Nigeria restricts ATM cash withdrawals to force use of CBDCs

Nigeria’s central bank has sharply reduced the daily withdrawal limit from automatic teller machines (ATMs) in a bid to boost digital payments in Africa’s most-populous nation.

The Central Bank of Nigeria (CBN) capped the maximum withdrawal at 20,000 naira (US$45) a day for both individuals and businesses – down from the previous limits of ₦150,000 for individuals and ₦500,000 for businesses – according to a circular sent to lenders this week. The weekly limit for ATM withdrawals is reduced to ₦100,000.

Individuals and businesses will also be limited to withdrawing ₦100,000 and ₦500,000 respectively at banks per week, with individuals subject to a 5% fee and businesses to a 10% fee for amounts above those limits.

The maximum cash withdrawal via point-of-sale (POS) terminals is also capped at ₦20,000 per day.

The move is part of the CBN’s campaign to further its “cash-less Nigeria” policy and increase the use of the eNaira — Nigeria’s central bank digital currency (CBDC). Announcing the changes, the Director of Banking Supervision Haruna Mustafa commented: “Customers should be encouraged to use alternative channels (Internet banking, mobile banking apps, USSD, cards/POS, eNaira, etc.) to conduct their banking transactions.”

Adoption rates for the eNaira have been low since its launchon 25 October 2021. The  CBN has found it difficult to persuade Nigerians to use the CBDC with less than 0.5% of the population reported having used the eNaira in the 12 months from its launch.

Nigeria established its “cash-less” policy in 2012, suggesting a shift away from physical cash would make its payment system more efficient, reduce the cost of banking services, and improve the effectiveness of its monetary policy.

In October the CBN’s Governor, Godwin Emefiele, said that 85% of all cash in circulation was held outside of banks and as a result it would be reissuing new banknotes in a bid to drive the shift towards digital payments.

According to a CBDC tracker from the American think-tank, Atlantic Council, Nigeria is one of 11 countries to have fully deployed a CBDC, while 15 other countries have launched pilot programmes with India set to join the ranks later this month.

Bank of Canada continues with interest rate increases

The Bank of Canada (BoC) has announced its seventh consecutive increase in borrowing costs, in line with the recent policy adopted by many of the world’s central banks of delivering regular interest rate hikes this year.

The Bank surprised some analysts who expected a lower increase by announcing a 50 basis points (bps) hike, hiking its target for the overnight rate to 4.25%, the Bank Rate to 4.5% and the deposit rate at 4.25%. The Bank is also continuing its policy of quantitative tightening.

The BoC has now raised interest rates a cumulative 400bps since its first move in early March. The latest increase follows data showing Canada’s Q3 GDP at 2.9% annualised, nearly double the consensus forecast rate, while inflation at 6.9% continues to run at more than three times the 2% target. The latest jobs market figures showed a 108,300 increase in Canadian employment, meaning that there are now 523,000 more Canadians in work than there were before the pandemic struck in February 2020.

In its accompanying commentary, the BoC noted: “Inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report (MPR). In the United States, the economy is weakening but consumption continues to be solid and the labour market remains overheated. The gradual easing of global supply bottlenecks continues, although further progress could be disrupted by geopolitical events.

“Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target.”

World’s largest gold ETF to use non-UK vaults

The world’s largest gold exchange traded fund (ETF) is to store some of its inventory outside London for the first time in a move aimed at facilitating further expansion, reports the Financial Times.

HSBC was sole custodian of the US$52.5bn SPDR Gold Trust (GLD) but the ETF will now add JPMorgan vaults in Zurich and New York. It had held all its bullion in HSBC’s London vaults since its inception 18 years ago as the first physically backed gold ETF.

The paper adds that this is believed to be the first time a gold ETF has had multiple custodians. “[GLD] was a market innovation in 2004, which put us in a position of being a market leader. It’s now almost 20 years old and we have found a new way to innovate with it,” said Joe Cavatoni, principal executive officer of World Gold Trust Services, the sponsor of the fund.

GLD is a major player in the bullion market, accounting for more than 25% of all assets held by gold ETFs. At the peak of the gold rally in July 2020, when prices peaked at record highs above US$2,000 a troy ounce, the fund’s holdings topped 1,200 tonnes, making it a bigger owner than the central banks of either Japan or India.

