The Nation Newspaper

Category: Money

  • Skye Bank’s millionaire reward scheme for Aba

    Skye Bank’s millionaire reward scheme for Aba

    The peaceful town of Aba in Abia State will come alive on Thursday, January 21 as it brings another opportunity for new winners to emerge in the ongoing Skye Bank’s “Reach for the Skye” Millionaire Reward Scheme.

    The “Reach for the Skye’’ millionaire reward scheme which started last year and has taken place in  Ibadan,  Onitsha, Benin, Federal Capital Territory, Abuja  and Lagos, will hold at the Ariaria market, Aba.

    A businessman and past winner of the scheme in the 1 million naira category, Kazeem Saheed Owolabi expressed how winning the large sum erased previous doubts he had for the promo. Owolabi explained that since his winning, he has become a stronger ambassador for Skye Bank.

    Narrating his experience, he said that, “My phone rang that afternoon, and I was told I had won a million naira from the Skye Bank “Reach for the Skye” Millionaire Reward Scheme. At first, I did not believe, until I was invited to receive my cheque. I am super excited and I really appreciate Skye Bank for this laudable initiative.”

    According to the Head, Retail Banking, Skye Bank, Nkolika Okoli, the Skye Bank Millionaire Reward Scheme would also afford traders and those present at the Ariaria Market during the draw an opportunity to open accounts with the bank or upgrade from other types of accounts to the Save Plus account to qualify for the next month’s draw while winning exciting instant prizes like generators, refrigerators, household appliances and other prizes.

    Okoli added that, “At Skye Bank, we cherish and value our customers and we embarked on this journey as a bank that is committed to continuous reward of customers’ loyalty. This is our seventh edition. We are stepping out of the usual dynamics of rewarding qualified savings customers monthly by also giving instant gifts to customers who open new accounts on the spot.”

  • FirstBank offers educational solutions to schools

    FirstBank offers educational solutions to schools

    First Bank of Nigeria Limited is set to support schools and educational institutions with their educational requirements to enhance preparations for the school year.

    The bank’s support for educational development of the child and the institution is an offshoot of its initiative for Small and Medium Enterprises (SMEs). The lender has developed an array of products and solutions targeted at enabling schools at all levels to seamlessly automate their administrative processes and optimise the process for school fees collections whilst they also acquire attractive educational facilities to support their business.

    The bank’s educational products and solutions include the FirstEduPortal, SkoolPay, and theFirstEdu Loan. Others are Operational Vehicle Loan, Commercial Mortgage and Personal Loan against Salary (PLAS) which enhances Parents/Guidance’s capacity to pay their wards’ school fees.

    The FirstEduPortal facilitates online application and admission, result checking, course scheduling, transcript request, e-learning as well as school fees payment and confirmation amongst others. The portal gives educational institutions the option of receiving payments from their students via debit cards online, Point of Sale, Automated Teller Machines and through any FirstBank branch.

    A web portal will be developed for the schools where it is non-existent. The SkoolPay solution is for educational institutions that do not require a sophisticated system in supporting their collections. SkoolPay enables schools to receive payments through FirstBank branches nationwide. The solution provides detailed online real-time reports of payments received by the school and the payments are updated on the school’s internal system if required.

    The FirstEdu loan is targeted at private Nursery, Secondary and A-Levels schools. The product offers opportunity for private schools to access flexible funding to meet urgent cash flow needs, replace old furniture and equipment, as well as refurbish dilapidated buildings and classroom blocks.

    The Operational Vehicle Loan is targeted at registered businesses. It allows the entrepreneur to acquire brand new vehicles for the day to day operation of the business. Organisations can take advantage of this facility to purchase school buses in the case of school proprietors and even upscale their staff welfare schemes through provision of staff buses.

    The commercial mortgage facility offers flexible financing options for the acquisition of landed property for commercial purposes. Customers can now own their business premises and even earn rental income on acquired property. This product enhances wealth creation for customers given the capital appreciation on the property on the long run as well as the additional source of revenue from rentals. Again, the property financed is the only collateral required.

  • CBN’s challenge of meeting forex demands

    CBN’s challenge of meeting forex demands

    The continuing drop in oil prices is giving the Central Bank of Nigeria (CBN) sleepless nights. Its inability to meet the huge foreign exchange (forex) demand may lead to a review of the naira pricing policy at the Monetary Policy Committee (MPC) next week, reports COLLINS NWEZE.

