The Nation Newspaper

Category: Money

  • Nigeria’s exports to ECOWAS hit $6b

    Nigeria’s exports to Economic Community of West African States (ECOWAS) member-countries have been increasing yearly, according to the International Monetary Fund (IMF) Article IV Consultation Staff Report.

    They increased from $1 billion in 1990 to about $6 billion in 2013, IMF said.

    The report said the implementation in January 2015 of the Common External Tariffs (CET) for ECOWAS member-countries is expected to reduce incentives for informal trade and simplify customs procedures, potentially increasing recorded trade volumes.

    “Moreover, the slowdown in Nigeria will adversely affect informal exports to Nigeria. Anecdotal evidence indicates that goods that are subject to import restrictions in Nigeria have become key export goods for neighboring countries. Those informal exports to Nigeria are important sources of income for some neighboring countries and outward spillovers may be nontrivial,” it said.

    It said growing cross-border activity of Nigerian-based banks has increased the scope for spillovers through financial channels, along with regulatory and supervisory challenges.

    It said the depreciation of the exchange rate would add to inflation, reflecting the pass-through of higher domestic prices for imports, but the effect is likely to be contained, in part due to lower food prices from increased local production of staple food crops.

    The IMF said the outlook was compromised by low fiscal and external buffers, which have reduced the capacity to absorb shocks relative to the experience of the 2008-09 financial crisis.

    The lender said the government expressed its determination to implement appropriate measures to manage risks.

    “They agreed that the oil price shock is significant and, at least in part, permanent, but saw a smaller effect on economic activity than staff, owing to measures targeted at sectors critical for growth (agriculture, power, small enterprises) and the impact of remittances. They noted that rising food self-sufficiency would limit the pass-through to inflation and activity in housing construction would continue,” it said.

     

  • CBN disburses 20% of MSME fund

    ABOUT 20 per cent of the N220 billion Micro, Small, and Medium Scale Enterprises (MSMEs) fund has been disbursed to beneficiaries, the Central Bank of Nigeria (CBN) has said.

    CBN Director, Banking Supervision, Mrs. Tokunbo Martins, said the supervisory bank was working on ways of ensuring that more funds get to the critical sectors of the economy.

    Head, Relationship Management, MSME Development Finance Department, Tobin Jonathan, said CBN was jolted by low access to the fund by operators.

    CBN, he said, is worried that since the fund was launched last August only insignificant portion has been disbursed to operators because of stringent conditions attached to accessing the funds.

    MSME-operators, Ibrahim said, were complaining that the criteria were too difficult to meet, hence CBN Governor Godwin Emefiele relaxed them to make the funds more accessible.

    He added that the CBN also addressed other complaints by participating financial institutions, including the spread of profit to cover their cost of operations.

    “So, they can collect the forms at two per cent and give it out at five per cent. So they have seven per cent spread which is good enough. That has encouraged so many of them to begin to apply,” Jonathan said.

    The Project Manager for Financial Infrastructure Project to the CBN, International Finance Corporation (IFC), Ubong Awah, said: “We are collaborating with the CBN to establish the National Collateral Registry which will be launched by June.”

    He said it is important as part of efforts to stimulate financing to the MSME sector in Nigeria, stressing that collateral registry would provide part of the infrastructure for pushing the initiative ahead.

     

  • Many sides of mobile money

    Many sides of mobile money

    Call it a marriage of convenience, you won’t be wrong. Telecoms technology and banking services are creating a wave in the financial services subsector via mobile money. This payment module has grown beyond its original concept and is expected to bridge the gaps between the banked and the unbanked, writes COLLINS NWEZE.

    The dream of getting financial services to all nooks and crannies of the country is now being pursued by both the Central Bank of Nigeria (CBN) and Nigeria Communications Commission (NCC) via mobile money.

    That vision, many analysts said, would be largely driven by mobile money, which refers to payment services operated under financial regulation and performed via a mobile device.

    With mobile money, instead of paying with cash, cheque, or credit cards, a consumer can use a mobile phone to pay for  various goods and services.

