rates by 100 basis points instead, from 18.75% to 19.75%. 

“It is difficult to see how raising rates can make an impact,” Abia argued in an email response. 

“Nigeria’s inflation is a cost-push inflation buoyed by a steep increase in energy costs across the board, frequent energy scarcity, a nationwide food supply shortage problem, an illiquid power generation value chain, foreign exchange scarcity,” he added. 

Mayowa Badejo, a partner at 213 Capital, an investment and risk advisory firm, believes inflation will only moderate after the naira begins to strengthen.

It’s a nod to Cardoso and the CBN’s other troubles, like a volatile Naira that has resisted every policy thrown at it. 

The central bank hiked open market rates to 19% from under 12% to mop up excess liquidity and has tweaked the rules for oil companies to repatriate FX from Nigeria, but the Naira’s slide has only worsened this week.

Cardoso, who previously dismissed the impact of monetary policy meetings, is under pressure to deliver stability. This week, an aide of President Tinubu urged Cardoso to consider the “political implications” of the CBN’s policies. 

According to a calendar released by the bank today, the CBN is proposing six rate meetings throughout 2024. 

 Monetary Policy Committee meetings, which set interest rates, is an instrument through which the CBN controls inflation. 

Nigeria’s inflation has soared all through 2023 to a 27-year high. While experts who have spoken to TechCabal on inflation figures have predicted interest rate hikes, Yemi Cardoso has held out, failing to call any meeting since his appointment. 

Adedayo Bakare, an investment analyst at Money Africa, believes raising interest still holds the key to curbing inflation.

“MPR is not ineffective; the CBN has broken the transmission of MPR to the financial markets and the overall economy,” Bakare said.

The rule change, made by Nigeria’s Central Bank, comes after several high-profile fraud incidents raised concerns about existing Know Your Customer (KYC) processes. Still, industry experts believe it will not solve what is now described as a “fraud pandemic.” 

“There is no silver bullet for solving fraud, but the new move can help us to identify bad actors faster,” said Babatunde Akin-Moses, CEO of Sycamore, a Nigerian lending platform. Other industry players share similar views.

“The accounts used to perpetuate fraud have always had BVN and NIN,” said Adedeji Olowe, a financial industry veteran and founder of Lendsqr. Instead, he framed the problem as a “lack of rules and regulations to stop fraud”. 

Nevertheless, Olowe said the rules are welcome and wonders “why it hadn’t been done since”. Like many banking industry experts, Olowe believes neobanks will be most affected by the new rules. 

While deposit money banks offer Tier-1 accounts—bank accounts that usually require no identification—neobanks like OPay and Palmpay may have popularised these easy-to-open accounts using the narrative of aiding financial inclusion. It has allowed them to onboard customers with little friction or without a need for national identity cards, which only 30% of Nigerians have. 

Yet, industry experts have criticised these lax KYC measures. In October, TechCabal reported that Fidelity Bank, a Nigerian commercial bank that holds ₦3.1 trillion ($3.9 billion) in consumer deposits, blocked several neobanks over concerns that neobank wallets and accounts are an easy way to move monies that had been fraudulently obtained. Another major bank held similar internal discussions, TechCabal reported at the time. 

The new directive is part of efforts to promote financial system stability and strengthen the Know Your Customer procedures in all financial institutions, said Nigeria’s Central Bank. 

Cardoso made this announcement at the Chartered Institute of Bankers annual dinner on Friday in Lagos. Having recently postponed the second crucial rate meeting since July, he stated that the Central Bank of Nigeria (CBN) had met its quota of rate meetings for the year 2023, even as inflation hit an 18-year high of 27% in October. KPMG predicted that Nigeria’s headline inflation will hit 30% by December 2023.

Analysts have anticipated this meeting hoping to make investment decisions following what they would hear at the dinner. They also anticipated a rise in interest rates this month to help slow down inflation and protect banks from losing capital as inflation continues to rise. Cardoso did not state when the first rate hike meeting for 2024 will be held under his leadership. The governor also said that the bank had initiated foreign exchange frameworks to address the backlog of dollar demand that has weighed heavily on the naira. He said the payment of obligations will continue until they are completely cleared.

The 66-year-old former Citibank executive directed that the banks’ minimum capital ratios be increased instead, in the hopes of meeting the $1 trillion target set by the Federal Government. 

Despite acknowledging the importance of technology in payments, Cardoso promised to checkmate the sector as some payment firms had been operating outside the activities approved for their licenses. The bank chief said that CBN has been mopping excess liquidity in the market via the introduction of Open Market Operation (OMO) bills. He also assured that the bank would no longer stray from its core mandate but work towards providing the right fiscal and monetary policies that would steer the nation forward.

