The Nation Newspaper

Category: Money

  • NDIC’s premium reduction begins

    The Nigeria Deposit Insurance Corporation (NDIC) plan to reduce premium banks’pay to it from 0.4 per cent to 0.35 per cent is expected to begin this year.

    NDIC’s Chief Executive Officer, Umaru Ibrahim, who made this known in a statement, explained that the premium reduction was meant to reduce premium burden on banks and ensure that the deposit insurance is fairly priced.

    He said the corporation had in 2010 reviewed the premium templates from 0.5 to 0.4; it ended in 2014.

    That premium review, he added, led to a reduction of N53 billion in premium revenue.

    He said banks are fairly stable as some of them are playing the role of financial intermediation outside the country.

    “There are improvements in terms of governance and banks are safe in terms of deposit savings and non-performing loans,” he said.

    Ibrahim added: “There is continuous concern that banks should lend more to the real sector particularly in the area of lending to agriculture. The banks are doing a lot in lending to oil and gas. There is the concern of banks’ inability to mobilise long term funds outside the banking system but the NDIC will ensure that banks mobilise long term finances in realisation of the short coming.”

    The corporation said it had paid N6.825 billion to 528,277 insured depositors of the 48 Deposit Money Banks (DMBs) in-liquidation as at August 31, 2014 and N2.756 billion to 80,059 verified depositors of the 186 closed Microfinance Banks (MFBs,) within same period.

    The NDIC boss said there had been a reduction in the examination cycles of banks over the years facilitated by proactive measures taken by the corporation to address detected aberrations in the system with minimal disruption to the payment system as well as minimal material and resource losses.

    One of such proactive measures he said is the development of software called Financial Institution Liquidation Management Software (FILMS) to enhance the NDIC’s liquidation process.

    The software, he said, was being enhanced to make it web enabled.

    The most profound success of the corporation in this area, he said, “included the introduction of risk-based supervision framework in the supervisory process, development of framework for Early Warning Signals to detect problem banks, development of framework for the identification and measurement of Systemically Important Banks (SIBs) and the institution of a framework for the provision of financial and technical assistance to deserving insured institutions to alleviate the constraints of funding faced by MFBs and PMBs, amongst others.”

    The corporation, he said, partners  the CBN in the development of framework for consolidated supervision and other frameworks, guidelines and code that help in strengthening supervisory process in the financial system.

     

  • Bonds rise on oil, euro zone worries

    Bonds rise on oil, euro zone worries

    Stock prices fell on global markets yesterday, stuck in a dismal start to the new year on tumbling oil prices and Greece possibly leaving the euro zone, as nervous investors bought more gold, yen, low-risk government bonds and other safe-haven assets.

    The oil market rout that began in mid-last year has continued. This intensified concerns about how the dramatic price drop, due to sluggish global growth and a supply glut, will hurt earnings of oil companies and exacerbate disinflationary pressure worldwide.

    Head, Currency Strategy at CIBC World Markets, London, Jeremy Stretch, said: “Global risk sentiment has been hurt by sliding stocks and oil prices. That is leading to a perception that there is a lack of demand, and that has implications for global growth.”

    Greece’s anti-bailout party Syriza held a slim lead in polls before the January 25th national election, which rekindled speculation whether the euro zone might let the country leave the economic bloc rather than renegotiate Greece’s international bailout.

    Data yesterday showed euro zone manufacturers registered almost no growth in the fourth quarter, putting pressure on the European Central Bank to take bold steps to avert the region from slipping into recession.

    U.S. and European equity markets enjoyed a brief respite, but investors resumed Monday’s exit of stocks following disappointing data on the U.S. services sector and factory orders.

  • Mobile money: The new face of banking

    Mobile money: The new face of banking

    Gone are the days when depositors must visit the bank for all transactions. With mobile money, banking has become easier. This payment module, which has grown beyond its original concept, has a lot of prospect, writes COLLINS NWEZE.