    In 2008, the global market for all types of mobile payments was projected to reach over $600 billion by 2013. In developing countries, including Nigeria, mobile payment solutions are deployed as a means of extending financial services to the unbanked or under-banked. This group constitutes about 50 per cent of the world’s population, according to Financial Access’ Report.

    Analysts insist that financial exclusion persists because of the inaccessibility of the unbanked, mostly people in the lower strata of the economy, by the financial services providers.

    The unbanked are often far removed from the centre of commerce, which tends to lower their participation in economic transactions.

    A combination of low demand for financial services and prohibitive costs without commensurate returns dissuades financial services providers such as banks, insurance, and pension administrators from establishing physical presence in these locations.

    However, mobile technology and innovations in the financial services industry, coupled with the phenomenal growth in telecoms’ subscriber numbers, have altered this situation.

    Financial services providers continue to leverage the reach of telecoms networks to provide mobile money services to otherwise inaccessible locations.

    The recent agreements on mobile money services between financial institutions and telecoms networks, MTN and Diamond Bank, UBA and Airtel, Stanbic IBTC Bank, First Bank, Ecobank and Globacom, will hopefully ramp up the synergy that should lead to further growth in mobile money.

     

    The M-Pesa example

    The poster boy of the successful integration of the rural/informal populace into formal banking system via mobile money services is usually Kenya. And rightly so. M-PESA, Kenya’s mobile money system, has been hugely popular and successful in that country. Today, M-PESA has over 40,000 agents and 17 million users (“equivalent to more than two-thirds of the country’s adult population, conducting more than two million transactions daily.

    In 2010, Kenya had just 840 bank branches and 1,510 ATMs to serve a population of 47 million people. M-PESA, with its 40,000 agents, helped to plug the supply hole and provide access to financial services to ordinary Kenyans.

    Micro finance institutions took advantage of M-PESA to penetrate remote areas very quickly without substantial increase in costs.

    In other countries, many financial institutions seemed to have found the right mix to ensure successful deployment of mobile money. Standard Bank (parent bank of Nigeria’s Stanbic IBTC Bank), for instance, has been successful with mobile money in Uganda, Tanzania, and South Africa.

     

    Bank-led model

    The bank-led mobile money model adopted by Nigeria may be slightly different from Kenya’s telecoms-driven model but the underlying peculiarities are broadly similar.

    Access, costs, lower economic activities, and partnerships are common threads. The lessons of M-PESA are not lost though as mobile operators like MTN Nigeria is beginning to play more significant roles in mobile money.

     

    CBN Vs Telco-led model

    The CBN said it avoided the implementation of the Telco-led model in the mobile money operation to have full control of monetary policy operations. The policy, it said will also enable it minimise risks and ensure that the offering of financial services are driven by organisations it licensed.

    In its new guidelines, the CBN said the Telco-led model, where the lead initiator is Mobile Network Operator (MNO), shall not be operational in the country. The apex bank said the overriding vision of achieving a nationally utilised and internationally recognised payments system necessitates strategies to bring informal payment transactions into the formal system.

    This framework has identified two models for the implementation of mobile money services namely; Bank Led – Financial Institution(s) and/or its Consortium as Lead Initiator and Non-Bank Led- A corporate organisation duly licensed by the CBN as Lead Initiator.

    “The CBN recognises the importance of MNOs in the operations of mobile money and appreciates the criticality of the infrastructure they provide,” it said.

    The CBN said a robust payments system is vital for effective monetary policy implementation and the promotion of economic efficiency. “The introduction of mobile telephony in Nigeria, its rapid growth and adoption and the identification of person to person payments as a practical strategy for financial inclusion, has made it imperative to adopt the mobile channel as a means of driving financial inclusion of the unbanked,” it said.

    CEO, MTN Nigeria, Michael Ikpoki, said the network will focus on meeting the significant market demand for financial services and mobile content with an expected positive impact on data revenue.

    “The success of Diamond Y’ello Account and other basic mobile money services is expected to lead to the adoption of more sophisticated mobile payment solutions such as bulk mobile payment designed for corporate organisations. This service makes it easier for organisations to send money in bulk to their suppliers, employees or other business partners without the beneficiaries necessarily having to own a bank account,” he said.