    In July 2008, when the price of Nigeria’s bonny light hit an all-time high of $147 per barrel, the managers of the economy saw the accrual of petrodollars into government coffers as normal.

    Then the foreign reserves rose to $63 billion; foreign exchange (forex) demands were met without problems and the naira was strong. But, today, things have changed. Crude oil prices slumped to below $35 per barrel on January 7, the foreign reserves shrunk to $29.3 billion.

    Now, the Central Bank of Nigeria (CBN) is not only unable to meet forex demands, it is churning out policies meant to reduce forex access to importers and real sector operators. The local currency has, reacted negatively, exchanging for N280 to dollar last Thursday.

    Since last December, the CBN has kept its official exchange rate unchanged at N197 to the dollar. Against the above, interbank market rate held steady at N199.10/$1 even as electronic transactions with the naira MasterCards exchange at rates far higher than the approved interbank rate.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke, said Bureaux De Change (BDCs) and parallel market spread compared to the official market rates continued to widen considerably in the last few months. “Compared to the N197 to dollar peg of the local currency, rates at the BDC segment of the market were as high as N265 to dollar. Irrespective of the dollar sales to BDCs last Wednesday, the rate depreciated by N1 to close at N266 to the dollar and further by N14 to N280 to dollar the next day as huge dollar demands remain unmet,” he said in an emailed statement.

    He said in the first four trading days of the year, external reserves had declined by 0.5 per cent year-to-date to $28.9 billion as inflows continue at a lower rate relative to outflows given lower oil prices of $32 per barrel (Brent).

    Also, last week, the performance of the Nigerian bond market was mainly bearish as investors free up liquidity to meet up with the speculated bond auction scheduled for the coming week,with increased mopped up and forex intervention provisioning observed.

    As a result, average yields closed the week at 10.7 per cent from an average of 9.8 per cent on Monday, last week. The sell-offs in the market was noticed across all bond tenors on all trading days in the week.

     

    Next MPC meeting

    Meanwhile, the next MPC meeting is in next week, when there are mixed signals on the direction of monetary policy in Nigeria. The CBN is expected to announce a new forex policy which will give it the flexibility to bring the external and domestic economic variables into equilibrium. This may include the announcement of a new exchange rate band, with a floor of N185 and a ceiling of N220 during this quarter.

    The MPC had regretted its decision reduce banks’ cash reserve requirement (CRR) from 31 per cent to 25 per cent during the last meeting.

    A report from FBN Quest, a research and investment arm of FBN Holdings, explained that the message from the latest personal statements of MPC members on the policy shift, has only benefited borrowers in sectors with low employment elasticity.

    It, therefore, instructed the CBN management to devise regulations and measures to ensure that subsequent cut in the CRR of five percentage points (to 20 per cent) reached employment generating sectors, such as agriculture, infrastructure, solid minerals and industries. The CRR is a portion of banks’ deposit kept with the CBN as reserves.

    However, the MPC team said the monetary policy in Nigeria was successful in delivering macro-economic stability until about the third quarter of 2014, though its impact on job creation was negligible. It was then undermined by the latest global headwinds, principally the collapse in the oil prices in the international market.

    “One member noted that the prime lending rate stood at about 17 per cent and the retail rate for Small and Medium Enterprises (SMEs) at 27 per cent. Since he estimated the internal rate of return for large and small businesses at 20 per cent and 15 per cent, it is evident why borrowers are struggling. He cited data showing that private-sector credit extension had expanded by only 3.5 per cent year-to-date by end of October and, therefore, far short of the target for the year of 26 per cent,” it said.

    The MPC said the consensus, therefore, argued for cuts in the monetary policy rate (MPR) and the CRR to reverse a trend decline in the gross domestic product (GDP) growth. One member notes that more than 50 per cent of banks’ deposits mobilised were not available for intermediation/on-lending before the latest reduction in the CRR. The consensus of statements made the reduction in the CRR “conditional”.

    “The statements use different formulae to express a similar message. One refers to aggressive quantitative easing, a second calls for targeted lending and two more advocate the deployment of unconventional monetary policy tools.

    ‘’Another envisages a rebate mechanism whereby the commercial banks appear to benefit from the reduction in the CRR after they have disbursed to favoured sectors,” it said.