    As 45-year-old lawyer Michael Obi waited out-side the courtroom for his colleagues, his smartphone beeped with a familiar SMS message alert. It was another reminder for him to pay his public power supply bills.

    In three minutes, he opened his mobile money platform on his phone and the payment was done. A few years ago, he could only have imagined been able to make such payment with such ease without going to the bank.

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

    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 a wide range of goods and services.

    In 2008, the global market for all types of mobile payments was projected to reach more than $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 constitute about 50 per cent of the world’s population, according to Financial Access’ Report.

     

    Why financial exclusion persists

    A key reason for financial exclusion is typically 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.

    Thus, 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 spate of 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 doubtless ramp up the synergy that should lead to further growth in mobile money.

    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 piggybacked on M-PESA to penetrate remote areas very quickly without substantial increase in costs.

    In other countries, some 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.

    One of the mobile money pacesetters is the Diamond Y’ello Account, a mobile money product developed by Diamond Bank in partnership with MTN. For instance, since the introduction of the product four months ago, the bank has grown its mobile banking customer base by more than 600,000. The bank projects that it would have five million mobile banking customers, double the current size, a year from now.

    Among the partnerships positioning to offer mobile banking services in Nigeria, the Diamond Bank/MTN deal perhaps has the greatest advantage due to MTN’s experience in the sector in countries, such as South Africa, Ghana, and Kenya.

    Even better is the telecoms giant’s Nigerian footprint. MTN’s reach covers 223 cities and towns, more than 10,000 villages and communities and across many highways in the 36 states and the Federal Capital Territory. Its fibre optic transmission backbone traverses over 10,000 kilometres.

    Chief Executive Officer (CEO), MTN Nigeria, Michael Ikpoki, said the network would 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 bespoke 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 not-so-obvious 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

    Nigeria’s telecoms subscriber base, put at 131 million as of last September 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.

    CBN Director, Payment Systems Unit, ‘Dipo Fatokun, said 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.

    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 United States-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’s (NDIC’s) extension of deposit insurance cover of up to N500, 000 to mobile money account holders.

    That, analysts said, implies that with NDIC’s Pass-Through Insurance, a mobile money account holder is indemnified to the tune of N500, 000 if a mobile money service provider becomes insolvent.

    They insist that many such consumer-centric regulations are needed to excite stakeholders and engender further uptake.

     

  • Bank gets crime control panel

    Standard Chartered PLC (the Group) has formed a Board Financial Crime Risk Committee (BFCRC) to oversee its financial crime compliance programme.

    The committee is aimed at combating financial crime and improving conduct.

    In a report, the bank said the committee is responsible for oversight of the Group’s policies, procedures, systems, controls and assurance for anti-money laundering, sanctions compliance, and prevention of bribery, corruption and tax crime.

    It will also have oversight of the Group’s financial crime compliance programme, including the financial crime risk mitigation programme and its commitments under the 2012 and 2014 Orders.

    The BFCRC took off on January 1.

    The BFCRC, it said, builds and replaces the Board Regulatory Oversight Committee (BROC), which has been in place since the beginning of 2013.

    Chairman, Standard Chartered Plc, Sir John Peace, said: “Over the past two years we have dedicated an enormous amount of resources, investment, training and management attention to our financial crime compliance programmes. The formation of this committee, together with the substantial build out of our financial crime compliance function, demonstrates our commitment to strong conduct and compliance at all levels of the organisation.”

    Last year, Standard Chartered made some significant enhancements. The lender said it is committed to investing in compliance, conduct and remediation improvements.

    The investments include systems upgrades, policy development, process improvements, capability building in sanctions compliance and anti-money laundering controls, and combating bribery and corruption.

  • Naira opens year with two per cent slide

    Naira opens year with two per cent slide

    The naira opened 1.9 per cent down on its 2014 close at 185 to the dollar, Thomson Reuters data showed. The naira has been sliding in recent months following continued fall in Brent crude oil prices and also decline in foreign exchange (forex) reserves.

