Posted by Ben-Bright Mkpuma on
The Central Bank of Nigeria (CBN) has picked holes in recent agreements signed between Nigerian banks and their foreign counterparts for the management of Nigeria's external reserves.....
The Central Bank of Nigeria (CBN) has picked holes in recent agreements signed between Nigerian banks and their foreign counterparts for the management of Nigeria's external reserves.
Mr. Mohammed Nda, director, foreign operations department, CBN, said in Abuja yesterday that most of the banks did not meet the expectation of the apex bank while drawing up the agreements with their foreign technical partners.
Nda explained that the strategic objective of the CBN in initiating the partnership arrangement for foreign reserve management was to leverage on the foreign reserve management capabilities of foreign banks to develop the capacity of the Nigerian banks to become custodian and global fund managers within the medium term. He noted that many of the agreements signed failed to make adequate provisions for this capacity-building attainment.
The CBN therefore, enjoined foreign fund managers and their Nigerian partners to strengthen their agreements, to ensure the acquisition of skills and competencies in custody, asset management and other financial services through 'learning by doing" by the Nigerian banks.
CBN arrived at this position after evaluation the agreements signed between Nigerian banks and their foreign counterparts on the external reserve management. The CBN said most of the agreements fall short of the requirements of the guidelines for foreign reserve management issued by the apex institution.
By this development, the affected banks are expected to go back and prepare an acceptable partnership agreement to qualify to manage the nation's external reserve put at about $34 billion, as at first quarter of the year.
Intercontinental Bank Plc, Oceanic Bank Plc, First City Monument Bank, and United Bank for Africa. Many of the banks have signed partnership agreements with foreign banks on how to manage the external reserves.
Nda remarked in a statement dated July 28, 2006 and served all the affected banks, that 'while the asset management mandate will be given to successful foreign fund managers with a view to achieving the CBN's primary reserve management objectives, the CBN requires that the mandate will be jointly implemented by the foreign fund managers and the Nigerian banks.
'This means that the latter will be involved in the day-to-day asset management operations, such as market monitoring to establish trends; trading, risk management and relationship with the custodian/CBN, which will be undertaken to fulfill the legal requirements of the mandate."