    Also, a dissenting voice quotes figures in the CBN’s banking stability report showing that gross lending increased by just N39 billion after the net injection of about N400 billion resulting from the cut in the CRR last September.

     

    IMF suggestions

    The IMF boss, Ms. Chrisitine Lagarde, who completed a four-day official visit to Nigeria last week shared her thoughts on how to deal with the challenges facing the economy. She stressed that her visit was only to offer advice and reaffirm the support of IMF to the President Muhammadu Buhari-led government.

    Noting that the resilience demonstrated by Nigerians as seen in the outcome of the 2015 general election buttresses the country’s ability to overcome the challenges ahead, she called on managers of the economy to spend wisely in the face of declining crude oil earnings.

    She suggested the need for the government to build resilience by making careful decisions on borrowing.

    Analysts insist that with a budget proposal to invest, burrowing solely into capital spending,  especially in power, infrastructure, housing and transportation, would show that the Presidency is on the right track. Her visit was also meant to give policy makers an opportunity to review their stance on critical issues in the economy within the context of global perception as the country makes hard choices in the year.

     

    Oil: How far will it fall?

    Managing Director, Financial Derivatives Company Limited, Bismark Rewane, said the idea of sub-$30 per barrel (pb) oil no longer seems unthinkable.

    “In fact, in some circles, it’s a question of when, not if. The Organisation of Petroleum Exporting Countries (OPEC) in its last meeting – which ended in utter disarray – dashed any hopes of a supply cut and even raised the threshold to 31.5 million barrels per day (mbpd),” he said.

    Rewane said the immediate impact was more turmoil in the market as Brent crude fell to just below $37pb – lowest level since December 2008 – amid a wider commodities sell-off. OPEC is responsible for 40 per cent of world oil supplies. The lack of any real decision betrays the deep divide within the cartel and it could mean even more pain for some OPEC members entering this year. Some oil producers have the capacity to increase production while some others do not.

    He explained that those in the latter category are suffering the most and this has led to strained relations not just within OPEC but between the cartel and non-OPEC producers as well.

    “Most traders and analysts are convinced that prices still have further to fall. So where lays the bottom? How much lower can the battle for market share drive oil prices? How long can OPEC hold out? The only sure thing is that more losers than winners will emerge as oil prices test seven-year lows,” he said.

    He said despite the challenges, the currency pressures are likely to intensify due to the sharp fall in oil prices. The CBN will continue to intervene in the markets, running the risk of external reserves depletion.

     

    Oil outlook

    The outlook on oil prices remains bearish as crude prices are unlikely to rebound with slowing demand from emerging economies such as China, increased production from non-OPEC producers, and a price war among OPEC members.

    This has significant implications for Nigeria’s budgetary framework, which is premised on a benchmark oil price of $38pb. Funding options for the government are limited revenue; if oil prices persist in the current downward path, there may be further revisions to the benchmark price. The impact on the external balance will be significant.

    The current account balance is estimated to move into a deficit position of -$10.8 billion, (-2.2 per cent of the Gross Domestic Product (GDP) in 2015. This year’s budget assumes a fiscal deficit of N2.2 trillion, a figure that may widen further due to revenue shortfalls.

  • Funding N1.84tr budget deficit

    Funding N1.84tr budget deficit

    The Federal Government has proposed an ambitious budget of N6.08 trillion for the 2016 fiscal year. The budget has N1.84 trillion deficit financing targeted mainly at infrastructure development to be funded through borrowing. The Debt Management Office (DMO) which is constitutionally empowered to explore local and international funding sources to see effective funding of the budget, needs government backing to achieve this feat, writes COLLINS NWEZE.

    That President Mohammadu Buhari presented a proposed N6.08 trillion 2016 budget to the joint session of the National Assembly, is no longer news. What far thinking stakeholders are looking at is how the government will finance the budget to achieve its developmental objectives and put the economy right on path of sustainable growth.

    The budget focuses on funding infrastructure, which entails the provision of tangible assets like housing, power (electricity), transport, education, communication, and technology, on which other intangibles can be built. It also seeks to protect the poor with a social safety net including scholarships and food provision in schools.

    The budget has revenue projection of N3.86 trillion, with oil related revenues expected to contribute about N820 billion or 21 per cent, while tax collection and public expenditure reforms in Ministries Departments and Agencies (MDAs) will account for the rest.