    Mobile money providers are also expected not be shy to adapt and replicate what works in other places but continue to innovate and develop products and services to excite consumers and boost conversion rate.

     

    Benefits to consumers

    Some of the benefits to the consumer include security, convenience, accessibility, speed and ease of transaction, competitive charges, access to quality advisory services, and integrity of transactions; the customer literally carries his bank in his pocket or bag wherever he goes.

    Other benefits which are nonetheless important are better cash flow management, enhanced financial planning, and inculcation of sustainable savings habit, which boost financial security and comfort in retirement.

    “Mobile payments, which I perform on my phone, help to reduce my travelling costs,” a farmer in rural Nigeria who uses mobile payment services said.

    Mobile money also has the potential to galvanise economic activities, leading to higher socio-economic development, lower cost of transactions and reduction of cash handling costs, among other benefits.

     

    Role of regulators

    CBN Director, Payment Systems Unit, ‘Dipo Fatokun, said the apex bank believes that mobile money and agent framework is the frontier of cashless boom.

    “Mobile money is the next thing expected to transform CBN’s cash-less policy. The apex bank believes that such initiative will aid both telecommunications and banking industries to further serve Nigerians better,” he said.

    Nigeria’s telecoms subscriber base, put at 131 million as of September, last year by the NCC, should play a major role in bringing the unbanked into the formal banking system.

    With over 50 per cent of Nigeria’s adult population unbanked, mobile banking could be the catalyst that will help quicken the adoption of banking services by this critical segment of the population.

    Offshore portfolio managers appear to be similarly persuaded and they are already positioning to take advantage of the expected growth in mobile money.

    For instance, Carlyle Group, a US-based global alternative asset manager with $203 billion of assets under management across 129 funds and 141 fund of funds vehicles, recently acquired a $147 million (about N27 billion) minority stake in Diamond Bank, partly on the strength that the bank’s new mobile banking service “will help rapidly boost the lender’s customers and profits.”

    Also strengthening mobile money is the Nigerian Deposit Insurance Commission (NDIC’s) extension of deposit insurance cover of up to N500,000 to mobile money account holders.

     

  • CBN, NDIC adopt fresh banking supervision model

    CBN, NDIC adopt fresh banking supervision model

    The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have adopted a new banking supervision model.

    Banking supervision will, henceforth, be risk-based, according to NDIC Managing Director Alhaji Umaru Ibrahim.

    In a report obtained from the corporation’s website, Ibrahim said risk-based supervision would enable CBN and NDIC to evaluate banks’ areas of risks, focusing on critical areas while evaluating the risk management models deployed to achieve business plans.

    He said the corporation has developed frameworks for Early Warning Signals (EWS), identified and measured Systemically Important Banks (SIBs), whose failure could trigger crisis in the economy.

    NDIC, he noted, has been complementing CBN in many areas, particularly in banking supervision and distress resolution in the last 26 years. Ibrahim said the banking supervision and failure resolution functions, which have been part of NDIC’s core functions, cannot be in doubt many years after.

    The corporation, he said, is seeking amendment of its law to enhance its operational performance and ensuring that it has powers to pay depositors after a reasonable time between 30 and 90 days after the bank closes its premises, following revocation of its licence or because of the court case.

    “A situation where depositors have their money trapped in failed banks without access to such funds should not be encouraged. That is the global best practice which must be allowed in Nigeria. That is the power being sought by NDIC,” he said.

    The NDIC boss said cases of failed institutions without succour for depositors abound in commercial banks, microfinance banks and primary mortgage institutions. He said the amendment will enable the corporation to discharge its core mandate in line with best practices.

    The corporation, he added, continues to seek consultation, collaboration, partnership and cooperation with the CBN as well as other members of financial stability groups.

    He said the core mandate of the NDIC as explicit deposit insurance  firm are deposit guarantee, banking supervision, failure resolution and bank liquidation.

    “The NDIC serves as a lifeline to Depositors through the Deposit Guarantee scheme. The NDIC deposit guarantee payment to depositors up to the maximum insured limit in accordance with its statutory mandate in the event of failure of an insured financial institution. This distinct role allows the NDIC to continue to discharge its mandate and bolster the confidence of depositors in the banking system,” he said.