    In the last one year, currencies of other oil exporters also suffered, with the Norwegian krone slumping 19 per cent and the dollar of Canada slipping 8.6 per cent.

    The naira has been devalued by over 35 per cent in the last 13 years.  The Central Bank of Nigeria (CBN) in 2001 cut its value by 27 per cent, followed by the eight per cent slash in the last monetary policy committee (MPC) meeting.

    To stop the naira from further slide, the MPC had at the November 25 meeting, moved the midpoint of the official window of the forex market from N155/dollar to N168/dollar. It also widened the band around the midpoint by 200 basis points from plus or minus three per cent to plus or minus five per cent.

    The Committee also increased the Monetary Policy Rate (MPR), the base lending rate, by 100 basis points from 12 to 13 per cent while the Cash Reserve Ratio (CRR) on private sector deposits also rose by 500 basis points from 15 per cent to 20 per cent. It also retained public sector CRR at its current level of 75 per cent. The CRR is a portion of banks’ deposits kept with the CBN.

    In a country stricken by 8.1 per cent inflation, one of the world’s worst; and declining forex reserves, now at $35 billion from about $42 billion a year ago, the last devaluation was the last straw that broke the camel’s back.

    Many analysts see the naira’s fair value at N200 to a dollar. That confirmed the widely held view that it had indeed fallen from its Olympian heights both at the interbank market (official rates) and at the black market.

    Less than 24 hours after CBN Governor, Godwin Emefiele announced the devaluation, the price of household goods, including bread, wheat, fish and rice, among others, shot up by 40 per cent or more. The services industry was also affected.

    Emefiele said the CBN under his leadership remains committed to safeguarding the value of the naira. For instance, the lender had last month, banned the sale of forex by banks to importers without requisite shipping documents.

    It also directed that only imports, which are backed with evidence of shipment and other relevant documents, will qualify for purchase of forex. Only such transactions will be eligible for forex purchase via the RDAS or the interbank window, it said.

    The apex bank also said henceforth, all importations involving electronics, finished products, information technology, generators, telecommunication equipment and invisible transactions would be funded from the interbank foreign exchange market only.

    The policy, the CBN said, was to maintain the existing stability in foreign exchange market and strengthen the various policy measures, already initiated, including the regulation of the Bureau De Change (BDCs) that cut dollar supply to operators from $50,000 to $15,000 weekly. These measures, Emefiele admitted, would help conserve the foreign exchange and support the naira.

    The former Executive Director, Keystone Bank Plc, Richard Obire, said the common man does not understand devaluation, but knows when his purchasing power has reduced. He explained that when a currency is devalued, consumers’ ability to demand and buy products would be drastically reduced. “It also means that people’s ability to spend on discretionary products will decline, as they focus on essential goods like food and shelter,” he said.

    Obire said such a policy usually leads to salary delays in private and public sectors, as cash crunch set in, adding that the common man would be adversely affected. “Vital liquidity in pocket of people is crucial. The common man is already feeling pangs of hunger and with the devaluation, a bad situation can only get worse,” he said.

    He said middle class earnings will also be affected. “The middle class send their children abroad for schooling. They are also the ones that feed the common man. They will now spend more money sending their children to school, and may have little left for the common man. The common man has very little flexibility for maneuvering at this time. He is at the receiving end,” he said.

  • Visa Europe to cost over $10b

    Visa Europe to cost over $10b

    Visa Inc., a global payments network provider, said it may have to pay more than $10 billion to buy Visa Europe Ltd. if the banks that own it decide to exercise their option to sell.

    Visa may seek third-party financing or sell debt to help pay for the purchase, the Foster City, California-based firm said today in its annual regulatory filing. The company said last year that London-based Visa Europe’s perpetual put option could cost several billion dollars or more.

    “This is a significant increase” from the 2013 estimate, Jason Kupferberg, a Jefferies Group LLC analyst, said today in a note to clients.