    The budget is clearly consistent and is part of the three-year Medium Term Expenditure Framework (MTEF). The budget seeks to stir Nigeria off the path of oil dependence by focusing on non-oil revenues by broadening the tax base and improving the effectiveness of the country’s revenue collecting agencies. However, the renewed drive to boost non-oil revenues may not be sufficient to cover the gap from lower oil revenues.

    And that is where the Debt Management Office (DMO) led by its Director-General, Dr. Abraham Nwankwo steps in. The budget has a deficit financing that requires an additional N1.84 trillion for capital expenditure, which must be funded through borrowing from local and international markets by the DMO.

    The capital expenditure represents over 30 per cent of total expenditure while Nigeria’s debt profile is expected to hit 14 per cent of Gross Domestic Product (GDP). Dr. Nwankwo said Nigeria’s low debt to GDP ratio means the country can borrow more to fund budget, infrastructure and other essential projects that will stimulate the economy and create jobs for the citizenry.

    The DMO is expected to source the additional N1.84 trillion for capital expenditure, N984 billion of which will come from local investors  and N900 billion from international investors.

    In a report titled: ‘Budget 2016: Changed budget, Changed People, Changed Leaders’, Managing Director, Financial Derivatives Company Limited, Bismark Rewane said the spending and revenue estimate is based on the Keynesian model of countercyclical spending to stimulate growth.

    Rewane said significant spending on infrastructure and security will complement reforms in agriculture and solid minerals.

    He said budget deficit of N2.2 trillion is projected which constitutes 2.16 per cent of Gross Domestic Product (GDP), and is considerably higher than the deficit of 0.79 per cent of GDP in the 2015 budget.

    Michael Albert, an economist based in Abuja, said if Nigeria is to borrow to fund the budget, the DMO is going to be responsible to perfect the borrowing process to ensure efficiency and positive feedback from investors. He said the debt office should be strengthened to enlighten the public on the benefits of such borrowing to the economy.

    “We have chances of borrowing more to fund capital projects. It better to borrow to fund projects and allow the people enjoy benefits of democracy that come with effective execution of identified and financed capital projects. Although saving to fund such projects is another option, but is not feasible at this period of low crude oil prices,” he said.

    For Albert, government is expected to enlighten the public and educate stakeholders on what the country stands to gain by borrowing to fund capital projects.

    “I expect the government to ask the DMO to source for the funds because the debt body has the expertise and experience to carry out the task. Besides, both domestic and external debts for Nigeria currently stand at N12.11 trillion which gives us the needed room to borrow more,” he said.

     

    Infrastructure needs

    The Africa Infrastructure Country Diagnostic (AICD) Report for 2011 estimates that Nigeria requires sustained spending of $14.2 billion per annum over the next decade in order to address the infrastructure challenge.

    The above scenario, clearly shows that as a result of the huge funding requirement for present and future infrastructural development and its attendant impact on survival and growth of businesses in Nigeria, traditional funding methods can no longer suffice as the traditional fund providers, different levels of government, do not have such resources at their disposal. Therefore debts may simply be the solution to bridging the infrastructure funding gap.

     

    Benefits of borrowing

    The DMO captures the benefits of using debts to fund projects more succinctly. “If you want to build a railway from Lagos to Aba, there are two options. Firstly, you can save up the money for 10 years, before starting the project. The second option is to borrow and build the railway, and within 10 years, generate enough revenues to offset the debt,” DMO’s head, Policy Strategy and Risk Management, Joe Ugolala said.

    He sees the second option as more plausible as it captures the inherent benefits of borrowing to build infrastructure that is in the interest of the economy. He explained that for one to borrow, there must be that inherent capacity to repay, whether the debt came from internal or external sources.

    He explained that the Federal Government has the capacity to borrow from outside to fund budget, and support specific projects including infrastructure.

    He said that despite challenges with external and internal economic volatility, the DMO is committed to supporting opportunities for employment generation. “We are more than ever committed to doing what we know how to do best, democritisation of public debt. We need to use debt to tackle poverty. We are committed to employment generation. Now that things are tight, we need to show that we are resilient people. We need to reassure ourselves that we have what it takes to achieve a sustainable growth,” he said.

    He called for the democratisation of public debt management system, adding that Nigeria’s debt to Gross Domestic Product (GDP) ratio is still low.  “The rebasing of the economy shows it has grown rapidly, and that the larger the economy, the larger the debt. There must be optimum relationship between the equity and debt,” he said.