    From its initial guarantee of N50,000 per depositor of Deposit Money Banks (DMBs) at inception, the maximum deposit insurance coverage was increased to N200,000 in 2006 and N500,000 in 2010.

    “As for the MFBs and PMBs from N100,000 in 2006, the coverage level was increased to N200,000 in 2010. At the moment, the Corporation provides deposit insurance cover to the all eligible CBN licensed 24 deposit money banks (DMBs), 880 microfinance banks (MFBs), 77 primary mortgage banks (PMBs) and one non-interest bank (NIB) operating in the country,” he said.

    Ibrahim said the NDIC, as the third pillar of the financial safety-net, collaborates with the CBN to conduct risk based banking supervision in line with global best practice.

    “It also protect depositors and assist to promote an effective and efficient payment system by encouraging healthy competition and innovation among the insured deposit taking financial institutions through off-site and on-site supervision,” he said.

     

  • Govt urged to implement Vision 2020 SMEs’ report

    Govt urged to implement Vision 2020 SMEs’ report

    The Federal Government has been urged to ensure seamless implementation of the Vision 20: 2020 National Technical Working Group report on Small and Medium Enterprises (SMEs).

    Heritage Bank Managing Director, Mr. Ifie Sekibo said this would lead to an efficient strategy for curtailing unemployment.

    He urged SMEs owners to join hands in sustaining an active SMEs revitalisation drive through the establishment of a framework supported by articulated government policy.

    “The high rate of unemployment in the country requires all stakeholders to work together in ensuring the quick revitalisation of the SME sector as the primary source of creating jobs and fostering entrepreneurship among the youths. The Vision 2020 National Technical Working Group on SMEs has developed a blueprint for boosting SMEs and the government needs to do all within its power to bring up the fine ideas in the blueprint for implementation,” he said.

    Sekibo noted that though SMEs are a vital national economic growth engine contributing to vital economic indicators, such as Employment Generation and Gross Domestic Product (GDP) with about 70 per cent of the rural population being active in formal and informal SME sectors, a study of the sector has shown that growth possibilities are hampered as significantly low number of start ups who apply for medium-longer term financing actually succeed.

    He attributed the main challenge facing SMEs’ promoters to limited access to appropriate capacity building opportunities and education which, in turn, lead to other growth-limiting impediments such as inadequate financial record keeping, poor managerial skills, lack of access to international markets, inability to provide collateral and poor access to infrastructure.

    He advised SMEs’ owners to focus more on restructuring and innovation to access the unfolding opportunities for growth and development of the economy.

    According to him, “The Micro, Small and Medium Enterprises (MSME) Development Fund which provides an exit window for the MSME schemes and programmes currently implemented by the Central Bank is one of the new opportunities for SMEs in the country to access wholesale funding requirements. It offers a relatively more sustainable approach to the provision of credit and guaranteed advisory services to the specialised needs of the MSME sector”.

     

  • Western Union signs payment pact with Skype

    Western Union signs payment pact with Skype

    Western Union, a global money transfer company, has announced an agreement that allows for Skype customers to replenish their accounts at more than 50,000 Western Union Agent locations throughout the United States.

    A report by payments.com said Skype Credit, the payment service that enables calls to mobile and landlines worldwide — as well as text messages to mobile — on the Microsoft-owned video, voice chat and messaging service, is now able to be topped up through the Western Union Quick Collect service.

    The service facilitates consumer-to-business payments. While Skype-to-Skype calls are free, Skype Credit is required to call landline or mobile numbers.

    Western Union President for the Americas and European Union, Odilon Almeida, said, “The relationship is a logical one, as both Western Union and Skype have a mission to connect people when they are apart. Western Union is optimising its money transfer system to link cash and digital for money movement and payments across the globe. We are driving our innovation on the back of what our customers want. Skype is a classic example; where customers can enjoy full digital access with a walk-in payment option.”

    Director of Business Development at Microsoft, Enrico Noseda, said: “Through Skype, Western Union customers can stay in touch with loved ones to let them know about money transfers and share everyday experiences,” said.

