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Kenyans Will Proceed With New Sh1000 Notes As Court Rules Jomo Statue Is Not A Portrait, New Notes Legal

September 28, 2019

In what is a like a significant landmark victory, Kenyans will would be proceeding to have new Sh1000 notes by September 30. A Kenyan High Court has ruled that the new bank notes are legal and that Kenya’s first President, Jomo Kenyatta’s statue on them is not a portrait. The court also declined to extend the expiry date of old Sh1,000 notes.

Here Is All You Need To Know

On June 4, two cases challenging the release of new bank notes into circulation were filed before the High Court.
The petitions filed separately by activist Okiya Omtatah and East Africa Legislative Assembly Member of Parliament Simon Mbugua said the image of a statue of President Jomo are in violation of the Constitution and should be removed from the new denominations.
According to the petitioners, although Kenyatta’s portrait is captured as a part of Kenyatta International Conference Center (KICC), it is a representation of the former President’s image, whose inclusion is illegal.

“The petitioners posit that the new design Kenyan currency bank notes are unconstitutional and, therefore, invalid, null and void, because they violate Article 231(4) of the Constitution to the extent that they bear the portrait of the late President Jomo Kenyatta,” the petitions read.

On August 8, Omtatah also sued Attorney General Kihara Kariuki for publishing new laws to regulate circulation of the new currencies.
Omtatah argued that the AG sneaked in the new law after realising that the Central Bank of Kenya illegally introduced the new generation currencies, and when the court was at an advanced stage of determining legality of the new currencies.
He wanted the court to suspend a legal notice published by the AG, pending determination of his suit over the new currencies.
The activist challenged the laws relied on by CBK to introduce the new currencies and have founding President Jomo Kenyatta’s portrait on the notes.

Here Is How The New Currency Policy Has Pushed Some Kenyans To Tight Corners

Under Kenya’s new currency regime, some of the country’s currency would be replaced with a new generation of banknotes. To that effect, Kenyans must return their old 1,000 shillings ($10; £8) notes to banks before 1 October, 2019 in a bid to fight money laundering, counterfeits, and corruption).

To effectively implement the new policy, the Central Bank of Kenya has issued some tough guidelines on how to exchange the old Sh1000 currency for new notes.

Read also: What Kenyan Businesses Need To Know About The New Currency Policy In Place In The Country

To this effect, those without a bank account are not able to exchange more than Sh1 million of old currency with the new notes without CBK’s approval.
Even with a new bank account, it is reported as a suspicious activity if the holder all of a sudden credits his account with more than Sh1 million, or seeks to exchange it in cash and walk away without proper documentation on proof of source of funds.

There is an alleged feeling of desperation among those suspected to be hoarding money acquired illegally and who are hence unable to bank it as they cannot openly declare its source. Such individuals are faced with the challenge of losing the money when it is devalued on 1st October as Kenya officially moves on to the new currency as is dictated by the 2010 Constitution, reports Kenya’s Investment Company Soko Directory.

New Guidelines Warning Stakeholders By CBK

In its most recent circular, KCB warned it would take action against any commercial bank that fails to, neglects or omits to comply with relevant regulations.

The regulator reminded lenders of their obligation under the Crime and Anti-Money Laundering Act, 2009, saying they should undertake due diligence on customers’ transactions and ensure effective monitoring of all accounts and transactions.

In March 2019, CBK also directed all commercial banks, microfinance institutions, and mortgage finance companies to nominate “an independent and competent external third party” to evaluate the institution’s compliance to anti-money laundering and combating the financing of terrorism programs.

The appointed parties evaluate the institution’s customer due to diligence measures, its risk assessment for cases of money-laundering and terrorism financing, check the firm’s internal controls against such financial crimes, and their monitoring process.

The fight against money laundering was one of the Kenya ’s reasons to phase out old Sh1000 notes, which CBK said was becoming increasingly easier to imitate.

Speaking during the Madaraka Day celebrations, CBK governor Patrick Njoroge said the new Sh1,000 notes will help address the growing concerns of illicit financial flows in the country.

The Most Direct Implication of This Is That By October This Year, All Those In Possession of The Old Ksh1000 Notes Will Not Be Able To Use Them

This is directive of the Central Bank of Kenya. CBK governor Patrick Njoroge also revealed that 100 million pieces of the old Sh1,000 note had been returned by end of August 2019 out of 217 million pieces or Sh217 billion in circulation.