    Ugolala, said there is so much demand for infrastructure because of its immense benefits to the economy. Speaking on external and domestic borrowing guidelines for the Federal and State Governments and their agencies, he explained that the National Assembly has a role to play in government’s borrowing plan.

    Firstly, the National Assembly is to approve the borrowing programme for every succeeding year and approval of overall limits, for the amounts of consolidated debts of the Federal, state and local governments, to be set by the President on the advice of the minister.

     

    Other borrowing

    guidelines

    The National Assembly is expected to grant prior authorisation in the appropriation or other Act or Law for the purpose for which the borrowing is to be utilised. “The Federal Government may borrow from the capital market, subject to National Assembly’s approval. Government at all tiers shall only borrow for capital expenditure and human development on concessional terms,” the debt guidelines said.

    Any government of its agencies can only obtain external loans through the Federal Government and such loans must be supported by Federal Government guarantee. “No state, local government or federal agency shall, on its own, borrow externally. State governments and their agencies wishing to obtain external loans shall obtain Federal Government’s approval-in-principle, from the Federal Ministry of Finance,” it said.

    However, the borrowing proposal must be submitted to the Federal Ministry of Finance and the DMO for consideration, and must state the purpose for which the borrowing is intended and its link to the development agenda of government.

    It must also state the cost-benefit analysis showing the economic and social benefits to which the intended borrowing is to be applied; cash-flow statements of the Ministries, Departments and Agencies (MDAs), to ascertain their viability and sustainability. There must also be copies of the state’s Executive Council’s approval and the resolution of the State House of Assembly.

    Also, all banks and financial institutions requiring lending money to the Federal, State and Local Governments or their agencies, shall obtain the prior approval of the Minister of Finance and shall state the purpose of the borrowing and tenor.

     

    Economy diversification

    Dr. Nwankwo said diversifying the country’s source of revenue will make its public debt profile more sustainable. “So, it is an appreciation from the point of view of those global financial institutions that the Nigerian economy is moving to the next level and has been reclassified by the International Monetary Fund (IMF) to borrow,” he said.

    He allayed fears that Nigeria’s delisting from the Global Bond Index by JP Morgan will harm the economy. He said there was no cause for alarm and that the economy is still attractive to investors despite the JP Morgan action. He said should Nigeria need money from both local and international investors, it will get it.

    Dr. Nwankwo said there is nothing wrong in borrowing, and that as a nation, Nigeria can borrow to fund budgets or carry out key developmental projects. He called for the democratization of public debt management system adding that Nigeria’s debt to Gross Domestic Product ratio is still low.

    On the economy, Dr. Nwankwo said government has no choice than to diversify the economy away from oil. “There is still a broad resources base for diversifying and industrialising the economy. With appropriately structured financing, Nigeria should be able to programme a trajectory of long-term fiscal stability and self-sustaining growth,” he said.

     

    Drop in oil prices

    Dr. Nwankwo said with the drop in oil prices, government has no choice than to diversify the economy away from oil. “There is still a broad resources base for diversifying and industrialising the economy. With appropriately structured financing, Nigeria should be able to programme a trajectory of long-term fiscal stability and self-sustaining growth,” he said.

    He said the debt body has been helping the country  to    manage its debt effectively. For instance, it commenced the implementation of the strategic objective of assisting the states of the   federation to develop debt management institutions and capabilities since the last quarter of 2007, as part of its five-year strategic plan.

    The goal was to forestall a relapse into debt un-sustainability, as was experienced by the country before its successful exit from the Paris and London Club debts over-hang. The strategy was to redress the very weak debt management institutions, structures and practices at the state levels towards a more effective coordination of public debt management.

     

     

    The DMO has also established Domestic Debt Data of States of the 36 states, with framework in place for regular updates. The debt office has also helped in the passage by some states within the federation, the Fiscal Responsibility/Public Debt Management Laws to govern debt management and engender fiscal discipline.

     

     

     

  • N100m capital base: CBN, Finance Houses hold emergency meeting

    N100m capital base: CBN, Finance Houses hold emergency meeting

    The Central Bank of Nigeria (CBN) yesterday met with finance houses operators to enable both parties discuss the way forward for the industry.