    Western Union’s Skype partnership comes just a few weeks after it announced a new partnership with Hyperwallet, and a few months after Western Union announced it would accept Apple Pay at several flagship locations.

  • Interbank rates rise on N72b cash withdrawal

    Interbank rates rise on N72b cash withdrawal

    Plans by the Central Bank of Nigeria (CBN) to withdraw about N72 billion from commercial lenders to enforce its cash reserves requirements (CRR) have induced an upsurge in inter bank rate.

    The measure is in line with the apex bank’s policy to maintain its current Cash Reserve Ratio (CRR). The CBN requires commercial lenders to set aside 75 per cent of public sector and 15 per cent of private sector deposits in cash in their respective accounts with the regulator. The CRR is a portion of banks’ deposit kept with the CBN as regulatory requirement.

    This has led to overnight lending rates rising sharply on Friday to 27 per cent from 10.25 per cent following a scramble for funds as lenders sought to meet a CBN’s CRR requirement, making demand for funds very high in anticipation of the CRR debit this week.

    A dealer said he expects the market to be tight next week, while rates should hover around 25 per cent until central bank repays some matured Treasury bills.

    Also, the apex bank at the weekend, raised N183.64 billion in Treasury bills with yields falling compared with the previous sale last month.

    The lender said Treasury bill yields fell in tandem with declining yields on fixed assets on renewed investor interest in the local debt market after a peaceful presidential election in Africa’s biggest economy and most populous country.

    It raised N20.15 billion in the three-month debt at 10.5 per cent at the auction held on Wednesday compared with 10.69 per cent at the March 25 auction.

    The bank also sold a total of N33.49 billion worth of the six-month paper at 14.1 percent, lower than 14.55 percent at the previous auction.

    The bank raised N130 billion of the one-year note at 14.15 per cent, down from 14.85 per cent at the last auction. Investors – mostly domestic banks and pension funds – submitted bids worth a total of N433.13 billion against N297.06 billion at last month’s auction.

  • Union Bank deploys ‘Oracle Flexcube’ to boost operations

    Union Bank deploys ‘Oracle Flexcube’ to boost operations

    Union Bank of Nigeria Plc (UBN) has deployed the Oracle Flexcube Universal Banking Solution 12.0, a new core banking application introduced to modernise its infrastructure, improve operating efficiency and customer service delivery.

    The latest version of Oracle Flexcube was deployed by the lender as the single operating platform for its countrywide network.

    The bank’s Group Managing Director/CEO, Mr. Emeka Emuwa said the new platform is in line with the bank’s goal of becoming a highly respected provider of quality banking services within six areas of focus. He said the lender is focusing on quality of customers experience, quality of client base, quality of talent, quality of banking platform, quality of professional standards and quality of the banks’ earnings.

    Chief Information Officer (CIO) of the bank, Yomi Akinade said with the new platform, the lender would be enhancing and standardising its operations across the country by leveraging on the capabilities of the new technology. “We will have a common operating platform in our extensive network of over 320 branches across Nigeria,”   he said.

    Akinade said the software, already deployed, puts lender at the top with this state of the art technology.

    He said since the bank embarked on restructuring in 2010; his team has implemented well over 70 technology projects. “There are three key areas on the over 70 technology projects, which include: improving customers’ services, securing customers and the bank’s data as well improving our productivity as an institution,” he affirmed.

    He disclosed that during the time of the upgrade, customers and the general public may experience some challenges, but measures have been put in place to ensure continuous seamless service delivery in case of disruptions during implementation.

    “As you well know, when you go live with a major massive complex project like this, there would be teething issues. So, there are challenges and customers should understand this; but is for their own long term benefit; because we would have a much more superior service offering when the system runs fully,” he added.

    He affirmed that the bank is trying to bring all of its third party applications up in the earliest possible time, when over 90 per cent of those applications would be working.

    He listed some of the challenges being experienced with the current system as the maintenance of multiple servers in branches, constant need for system enhancement when a new field is required on the system.

    According to Akinade, others are income leakage since some charges and new products could not be automated or configured, customer mandate maintained on third party applications instead of the core banking application, complexity in report generation, audit trail on maintenances and issue of account replication from the retail to the corporate modules are some of the challenges with the old version.