This means the public has less than 3 days to exchange some of the remaining bulk.

With the deadline fast approaching, businesses have started blocking usage of the old Sh1000 notes.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world

Startup VertoFX Raises $2M For African and Emerging Market Currency Trading Platform

July 20, 2019

More startups that are either Africa-based or Africa-focused are really having a good time raising funds to scale their businesses. Indeed, this funding goes to show that even startups with very remote niches can raise funds. VertoFX, the startup that focuses on currency trading and payment for African and emerging markets has just raised a $2.1 million seed round, led by Accelerated Digital Ventures.

Here Are The Funding Details And What This Means For Similar Startups With Remote Niches

The $2.1 million seed round of funding was led by Accelerated Digital Ventures.
The startup is simply a bureau de change for African and emerging market businesses.
The startup will use the round for platform development, expanding the currencies and gaining licenses in new countries. It will also use the round for hiring, primarily in compliance and regulator type roles. VertoFX already has a developer team in India and is looking at local developer talent for its Africa offices.
Although London-based company, with a subsidiary in Lagos, Nigeria, the startup’s platform allows businesses and banks to exchange and make payments in exotic foreign currencies that don’t often convert or trade conveniently across businesses or banks.
For example, South Africa’s Rand is Africa’s most convertible and traded currency — with lower spreads and transaction costs — while currencies of countries such as Ethiopia or Egypt may be difficult or expensive to trade or transact B2B payments.
All around the world, there are around 40 currencies that are considered exotic or illiquid, most of them in frontier markets in Asia, Africa, and the Middle-East, says Oyetayo, VertoFX founder.

“That’s the reason we are utilizing technology to create a marketplace model and price discovery to create liquidity for these currencies,” VertoFX founder Ola Oyetayo said in an interview.

And there’s a revenue opportunity to creating a convenient online marketplace for trading and payments in these currencies.

“Our research says there’s about $400 billion being done by small and medium-scale businesses in Africa alone in transactional volume on an annual basis. If we take 1% of that as a commission or transaction fee, that’s a $4 billion addressable market, just in the continent,” said Oyetayo.

A Look At VertoFX

VertoFX was founded in 2017 by Oyetayo and Anthony Oduwole — both ex-global bankers born in Nigeria. The company was part of Y Combinator’s 2019 winter cohort and processed around $7 million in transaction volume last month, according to Oyetayo.

VertoFX is registered as a payment services provider with the U.K.’s Financial Conduct Authority. Current clients include several undisclosed banks and San Francisco-based payment venture Flutterwave.

VertoFX doesn’t release revenue figures but confirmed it earns a commission, or spread, on each transaction processed on its platform. There are currently 19 currencies on the platform and the ability to settle in 120 countries, including China and the U.S.

VertoFX is also moving into offering market research — toward potential subscription services — on the currencies it trades, according to Oyetayo.

On the possibility of becoming acquired by a big bank, VertoFX isn’t so interested, according to Oyetayo.

“We both come from big banks and if we’d wanted to go down that route we’d have developed this more like a software as a service platform,” he said.

“We’re playing the long game here, and I don’t think the acquisition is the end game,” he said.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

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ECO: As West Africa Takes the Single Currency Plunge

July 10, 2019

Analysts have started exploring opportunities inherent in the proposed single currency for the West African region; The Eco. It could be recalled that leaders of the 15 member states of the Economic Community of West African States (ECOWAS) met in Abuja, Nigeria, and formally agreed on the name of the planned common currency the “ECO” The currency according to a release from ECOWAS Secretariat Abuja, would be based on a flexible exchange rate regime, coupled with a monetary policy framework focused on tackling inflation.

Observers say there seems to be a sense of urgency in this latest efforts, maybe being buoyed by the recently signed Africa Continental Free Trade Agreement (AfCTA). This is because the target launch date for Eco has been postponed several times; in 2005, 2010 and 2014; since the concept first arose in 2003. Now the Economic Community of West African States (ECOWAS) is planning to launch the currency in 2020, with member states agreeing to name it the ‘ECO’ there seem to be a new sense of urgency.

Reports indicate that governments in the region are keen on more integration and a single currency will facilitate trade, lower transaction costs, and payments amongst ECOWAS’ 385 million people.

Currently, eight of ECOWAS countries i.e. Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo jointly use the CFA franc while the remaining six members have their own independent currencies.

Some analysts are of the view that the single currency if properly implemented will improve trade by allowing specific countries to specialize at what they are good at, and exchange it for other goods that other countries in the bloc produce more efficiently.”