    The emergency meeting, it was learnt, followed last week’s expiration of the December 31 deadline given by the regulator to operators to either meet the new N100 million capital base for the subsector or suspend operations. The initial September 30, last year deadline was shifted to allow more operators comply.

    The Nation gathered that with tight liquidity in the market, many operators are yet to secure funds to continue their business and this may lead to the exit of several fringe players.

    A source at the Financial Houses Association of Nigeria (FHAN), an umbrella body for the sector, said many of the operators had not secured the funds required to stay afloat.

    “The N100 million minimum capital base looks small, but surprisingly, not many operators have been able to get it. I see many of them closing shop after the deadline lapses,” the source said.

    CBN Director, Other Financial Institutions Supervision Department, Ahmad Abdullahi had instructed that operators that fail to meet the deadline will be forced to close shop, or move into new business requiring low capital base.

    He said the subsector also operates on a ratio of non-performing loans to total loans now pegged at maximum of 10 per cent. He said Finance Houses shall consult at least two licensed credit bureaux to obtain credit information on borrowers.

    He said the finance companies’ sub-sector was envisioned to operate at the middle tier of the financial system, to cater for the financial needs of the Micro, Small and Medium Enterprises (MSMEs), adding that they were also expected to leverage on the resources from the banking system among other sources of funding.

    He explained that the CBN had in a bid to sanitise the sub-sector, revoked the licences of 208 finance companies and cancelled the approvals-in-principle of 462 others due to the distress in the sub-sector.

    By 2012, there were 116 FCs in the records of the CBN; 51 licences were revoked by the CBN in September, 2012 thus leaving a balance of 65 FCs with valid licences.

    “The idea is to have finance companies that are strong and virile to perform the functions they were set up to per form. The objective of shareholders in the operation of finance companies is to make profit, but for the CBN, it is to have stable and strong finance companies,” he said.

    Abdullahi said the CBN will continue to sanction finance companies that do not have the licences, but are in operation as such would ensure that the subsector is run efficiently to the benefit of the economy.

    He advised finance companies to maintain a database of their customers and generate quarterly risk management reports to be submitted to the CBN. “Finance companies shall be permitted to participate in accessing and disbursing funds to SMEs via relevant vehicles/ intervention funds set up by the CBN, the Federal/State Governments and other relevant bodies. The CBN shall continue to provide support towards capacity building in the Finance Company sub-sector,” he said.

  • MPC regrets cut in Cash Reserve Requirement

    MPC regrets cut in Cash Reserve Requirement

    The Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC), said it  the decision reduce banks’ cash reserve requirement (CRR)  from 31 per cent to 25 per cent.

    A report from FBN Quest, a research and investement arm of FBN Holdings, explained that the message from the latest personal statements of MPC members on the policy shift, has only benefited borrowers in sectors with low employment elasticity.

    It therefore instructed the CBN management to devise regulations and measures to ensure that subsequent cut in the CRR of five percentage points (to 20 per cent) reached employment generating sectors, such as agriculture, infrastructure, solid minerals and industries. The CRR is a portion of banks’ deposit kept with the CBN as reserves.

    However, the MPC team said the monetary policy in Nigeria was successful in delivering macro-economic stability until about the third quarter of 2014,  although its impact on job creation was negligible. It was then undermined by the latest global headwinds, principally the collapse in the oil prices in the international market.

    “One member noted that the prime lending rate stood at about 17 per cent and the retail rate for Small and Medium Enterprises (SMEs) at 27 per cent. Since he estimated the internal rate of return for large and small businesses at 20 per cent and 15 per cent respectively, it is evident why borrowers are struggling. He also cited data showing that private-sector credit extension had expanded by only 3.5 per cent year-to-dated by end-October and therefore far short of the target for the year of 26 per cent,” it said.

    The MPC said the consensus therefore argues for cuts in the monetary policy rate (MPR) and the CRR to reverse a trend decline in gross domestic product (GDP) growth.

    One member notes that more than 50 per cent of banks’ deposits mobilised were not available for intermediation/on-lending before the latest reduction in the CRR.

    The consensus of statements made the reduction in the CRR “conditional”. “The statements use different formulae to express a similar message. One refers to aggressive quantitative easing, a second calls for targeted lending and two more advocate the deployment of unconventional monetary policy tools. Another envisages a rebate mechanism whereby the commercial banks appear to benefit from the reduction in the CRR after they have disbursed to favoured sectors,” it said.

