Guardian

The Central Bank of Nigeria (CBN), in collaboration with MICR Technical Implementation Committee, has announced recently that only two companies among the 14 that print cheques for Deposit Money Banks (DMB) are accredited to print cheques and other “debit pull” paper instruments for the Nigerian market.

The 12 others, constituted by foreign-based printers, were neither accredited nor re-accredited. This decision follows the CBN’s policy to domesticate cheque printing in Nigeria. Notwithstanding, the decision has raised key questions around the capacity of the two local printers to meet the demand of more than 300 million cheques per year by commercial banks.   AJIBOLA AMZAT examines the merits and demerits of the CBN’s decision.

In his last visit to South Africa, President Goodluck Jonathan had hardly completed his speech on the imminent “national industrial revolution” set in motion by his administration, when CBN issued a circular that put an end to the business of 12 foreign-based printers in Nigeria.

IN a circular signed by the director of Banking and Payment System Department, Dipo Fatokun, dated May 9, 2013, the apex bank announced two local firms as the accredited printers. They are Superflux International Limited and Tripple Gee and Company Plc. The unaccredited foreign-based firms were advised to either domesticate their operation or take their business elsewhere. The printers are Kalamzoo Seure Solutions Ltd, Birmingham, England; Security Print Solution, UK; CFH Total Document Mgt Ltd, England; Smith and Ouzman Ltd, England; Tall Security Print Ltd, England; A1 Trade print Services, England; Papi Pinting Coy Ltd, UK; Corrinum Continous Ltd, UK; Euphoria Comm. Ltd, UK; DLRS Group, Ireland; Camelot Ghana Ltd, Accra, Ghana; Shave and Gibson Group, South Africa.

To boot, CBN enjoined banks to patronise only the accredited companies and warned that penalties would be meted out to those banks that defy the directive. This decision has attracted both compliments and criticism from stakeholders.

Those who applaud CBN viewed the decision from the nationalistic point of view. Every nation is expected to grow her economy and create jobs for her citizens. Patronising foreign companies rather results in capital flight, and limits the employment opportunity for Nigerians, they argued. China, United Kingdom, South Africa, Ghana and other economies firmly protects jobs of their citizens. In Nigeria, jobs are being taken abroad on regular basis. At present, the unemployment rate in Nigeria stands at 20.3 per cent according the National Bureau of Statistics. The situation is even growing worse as population balloons. Therefore, any attempt to attract more investment to Nigeria and boost employment opportunities for the Nigerians is laudable, the argument goes. This position informed CBN’s call for domestication of cheque printing in Nigeria, and the subsequent de-accreditation of foreign-based printers, says a CBN official.

In contrast, there are others who reason that CBN’s decision may put banks under unnecessary stress. Presently, more than 300 million cheques are printed annually for Nigerian banks, according to industry watchers. These volumes were previously handled by the 14 printers including Nigeria Security Printing and Minting Plc. But with the exclusion of 12 printers in the production process, the burden of cheques supply for 23 Nigerian banks will fall squarely on the two accredited companies. How does the CBN plan to address the challenge of huge demand for cheques that will be laid at the doorsteps of the two accredited printers? Can the two accredited printers take the orders of 23 banks and deliver them on deadline? What is the cost implication of printing cheques by two printers instead of 14 printers? These are the important questions that CBN failed to address in the published circular. In addition, the accredited printers offer services that extend beyond the printing of cheques. Superflux and Tripple Gee do print other security documents including ballot papers for INEC, certificates for universities and other security documents. Bankers who spoke with The Guardian in confidence said the situation would certainly put greater pressure on the production capacity of the accredited printers. “It may take us back to the era when fake cheques flooded the market,” a banker disclosed. The banker said though CBN has introduced a number of security measures to guide against reproduction of fake cheques, but concentrating production on a couple of printers may further weaken the security system already in place.  Also, the cost of printing cheques may rise if production is left to two printers only.

A Lagos mortgage banker agreed to the previous speaker saying, the decision is tantamount to telling banks to bite more than they can chew. “It will somehow have an adverse effect on the banking industry.”

He added, however, that CBN might take this decision in order to drive electronic transaction. “It is easier to monitor the movement of fund   through electronic platform because every transaction will pass through the CBN. That may be one of the undisclosed reasons. It could be a way of driving the cashless policy of the CBN”.