A report by the African Development Bank Group (Afdb) indicates that the 2020 deadline for the single currency will most like be postponed again unless the region can align with its monetary and fiscal policies.

Countries are required to meet a ten convergence criteria, set out by the West African Monetary Institute (WAMI), by the 2020 deadline. The primary four beings: a budget deficit of not more than 3%, an average annual inflation rate of less than 10%, Central Bank financing of budget deficits should be no more than 10% of the previous year’s tax revenue and gross external reserves worth at least three months of imports.

The six secondary criteria to be achieved by each member country are: Prohibition of new domestic default payments and liquidation of existing ones, tax revenue should be equal to or greater than 20 percent of the GDP, wage bill to tax revenue equal to or less than 35 percent, public investment to tax revenue equal to or greater than 20 percent, a stable real exchange rate and a positive real interest rate.

However, reports indicate that although countries may meet the criterion by the deadline they fall behind thereafter thus posing the main difficulty in inconsistencies.

As at today, only five countries, viz; Cape Verde, Ivory Coast, Guinea, Senegal and Togo of the region’s fifteen countries currently meet the single currency’s criteria of a budget deficit not higher than 4% and inflation rates of not more than 5%, as noted by Charlie Robertson, chief global economist at Renaissance Capital.

Additionally, while ECOWAS says the integration will be gradual as countries meet the criteria, it’s unlikely that a 2020 launch date is feasible as there is no significant progress in the design, production, and testing of the currency notes.

Given that various economies in the region are at “dramatically different levels of development,” the leadership of ECOWAS is being unrealistic in both its timing for the currency’s launch and expectations of what it might achieve, Robertson says. “You’ve got very different levels of debt, interest rates, and budget deficits. Trying to align these countries to operate as one is extremely difficult,” he says. “What currency policy is right for two such divergent countries like saying Ghana and Burkina Faso?”

There is also the glaring disparity in the economic size of Nigeria in the region. For example, Nigeria is 67% of ECOWAS’ GDP, so really this isn’t a single currency for 15 countries, this is the Nigerian Naira plus a few countries.

How the leaders hope to close all these gaps between now and next year remains to be seen.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

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What West African New Currency Means For West African Businesses

July 1, 2019

West African businesses can now benefit from seamless trading across West African borders. This is because the Heads of State and Government of countries in the region have finally adopted ECO as the name of the single currency to be issued in January 2020.

Here Are Things To Know About The New Currency

The currency would fully be in use from January 2020.
The currency would be used for trade across West African countries.
The ECO will work this way: shops, hotels, and restaurants, particularly in the larger cities in Ghana, for instance, may now display prices in both the Ghanaian Cedi and ECO currency and many are likely to accept payment in ECO. However, as the official currency is Ghanaian Cedi, no establishment is under no obligation to accept payment in any other currency apart from Cedi.
Consequently, the introduction of ECO may serve as an alternative to the legal tenders in the countries of West Africa who have met all the requirement to start using ECO.
In simple terms, for people living in Nigeria, this means that you can now carry, in addition to Naira, ECO, and ECO can be used to buy or sell anywhere in Nigeria as long as the other party is willing to accept so.
The West African Monetary Agency, the body of ECOWAS in charge of money and finance across the region has said the currency would be based on a flexible exchange rate regime, coupled with a monetary policy framework focused on checking inflation.

In Which Countries Can You Use The Currency?

The currency can be used across the whole of West African countries from January 2020. However, ECO would be used only in the countries that have met the requirement for its use. That is, for any country in the West African sub-region to start using ECO, it must first meet the following requirements:

It must have a single-digit inflation rate at the end of each year
It must have a fiscal deficit (liabilities) of no more than 4% of the GDP
Its central bank must have deficit-financing of no more than 10% of the previous year’s tax revenues
The country’s gross external reserves must give import cover for a minimum of three months.

Additionally, each country must:

Prohibit new domestic default payments and liquidate existing ones. (That is, all domestic debts must be paid off first)
Have a tax revenue base which should be equal to or greater than 20 percent of the GDP.
Have its wage bill to tax revenue equal to or less than 35 percent.
Have its public investment to tax revenue equal to or greater than 20 percent.
Have a stable real exchange rate.
Have a positive real interest rate.

Right now, it appears Ghana is the only country in West Africa that has met all of the above requirements.