    Also, a dissenting voice quotes figures in the CBN’s banking stability report showing that gross lending increased by just N39 billion after the net injection of about N400 billion resulting from the cut in the CRR in September.

    Meanwhile, the next MPC meeting is in two weeks, at a time when there are mixed signals on the direction of monetary policy in Nigeria. The CBN is expected to announce a new forex policy which will give it the flexibility to bring the external and domestic economic variables into equilibrium. This may include the announcement of a new exchange rate band, with a floor of N185 and a ceiling of N220 during the first quarter.

     

  • Apex bank raises N136b in T-bills

    Apex bank raises N136b in T-bills

    The Central Bank of Nigeria (CBN) has sold N136.24 billion ($684.67 million) in Treasury Bills with maturities from three months to one year at its first auction of the year.

    T-bills are marketable money market securities used to raise money for the government and also help in monetary policy management of the Central Bank. T-bills are short-term. The auction, held on Wednesday, was at higher yields than previously, the central bank said on yesterday.The apex bank sold N55.4 billion of three-month paper at four per cent, up from 3.62 per cent at a sale on December 23. It also sold 25 billion naira of six-month debt at 6.99 percent against 6.19 percent, and 55.84 billion naira of one-year paper at 8.05 percent compared with 7.45 per cent. Total demand stood at N311.5 billion compared with N226.97 billion last time.

    The main investors in government securities are mainly pension funds and commercial banks which control more than 60 per cent of the market, followed by insurance funds and a few micro-finance institutions.

  • Bank CEOs, investors for Aba confab

    Chief Executive Officers (CEOs) of banks, foreign government emissaries, captains of industry, development partner organisations and an array of stakeholders are expected to attend the forthcoming Aba Development Summit.

    In a statement, Abia State government expressed its commitment to transforming the city of Aba to enable it realise its full potential. It said the development summit, holding in Aba, the state’s commercial nerve centre, will be taking place from January 13 to 15.

    A letter signed by the State Governor, Dr. Okezie Ikpeazu, explained that the summit is in line with one of the key cardinal development agendas of our administration which is to drive sustainable and all-inclusive development in Abia state. Aba, the commercial nerve of the state, when sustainably developed, will trigger development activities in other parts of the state.

    The summit, being organised in partnership with the Ford Foundation, seeks to convey key policy makers, social, economic and technical experts and investors and entrepreneurs to discuss the key priorities and levers for unlocking the full potentials of Aba.

    Ikpeazu said the summit is also expected to “showcase opportunities for the private sector and development community to partner Aba in particular and Abia more broadly to invest in the infrastructure, power, agriculture, manufacturing and services sectors.

    Aside the expected participating stakeholders, the entire Abia State Executive Council and members of the Abia State House of Assembly, will make up the projected 300 participants, who must be invited guests.

  • CBN cuts BDCs’ dollar sales to $10,000

    CBN cuts BDCs’ dollar sales to $10,000

    The Central Bank of Nigeria (CBN) will on Wednesday sell $10,000 to each of the 2,839 bureaux de change (BDC) operators it approved last week.

    President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, who made  this known yesterday, said the CBN took the decision  because demand for dollar is still low as business activities were yet to pick up after the holidays.

    He said the CBN has promised to continue the intervention to bridge the widening gap between the official and parallel market rates, saying the naira still exchanges for between N262 to N265 against the dollar at the parallel market, but exchanges for N199 at the official market.

    Also, the CBN has issued new guidelines for the operation of BDCs which pegged the minimum capital base and cautionary deposits for intending operators  at N70 million.

    The guideline, which is in line with the exercise of the powers conferred on it by the Central Bank of Nigeria Act of 2007 and the Banks and Other Financial Institutions Act 2004 (BOFIA), also stipulates a non-refundable application fee  of N100,000 and  non-refundable licensing fee  of N1 million.

    The circular, which took effect on January 1, orders retail money exchanges to deposit a mandatory cautionary deposit of N35 million in an account with the CBN, in addition to a minimum capital requirement of N35 million.

    The CBN has been struggling to shore up the naira, hit by the plunge in oil prices which started late last year.

    According to the guideline, an intending BDC operator is also to provide non-refundable annual licensing renewal fee of N 250,000 and a non-refundable change of name fee of N100,000.