It still holds more than 900 tonnes, despite outflows from gold funds as the price has softened to US$1,800 per troy ounce. JPMorgan and HSBC are the world’s leading bullion banks.

Cavatoni said that no client has asked for their assets to be moved out of London or away from HSBC and there were no issues with capacity at HSBC’s vault.

He said the decision to bring JPMorgan on board was not driven by financial considerations, but from a “risk management perspective we can see some benefits” from increasing the diversification of storage sites.

Lithium prices ease from peak as demand cools

Strong demand from battery manufacturers and shortages recently pushed the price of lithium to a record high, but improved supply and China’s removal of subsidies for electric vehicles could extend a fall from recent peaks.

Battery grade lithium prices are still trading at 571,500 yuan (CNY) per tonne – around US$82,000 – and although they have edged lower since last month are still more than double the levels seen at the start of 2022 and four times the levels seen in September 2021.

China accounted for 50% of demand for electric vehicles last year and is expected to remain by far the top single country for sales over the years ahead, but the pace of demand growth is slowing.

“November and December are usually very big months for electric vehicle sales in China,” said Benchmark Mineral Intelligence (BMI) analyst Caspar Rawles. “There is normally a large fall in electric vehicle sales in January, which next year will be exacerbated by subsidy cuts in China. We expect a demand drop in the first quarter.”

China’s major electric car producer BYD has called lithium prices “unreasonable” but believes the supply shortage could become a surplus in the near future. BMI forecasts supply next year at nearly 863,000 tonnes, up 36% from 2022. The consultancy sees the deficit in 2023 narrowing to 5,000 tonnes from 80,000 tonnes this year.

Most of the lithium produced around the world – 80% of more than 710,000 tonnes this year, according to BMI – will be used to make electric vehicle batteries. Lithium is also used as a lubricant and in medicines to treat mood disorders.

Rising inventories at lithium-consuming firms will also pressure prices, but not to the extent they fall back to levels seen in November 2020 when it reached as low as US$6,000 a tonne, analysts say.

Bank of America analyst Michael Widmer expects supplies to grow 38% next year to 880,000 tonnes, and a surplus of more than 16,000 tonnes in 2023 from a shortfall of 62,000 tonnes this year.

“While the project pipeline is sizeable and might help alleviate shortages, virtually every site needs to come online at the volumes and within the time frames promised to prevent sustained shortfalls,” he said. “Unfortunately, accidents and disruptions happen, so delays are the norm in the mining industry.”

Overall, producers are rushing to bring new projects online, as lithium demand is expected to grow at an exponential pace alongside accelerating demand for electric vehicles. Widmer estimates global production will rise to 2.26 million tonnes by 2030.

Latin America dollar bond sales “to bounce back in 2023”

Sales of dollar bonds in Latin America are set to jump by around 50% in 2023 from this year’s low levels as the Federal Reserve’s monetary tightening eases, according to bankers at HSBC Holdings.

Bloomberg reports that a chill that pushed the region’s borrowers out of international bond markets this year. A dearth of new deals has seen LatAm dollar bond issuance fall by almost 60% from 2021 to its lowest level since the global financial crisis 14 years ago.

The Fed’s monetary policy shift to battle the highest inflation since the early 1980s made it harder for issuers to gain traction in 2022, it notes. Companies and governments in the LatAm region have sold about US$44 billion of dollar bonds this year

However, HSBC’s team believes that US rates are likely to peak in 2023 and the market tone will improve, meaning borrowers should become comfortable selling more debt. However, Citi is reported to be less optimistic, expecting emerging market (EM) pipelines to remain thin until the second half of next year.

Meanwhile, Peru’s financial markets have weathered a brief fall and rallied after Congress swore in a new President in a day of sweeping political drama that saw the former leader, Pedro Castillo, ousted in an impeachment trial hours after he attempted a last-ditch bid to stay in power by trying to dissolve Congress.

Ignoring Castillo's attempt to shut down the legislature by decree, lawmakers moved ahead with the previously planned impeachment trial, with 101 votes in favour of removing him, six against and 10 abstentions.

The legislature called Vice President Dina Boluarte to take office and she was sworn in as president through 2026, making her the first woman to lead Peru. Boluarte called for a political truce to overcome the crisis and said a new cabinet inclusive of all political parties would be formed.

