The Central Bank of Nigeria (CBN) is set to introduce a singular foreign currency (FCY) gateway bank that will centralize all correspondent banking activities.
The CBN Governor, Yemi Cardoso made this known in a TV interview on Monday where he also outlined short and medium-term strategies for fixing Nigeria’s forex challenges. Included in the medium-term strategy was the setting up of a Gateway Bank.
- “Introducing a single FCY gateway bank to centralize all correspondent banking activities, currently dominated by two major banks in the corresponding banking space.”
This initiative forms a critical part of the CBN’s medium-term strategy to stabilize the forex market and enhance the overall management of Nigeria’s international financial transactions.
This strategic move is accompanied by a broader scheme of reforms which the CBN has articulated as part of its overarching plan to improve the nation’s forex inflows and to stabilize the Naira.
According to Cardoso, Correspondent banking, which facilitates international trade and economic activities by enabling domestic banks to conduct business and provide services to their clients across borders, is presently under the dominion of two major banks within the Nigerian banking landscape.
However, it is unclear whether the two major banks mentioned are local or foreign and what the legal framework is for creating a gateway bank.
The creation of a central gateway bank is poised to disrupt this concentration, ensuring more efficient and transparent financial operations that align with global best practices.
The CBN Governor also mentioned that in response to the evolving landscape of digital finance, the CBN is also intensifying its efforts to strengthen surveillance and technological capabilities to effectively monitor cryptocurrency transactions.
- Strengthening surveillance and technological capabilities to monitor cryptocurrency transactions effectively
Other Plans
Additionally, the CBN is exploring innovative mechanisms to incentivize individuals who hold foreign currency outside the formal banking system.
- By encouraging the deposit of these funds into the banking system, the CBN aims to deepen the forex market with increased liquidity.
- However, such an incentivization program requires a robust legal framework to ensure compliance, security, and transparency.
Another pivotal component of the CBN’s medium-term strategy is the establishment of an Investor Relations Group (IRG), modeled after the successful framework employed by the Philippines.
- The objective is to elevate Nigeria’s credit profile on the global stage and to position the country as a prime investment destination.
- By enhancing investor communications and building stronger relationships with the international investment community, the IRG will play a vital role in attracting foreign direct investments, thereby bolstering the country’s economic resilience.