“The single currency for 2020 vision is: let’s find two, three or four countries that are ready. Once they meet up, we follow through with the others cascading in,” said Ken Ofori-Atta, Ghana’s finance minister, at a meeting of West African ministers in Accra recently.

The seriousness of the ECOWAS leaders on ECO is buried in this communique issued after the 55th Ordinary Session in Abuja:

‘‘The single currency would be issued in Jan. 2020.’’ the communique reads. “We have not changed that but we will continue with assessment between now and then. We are of the view that countries that are ready will launch the single currency and countries that are not yet ready will join the programme as they comply with all six convergence criteria.”

The leaders also instructed the commission to work with West African Monetary Institute and the central banks to accelerate the implementation of the revised roadmap with regard to the symbol of the single currency.

“It [the communique]further directs the commission to ensure implementation of the recommendations of the meeting of the ministerial committee held in Abidjan on June 17 and June 18 as well as preparation and implementation of the Communication Strategy for the single currency programme. The Authority takes note of the 2018 macroeconomic convergence report. It noted the worsening of the macroeconomic convergence and urges member states to do more to improve on their performance in view of the imminent deadline.”

The Benefit of Using The New Currency

Most of the eight currencies used in the 15 countries of the West Africa region are not convertible. Convertibility is defined as the possibility to freely exchange a country’s currency for foreign currencies. Where they are convertible, their rates are highly volatile ($2 in the morning, $5 dollars in the afternoon) Hence, ECO will help to address the issue of multiple currencies and exchange rate fluctuations that affect intra-regional trade.
West African countries have the least developed financial sectors in the world. The ratio of bank credit to GDP there is very low. There is no much money in their financial markets, through which money can easily flow across the region. Unlike the Eurozone where payment can be made and settled by banks using Euros and cheques. Payment and settlement systems in several West African economies are still marked by the predominance of cheques in noncash payments. In 2013, for instance, the whole money available in the West African regional market only represented 13% of GDP of the whole of the West African countries put together — this is like 8.5% of GDP for Ghana and 21% for Nigeria, against an average of about 65% for Sub-Saharan Africa. Hence, ECO will open up the market a bit.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Zimbabwe Set To Reset Its Currency — Outlaws Usage of Rand, US Dollar and Botswana’s Pula

June 24, 2019

“References to the currency of Zimbabwe shall, with effect from the 24th of June 2019 be construed as references to the form of legal tender and the electronic currency with which the term Zimbabwe dollar is.’’

The above statement is from the Zimbabwean government as the country begins a new journey to reshape its bad currency.

Henceforth, international and regional currencies such as the rand, US Dollar, Botswana Pula, and British Pound will no longer be acceptable in Zimbabwe as legal tender. Zimbabwean Finance Minister has gazetted mandatory and sole usage of the Zimbabwe Dollar for all local transactions.

‘It is hereby notified that the Minister of Finance … has made the following regulations; Zimbabwe dollar to be the sole currency for legal tender purposes,” reads a part of the Statutory Instrument issued today.

“With effect from the 24th June 2019, the British pound, United States Dollar, South Africa rand, Botswana Pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.”

The Statutory Instrument states that “references to the Zimbabwe dollar are coterminous with references to the following and to no other forms of legal tender or currency — (1) the bond notes and coins, 2.) the electronic currency that is to say the RTGS$”.

Zimbabwe has been using multiple currencies since 2009 when hyper-inflation ravaged the country’s local unit.

In 2016, the central bank of Zimbabwe introduced bond notes which traded at par with the US Dollar but have quickly been losing value.

Zimbabwe Is Poised To Have Its New Currency Now Or Never

Earlier this year, Zimbabwe introduced a new currency, the RTGS$ with President Emerson Mnangagwa and the Finance Minister, Mthuli Ncube, saying in the past few months that Zimbabwe was set to have a substantive currency of its own.

It also says the current bond notes and RTGS$ are at par with the Zimbabwe dollar. This has been viewed as an effective introduction of a new currency for Zimbabwe, which is currently battling a severe financial crisis.

Free For All

Companies such as Old Mutual have been accused by allies of President Mnangagwa for fueling informal market currency rates which have spiked out of control. Early Monday morning, the bond notes were trading around 1:10 against the US Dollar while the official interbank market rate is around 1:6.2.

Other listed companies in Zimbabwe have been facing accounting challenges and several have sought permission from the Zimbabwe Stock Exchange to delay financials following the introduction of the RTGS$ in February this year.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.