Indonesia has ambitious plans for digital rupiah

Bank of Indonesia Governor Perry Warjiyo has announced developments in its plans to launch a central bank digital currency (CBDC) for “various digital economic and financial transactions.”

In a speech at the central bank’s annual meeting, Warjiyo said that the bank planned to release details on the conceptual design of a digital rupiah — a currency the equivalent of the country’s fiat — and open the proposals to public comment.

The Bank of Indonesia intended for the digital currency to be “integrated, interconnected, and interoperable” with other countries’ CBDCs following discussions with central bank officials. “Collaboration and synergy on national and international level is critical to the development of Digital Rupiah,” said Warjiyo.

The CBDC initiative, called Project Garuda, will start with the launch of a wholesale digital rupiah (IDR) for “use cases of issuance, redemption, and interbank fund transfer” followed by “monetary operations and financial market development.”

The project’s white paper states that the third phase will deal with end-to-end transactions between wholesale and retail digital IDR users. Warjiyo said that he also envisaged the digital currency being used in the future to buy products in the metaverse.

Indonesia imposed a blanket ban on crypto payments starting in 2017, while trading in digital assets has largely remained legal in the country as regulated under the Commodity Futures Trading Regulatory Agency (CFTRA). Warjiyo first revealed plans for Indonesia to introduce a CBDC in May 2021 but did not provide a specific timeline for the digital currency’s release.

Volante issues payment modernisation whitepaper

The many barriers to businesses’ adoption of new payment systems are reviewed in a recent whitepaper by Volante Technologies.

Effective Preprocessing: the path to faster payments modernisation is prepared by advisory firm Aite Novarica nd discusses the challenges of payment modernisation, how these can be mitigated and what financial institution professionals should do going forwards.

Currently, around 42% of businesses wait for their primary relationship bank to offer new payment channels and capabilities. While many are enthusiastic about adopting new methods, the cost of doing so independently is a considerable barrier. If banks offer file format translation, and do not rely on file format requirements, this becomes far more accessible.

However, the replacement of payment engines can prove expensive for the banks themselves and may bring new risks into their operations. The impact on processes can be a disruption to clients, despite the overall goal of improving services.

Cloud-based payment systems can be an attractive alternative, able to be integrated into existing systems with minimal disruption and reduced implementation times. Modularised solutions should be prioritised, the report claims, avoiding the need for entire payment engine replacements.

A further way to reduce cost is through the adoption of payment channels through businesses’ existing accounting systems, which will allow for greater sales opportunities and streamline the onboarding process. Banks also need to offer logic-based routing rather than only connecting businesses with new payment rails, the report claims. Without doing so, the management of payment and transaction fees remains overly complex.

Straight-through processing rates will be improved by pre-processing incoming payments, the report states, so as to emulate the complexities of a payment engine environment.

Effective preparations for ISO 20022 implementation is cited as an essential component of payment modernisation, allowing firms to maximise and future-proof their efforts while still providing customers with the support they require.

WOO Network dashboard aims to increase crypto transparency

WOO Network – a system of centralised finance (CeFi) and decentralised finance (DeFi) services – is launching what it describes as the first-of-its-kind live self-reporting dashboard aimed at making crypto exchanges more transparent

The new transparency dashboard, WOO-X, offers real-time reporting of assets and liabilities and includes live data reporting that updates every 15 minutes, proof of assets and where they are held, information on liabilities, and additional information related to transparency.

“In coming up with the dashboard, WOO Network also analysed other centralised exchanges (CEXs) including WOO X, to check for the transparency features that users are looking for. According to its study, not all the top 50 exchanges are confident to display their books,” it announced in a statement.

“Various solutions have been put forward after the FTX collapse, but many solutions including proof of reserves fall short of establishing consumer trust. To compare, proof of reserves is the equivalent of a bank showing how much capital they have, but not showing how much they owe to clients and to others.”

Jack Tan, Co-founder of WOO Network described WOO X as much more than a simple exchange with its ability to aggregate liquidity from top trading venues and provide this liquidity at lower fees, through well-vetted and diversified holdings on other liquidity venues.

“We arrived at this solution by coming up with a wish list for what we want to see from other exchanges. So we are holding ourselves to the same standard and being the first to act with this type of radical transparency and live data. Our transparency dashboard is just one of the steps towards our goal of making CeFi more transparent than traditional banks and financial institutions,” Tan noted.