    Visa Inc., which has $7 billion of unrestricted cash and an untapped $3 billion line of credit, could be exposed to European Union regulations and future litigation involving Visa Europe if the option is exercised, Kupferberg wrote. For the purposes of valuing the option, Visa assumes a 40 percent probability that it will be exercised “at some point in the future,” the company said in the filing.

    The European firm split from Visa Inc. prior to the United States company’s 2008 initial public offering. While purchasing Visa Europe could introduce new risks, it would add about $1.2 billion to the United States firm’s annual revenue, Tien-tsin Huang, a JPMorgan Chase & Co. analyst, estimated last year.

  • ‘Private health firms need $3b financing’

    ‘Private health firms need $3b financing’

    The International Finance Corporation (IFC) has estimated that the bankable need for private health institutions within the country is currently worth $3 billion. The global lender also said in a statement that with an available leveraged funding potential of about $1 billion that could be tapped for investment into health.

    This is according to a new Study by the IFC, the private sector arm of the World Bank Group, which is partnering with the Federal Ministry of Health and James Daniel Consulting to organize the Nigerian Healthcare Infrastructure Investment Summit holding this month in the country.

    “This summit targets the private sector in healthcare and aims to showcase the best practices of what works within the private health sector in Nigeria and other countries. The IFC will also be launching her maiden edition of the study, Nigeria Health Market Studies, which details investment opportunities within the Nigerian health sector and how to create value for Nigerian patients through private sector investment.

    “The private sector in Nigeria has a bigger chance of excelling more than other countries both in terms of intellectual capacity and in terms of potential resources that are not harnessed yet.” said Khama Rogo World Bank Group.

  • Sterling Bank’s customers pledge continued loyalty

    Sterling Bank’s customers pledge continued loyalty

    Customers of Sterling Bank Plc have assured the lender of their continued patronage  in 2015 based on satisfied and rich-customer experience in 2014.

    Some of the customers who spoke in Lagos and other parts of the country, hinged their position on the provision of quality banking and financial advisory roles they got from the lender in 2014.

    They praised the reward system instituted through activities such as the Automated Teller Machines activations, Retail Mobile Clinic, and Children Shopping Dash programme, its contributions to financial literacy programme of the Central Bank of Nigeria as well as its Corporate Social Responsibility initiatives especially in the area of health and the environment. All these will continue to serve as the right motivation to sustain our relationship with the bank this year.

    Chief Executive of Ofelpaco Nigeria Limited, Dr. Felix Obiagbo, described the bank as a reliable financial institution committed to the growth of the businesses of its customers in particular and the economy in general.

    “We are into fast food business. We have UAC Franchise and we run four outlets in Port Harcourt. With the support of Sterling Bank, the company has continued to grow. For instance, we started with just one outlet 10  years ago and we now have four as we speak. Sterling Bank has remained our pillar of support in this business through the provision of credit facilities, which helped to grow our business. Its business combination with other financial institutions has strengthened its capacity to meet the demands of its customers,” he said.

    The General Manager of Zerock Group, Jean Matter,  and Mr. Sunday Oduyale,  the Chairman and Chief Executive of Esbee Limited, said that their business relationship with Sterling Bank had been a major catalyst to the continued growth of their organisations.

    Matter said his firm has continued to enjoy excellent relationship with Sterling Bank since it began operations in the country. “The bank is very responsive in terms financial support while we have also ensured that we play according to the rules of the business to enable us continue to enjoy the support of the bank”, he said.

    The bank’s Group Head, Strategy & Communications Mr. Shina Atilola assured that the year 2015 will see the bank consolidating on the gains of 2014 to the advantage of its customers who have continued to enjoy unparalleled and qualitative banking experience from the bank over the years. Other stakeholders including the shareholders will not be left out, he assured.

  • Skye Bank strengthens support roles

    Skye Bank strengthens support roles

    Skye  Bank  has engaged the  services  of  Optimum Continental Services, Strategic Outsourcing Limited  and  Integrated Corporate Services Limited,  to manage its support function staff.

    The lender took the decision as part of its initiatives to position the bank for excellent service and superior performance in the coming years.