    The new guideline stipulated that no person shall carry on the business of BDC in Nigeria, except with the prior authorization of the CBN. It also stipulated that a BDC shall be construed as any company that is licenced to carry on small scale foreign exchange business in Nigeria and whose sole object is the carrying on of such business on a stand-alone basis. It said the application for BDC licence shall be processed in two stages, namely: approval-in-principle (AIP) and final licence.

    For the AIP, a formal application to the CBN Governor to grant the promoters an AIP to carry on the business of a BDC in Nigeria is required. Also, a non-refundable application fee of N100,000 or such other amount as may be determined by the Bank from time to time in bank draft payable to the Central Bank of Nigeria.

    “There also should be an evidence of payment of the prescribed minimum capital of N35 million or any other amount as may be determined by the CBN from time to time, into the designated CBN account. The bank shall refund this amount with interest after the proposed institution has obtained its final licence,” it said.

    The guideline, also said that not later than six months after the grant of AIP has been secured, the promoters of a proposed BDC shall submit application for the grant of a final licence to the Governor, with evidence of payment of a non-refundable licencing fee of N1 million only, or any other amount as may be determined by the CBN from time to time among other conditions.

    “There should also be evidence of payment of N35 million mandatory caution deposit, or any other amount as may be determined by the CBN from time to time, into a designated CBN account and evidence of having suitable office accommodation for the operation of the proposed BDC,” it said.

    It stipulates that the qualifications and experiences of the Managing Director/CEO shall be first degree or its equivalent in any discipline with three years post-graduation while the minimum qualifications and experience shall be first degree or its equivalent in any discipline with two years post-graduation experience.

    “One of the Management staff appointed above should be designated as compliance officer for the purpose of ensuring compliance with all regulatory guidelines and circulars,” it said.

    It said any person/individual wishing to sell foreign currency above $10,000 or its equivalent to a BDC shall be required to disclose the source. “The maximum amount per transaction for a BDC shall be determined from time to time by the CBN with respect to business and personal travel allowances. The maximum amount currently for Personal Travel Allowance and Business Travel Allowance (BTA)  per quarter is $4,000 and $5,000,respectively.

  • ‘Unstable naira hurting real estate funding’

    The ongoing volatility facing the naira and related regulations, remain the biggest challenge facing real estate funding, Head of Real Estate Finance for West Africa at Stanbic IBTC, Adeniyi Adeleye, has said.

    For him, most property development projects are financed in dollars for the creation of sustainable and predictable funding environment for the assets.

    He suggested that dual currency funding structures can bring stability to real estate deals in sub-Saharan Africa, as developers and retailers seek solutions to the volatility currently faced in domestic economies.

    Dual currency structure refers to utilising a combination of hard and local currencies, while hedging the interest rate risk.

    “These facilities would provide a natural hedge and create a win-win between developers and retailers. For example, a local currency facility can be accessed to hedge leases that are unlikely to be sustainable or easily adjusted in shock currency devaluation scenario, for defined periods. This way the exchange rate risk can be more effectively shared between retailers and developers by keeping lease exchange conversion rates constant for periods of volatility,” he said.

    “This has exposed tenants to rental increases because their rents are indexed to dollars. The devaluation of currencies in countries like Nigeria and Ghana has been quite significant,” he said.

    “Over time, these cost increases will inevitably be passed on to consumers, which will in turn create additional affordability challenges. The level of interest from property developers has not waned in spite of the strained environment. In fact, most developers are positive about the long-term prospects of the economy and options available to them, largely because of the supply gaps in these markets. They are now challenged with trying to create robustness in their operating models to ensure they can continue to execute projects in the short-term,” Adeleye said.

    Continuing, he added: “It is now more about new solutions that are needed to improve the structuring of these deals, so developers can manage the challenges caused by policies aimed at shoring up dollars, the high local interest rates relative to dollar-based interest rates and weakening currencies,” he said.

    He explained that should the market stabilise, it would also be simple to refinance local currency exposure back into foreign currency and then original lease assumptions and plans can then be achieved, unless macroeconomic indicators show that local currency funding has now become appropriate for these deals. “The robustness of the structure is that it adjusts in periods of shock to provide stability,” Adeleye said.

    It provides sound financial structuring, inbuilt buffers and flexibility into project funding structures, to accommodate for unexpected changes in the economic environments.