The Central Bank of Nigeria is mandated by law to hold monetary policy committee (MPC) meetings every two months to set the lending rate for Africa’s biggest economy. Still, it has failed to do so since July.

“Tomorrow’s meeting may boost market confidence as uncertainties about CBN’s actions would reduce,” Mayowa Badejo, a partner at 213 Capital, an investment and risk advisory firm, told TechCabal. He added that the dinner would help Cardoso interact with bankers and share his plan regarding monetary policy with them while seeking their cooperation.

Cardoso’s silence and lack of urgency comes as Nigeria battles with rising inflation, which hit an 18-year high of 27% in October. KPMG, a financial and business advisory firm, predicts that Nigeria’s headline inflation will hit 30% by December 2023. Analysts anticipated a rise in interest rates this month to help slow down inflation and protect banks from losing capital as inflation continues to rise. However, the lack of communication, which might continue until 2024, has now created a vacuum. 

Aside from failing to curb inflation, the failure to host an MPC meeting in four months and the lack of communication from Cardoso since his appointment are also dampening foreign investor confidence. His two-month silence comes as the naira trades at some of its lowest levels amid a dollar shortage.

Under the acting CBN governor, Folashodun Shonubi, the bank raised interest rates, but Cardoso has yet to make any decisions. TechCabal reported that CBN postponed this month’s MPC meeting scheduled for Monday and Tuesday without giving a reason. The Central Bank’s decision to unveil an economic outlook for 2024, shows that Cardoso is finally ready to talk and share his ideas on how inflation could possibly be curbed.

NBS data showed food inflation hit 31.5% in October. The prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, fruit, meat, vegetables, milk, cheese, and eggs soared as cash-strapped Nigerians struggled to buy major essentials. 

For the first time in eight years, Nigeria’s Central Bank postponed the Monetary Policy Committee (MPC), to decide the nation’s interest rates temporarily. The MPC meeting is usually held every two months to decide interest rates. It was initially scheduled for Monday and Tuesday, September 25 and 26, 2023.  

A statement signed by the Director, Corporate Communications, Isa AbdulMumin, said a new date for the meeting will be communicated in due course. “We regret any inconvenience this change may cause our stakeholders and the general public,” the statement read on the central bank’s website.

Have you got your tickets to TechCabal’s Moonshot Conference? Click here to do so now!

Last week, President Bola Tinubu nominated Yemi Cardoso as Nigeria’s next CBN governor. Cardoso is expected to succeed Godwin Emefiele, whose suspension and dramatic removal still raise legal questions. Nonetheless, the Central Bank has struggled with price stability since Emefiele’s reign as CBN Governor. Nigeria’s inflation figures have now crossed an 18-year high with the current figures at 25.80%, driven by food prices. Emefiele’s reign has caused several analysts to question the bank’s independence especially with a last minute stunt of ex-bank chief to vie for the presidency.

While Cardoso’s political affiliations maybe called into question, the decision to maintain or raise interest rates in response to mounting inflation has to be made very soon at the MPC meeting. The now postponed meeting is sure to raise eyebrows over how the leadership of the CBN would be managed, especially under Tinubu’s administration.

Have you got your tickets to TechCabal’s Moonshot Conference? Click here to do so now!

President Bola Tinubu has nominated Olayemi Michael Cardoso as the next governor of Nigeria’s Central Bank. His nomination comes exactly four months after the president’s suspension of former Central Bank Governor Godwin Emefiele.

Cardoso’s appointment will need to be ratified by the Senate. Four deputy governors, Mrs. Emem Nnana Usoro; Mr. Muhammad Sani Abdullahi Dattijo; Mr. Philip Ikeazor and Dr. Bala M. Bello were also appointed to the leadership of the Central Bank, also pending Senate approval. 

Cardoso—who will be leading the nation’s apex bank for the next five years upon confirmation—was the former chairman of Citibank Nigeria with over 30 years of experience, having sat on the boards of Nigerian subsidiaries of Texaco and Chevron and chaired the committee of EFInA, a financial sector development organisation supported by the Bill and Melinda Gates foundation.

Cardoso’s major test is the Monetary Policy Committee (MPC) which convenes in two weeks where a decision will be made to maintain or raise interest rates in response to mounting inflation. Two months ago, the apex bank elected to raise interest rates by 25 basis points. This came after the board members disagreed on the best policy to control inflation in a cash-strapped economy. With Nigeria’s inflation driven by food and transport prices, as well as a significant arbitrage at the FX market, the new CBN governor already has work on his hands.
The next MPC meeting comes with much expectation that the Central Bank would hike their rates at least to 20%, according to experts.

Have you got your tickets to TechCabal’s Moonshot Conference? Click here to do so now!