  • CBN bans dud cheque issuers from clearing, loan access

    CBN bans dud cheque issuers from clearing, loan access

    The Central Bank of Nigeria (CBN) yesterday mandated commercial banks to ban any of their customers that issues dud cheques from use of the clearing system for a period of five years.

    CBN Director, Banking Supervision,  Mrs. Tokunbo Martins who disclosed this in a circular, said the banks are to also ban the serial issuers of dud cheques from accessing credit facilities from the banking system for a period of five years.

    She noted with great concern the impunity with which some customers of banks issue dud cheques on their accounts despite the provisions of the Dishonoured (Dud) Cheques Act of 1977 and its recent directives to banks’ customers to desist from such practice.

    She said the names of the offenders should be forwarded to the three Private Credit Bureaux and the Credit Risk Management System (CRMS) adding that no institution shall, except with the prior written approval of the CBN, remove such a person’s name from the three Credit Bureaux and the CRMS.

    Martins said the customers’ names would be listed on the database of the private credit bureaux and CRMS for a period of five years from the date of submission, after which offenders will be eligible for removal.

    However, if the offender is found wanting after the name is removed, such an offender shall be permanently reinstated in the data base of both the three Credit Bureaux and the CRMS.

    The CBN director said that where an Institution fails to report a serial dud cheque issuer in its return to the CBN CRMS and Private Credit Bureaux as required, it shall be considered as concealment and misrepresentation of material fact and the affected institution shall be penalized in accordance with the relevant provisions of the Banks and Other Financial Institutions Act, LFN 2004 CAP B3 (BOFIA).

    Martins said that to sustain the positive achievements already recorded in the Nigerian Payment System, it is essential that confidence and integrity in negotiable instruments, especially cheques, should be restored and enhanced.

    “Consequently, it has therefore become imperative for the CBN to implement further measures to dissuade the issuance of dud cheques to the barest minimum. The CBN has put in place additional regulatory measures against dud cheque issuers. Upon CBN’s compilation and dissemination of information on serial issuers of dud cheques based on bank’ returns, banks would be required to Recall/cancel all unused cheque books issued to serial issuers of dud cheques,” she said.

  • Ecobank M.D. Aku offers investment tips

    Ecobank M.D. Aku offers investment tips

    The Managing Director, Ecobank Nigeria, Mr. Jibril Aku, has said one of the best ways to grow money is making investments. Aku gave this advice recently while lecturing students of Government Secondary School, Lugbe, Abuja on the topic “Growing Your Money” as part of Global Money Week.

    He described investment as something that is purchased with money and expected to produce income or profit, stating that, investing money reduces risk of theft, spending and gives chance for the money to grow.”Generally, investments are broadly divided into ownership (equities) and lending (debt). The higher the risk involved, the higher the return and interest rate; the longer the period of investment, the higher the interest rate,” he said.

    The Ecobank boss also took the students through investing in real estate, precious objects, bonds, mutual funds, adding that “just like you eat good food and take vitamins to protect your body from sickness and allow you grow, you need to protect your money and investments in a similar way by getting insurance.”He explained that “Stocks are securities that allow you become a part-owner of the company whose stocks you purchase. Examples of stocks are shares. When you buy the shares of a company, you are given a share certificate and entitled to dividends only if the company makes a profit. Shares also allow you to attend the company’s general meetings and sell your shares for capital gains in the stock market when the price of your shares increases.”

    He also counselled the students on the need to save money in the bank, noting that “to register with a financial institution, you opened an account and are provided with an account number. The commercial banks generally offer ordinary savings account; current account; time savings deposit account and foreign exchange deposits.

    “The Global Money Week is a global money awareness celebration that takes place between March 10 and 17 every year to engage children globally in learning the concept of savings and investment. The day is being marked to focus attention on children and youth in primary and secondary schools nationwide and to empower them by enhancing their financial knowledge and planning skills. During the period, financial institution chief executive will visit; teach selected students from the schools a module of a Financial Literacy curriculum specially designed by Junior Achievement Nigeria – a non-governmental organisation focused on educating children about their economic environment.