    It noted that efficiency and excellent customer service will be key to winning in the market place in the years ahead, acknowledging that  the  support  functions  are  pivotal  to  the  ability  of  the  bank  to  meet  its  growth objectives and be managed by professional human resource companies that have extensive skills and competence in this regard.

    To assure the welfare of the staff that are mostly on the lower cadre, the bank insisted that a non – negotiable condition for taking over the support staff by the human resource companies is that the staff will enjoy the same terms and conditions as they did, when they were employed by their former employer, Skye Bank Resources Ltd.

    The bank said under the new arrangement,  the  affected  officers   consisting  of  drivers,  security  officers, tellers and other support staff, have been absorbed automatically by the new employers on the same terms and conditions they enjoyed prior  to now.

    It  is expected that the management  companies  who  are  industry  leaders  and  experts  in  human  resource management, would enrich the quality of the officers by relevant training, skills transfer and enhanced welfare packages.

  • Currency in circulation drops to N1.53tr

    Currency in circulation drops to N1.53tr

    The currency-in-circulation declined by 0.9 per cent, on month-on-month basis, to  N1.53 trillion in October, the Central Bank of Nigeria (CBN), has said.

    The apex bank which disclosed this report, said the figure, which is for October last year, contrasts the growth of 3.1 per cent recorded at the end of the preceding month.

    The development, relative to the preceding month reflected, largely, the 4.6 per cent fall, in its currency outside bank component.

    The CBN said total deposits at the end of the review month amounted to N6.9 trillion, indicating an increase of 4.2 per cent above the level at the end of the preceding month.

    It reflected largely, the 13.9 and 6.3 per cent rise in deposits of “Others” and banks, respectively. Of the total deposits, the percentage shares of the banks, Federal Government and “others” were 50.9, 44.2 and 4.9 per cent, respectively. Reserve money (RM) rose by four per cent to N5.07 trillion, reflecting the trends in bank deposits.

    Also, available data indicated that the money market rates were relatively stable during the review period.

    “The banking system was awash with liquidity surfeit, occasioned by maturing CBN bills, Cash Reserve Requirement (CRR) credit posting for the maintenance period, Joint Venture Cash (JVC) call and fiscal injections through statutory revenue released to the three tiers of government.

    “CBN bills of diverse tenors were floated at the Open Market Operations (OMO) segment to mop up the liquidity surfeit in the system. In the review month, Standing Deposit Facility (SDF) was more predominant as there was liquidity surfeit in the banking system. There was no request for repurchase transactions, same as in the previous month,” the report said.

    Provisional data indicated that the total value of money market assets outstanding in stood at N7.53 trillion, showing an increase of 2.2 per cent over the level in the preceding month. The development reflected the 1.8 and 2.7 per cent increase in outstanding Federal Government of Nigeria (FGN) bonds and Nigerian Treasury bills, respectively.

    Total deposits at the CBN at the end of the review month amounted to N6.9 trillion, indicating an increase of 4.2 per cent above the level at the end of the preceding month.

    The development reflected, largely, the 13.9 and 6.3 per cent rise in deposits of “Others” and banks, respectively. Of the total deposits, the percentage shares of the banks, Federal Government and “others” were 50.9, 44.2 and 4.9 per cent, respectively.

    Reserve money (RM) rose by 4.0 per cent to N5.07 trillion, at the end of the review month, reflecting the trends in bank deposits.

    The money market rates were relatively stable during the review period. The banking system was awash with liquidity surfeit, occasioned by maturing CBN bills, Cash Reserve Requirement (CRR) credit posting for the maintenance period, Joint Venture Cash (JVC) call and fiscal injections through statutory revenue released to the three tiers of government.

    CBN bills of diverse tenors were floated at the Open Market Operations (OMO) segment to mop up the liquidity surfeit in the system. In the review month, Standing Deposit Facility (SDF) was more predominant as there was liquidity surfeit in the banking system. There was no request for repurchase transactions, same as in the previous month.