It will be recalled that CBN governor said recently that the apex bank had taken some actions to focus attention on electronic payments as a veritable payment service option.

Presently, the Nigerian Electronic Fund Transfer and Instant Payment transaction on the Nigeria Inter-Bank Settlement stands at N80 billion daily.  CBN has projected that the electronic transaction will hit N2.48 trillion on a monthly basis.

Regarding de-accreditation of the foreign-based printing companies, however, CBN has pointed out that the decision to delist the companies was taken after several admonitions to their owners and their brokers in Nigeria. As far back as 2005, the bank has introduced a policy, which stipulated that cheque production in the country must be fully localised by the end of 2009. The admonition was repeated after the 2006 accreditation exercise, but the foreign printers turned deaf ears to the call.

In response to the CBN’s allegation, one broker for a foreign printer who declined to be named because he was not authorized by his principal to speak lauded the introduction of the domestication policy. “It is a good decision, but we expect a more robust engagement from CBN. When they mooted the idea of localizing cheque printing, we also indicated the challenges that may cause delay.” According to the broker, the institutional challenge in Nigeria is a key factor in setting up a factory in Nigeria. “But our principals are working to overcoming this challenge. We need the support of CBN to embark on huge investment in Nigeria. This may not happen when you force us out of the market because de-accrediting other cheque printers is tantamount to forcing them out of the Nigerian market.”

The broker disclosed that some of the foreign firms have indeed started relocating investment to Nigeria, “but we need more time.”

Furthermore, agents of some foreign printers faulted the CBN’s argument on employment creation. They ask: “If CBN is talking about generating employment, how much of employment can be generated in a close-knit industry like the security printing? How many employees can a security printing company employ? It is rather a technology-driven industry; therefore the argument to domesticate printing firms in order to provide employment is a weak one.”   To this group, the CBN’s decision is rather counter-productive.

Further still, there are those who believe that the authorities of the CBN is influenced more by private interest than by national interest. “I would not be surprised if some of the decision makers at CBN and the Bank of Industry (BOI) are not shareholders in any of the two accredited companies” a senior bank officer said. This is a view that some brokers  also share. That was how close the source got to mentioning the name of the CBN governor, Malam Lamido Sanusi

But this claim was invalidated by the investigation carried out by The Guardian. The Corporate Affairs Commissions report on the two companies does not include any of the CBN or BOI’s director as ownership members. For Triple Gee and Company Plc, the directors are: Victor A. Haffner, Gani Gbadebo Giwa, Olayiwola Osuolale, Mishela Fiama Diggira, Samuel T. Ayininuola, and Felix K. Bajomo. For Superflux International Limited, the directors are: Talabi Olatokunbo, Talabi Aderinola and Talabi Omowonuola.

“But these people could be fronts for some principals officer of CBN and other government functionaries”, another observer said.

The Guardian attempted to speak to the CBN spokeperson, Mr. Ugocukwu Okoroafor on the matter, but he requested that question be mailed to him instead. At press time, he is yet to respond to the questions sent to him a week ago.

Reacting to the allegation, the Division Head Marketing, Superflux International Limited, Mr . Gabriel Okonkwo said such allegation is not unexpected considering the goodwill extended to Superflux by CBN’s governor, Malam Sanusi by attending the launching of   N700 million facilities acquired by the company recently. Said he: “I think what may have warranted that kind of speculation from some quarters is because we were able to bring CBN governor to commission our facility. But you know who Mr. Sanusi is. He is not that kind of person. It took us a lot of effort to get him to attend because we wanted him to see what we have on ground.”  Sanusi led a team of CBN staff to attend the event. With the launching of the facilities, he said the company has capacity to print cheques for all the Nigeria banks. “The new facilities recently commissioned by CBN governor has put our company in the position to take cheque orders of all Nigerian banks including banks in other African countries,” Okonkwo said.

Brokers for foreign printing firms take this boast with a pinch of salt. They said no single Local printer could handle the printing of all Nigeria banks at present.

“Anyone can assure their customers that they can provide ABC, but how can customers determine that,” a banker queried.

The CBN’s decision may have been driven by national interest, but the decision may also leave adverse effect for the banking industry that the apex bank aims to protect.