The Nation Newspaper

Category: Money

  • FITC joins corporate governance network

    The Financial Institutions Training Centre (FITC) has been admitted as a member of the African Corporate Governance Network (ACGN).

    The ACGN said in a statement that future generations in Africa will only benefit from the rising prosperity of the continent if good governance is practiced.

    Chairman of the ACGN, Jane Valls said such governance is a key ingredient to sustaining economic growth in Africa.

    The ACGN is a collaborative network of director membership organisations that promote effective corporate governance on the African continent.

    Chairman of the Institute of Directors Kenya, Mr. John Luusa, said: “Through developing and implementing initiatives that respond to the unique challenges of the African environment, members of the ACGN play a vital role in ensuring that Africa is open for business and generates foreign investment for its economic development.”

    A major highlight of the meeting was the formal adoption of the Institute of Directors Nigeria (IoD) as a new member as well as FITC Nigeria as an affiliate member to the network.

    Discussion points at the meeting in Nairobi centred on the formulation and implementation of business plans to address the focus areas of the ACGN – capacity building, knowledge sharing, training and development, advocacy and research.

    Consultation and engagement with stakeholders were also on the agenda.

  • Foreign reserves rise by $50m in two days

    Nigeria’s foreign exchange reserves which have been on decline for the past two months reversed the trend with $47 million increase on Monday and Tuesday. The reserves were at $37.80 billion on March 31 but rose to $37.83 on April 1 and further increased to $37.85 on April 2.

    The reserves had received serious battering after the suspension of the Governor of the Central Bank of Nigeria (CBN) Sanusi Lamido Sanusi on February 20 as foreign investors scurried for exit.

    The reserves were at $42.77 billion on February 3, and dropped to $39.72 billion on March 3, losing $3 billion in one month. Analysts said the reserves declined as imports of petroleum and foods soared.

    The level of Nigeria’s external reserves had fallen to $43.63 billion as at December 30th last year. This is the lowest level since November, 2012 and a decline of 10.7 per cent from 2013’s Year to Date peak of $48.86 billion.

    The continuous use of the external buffers to support the value of the naira and declining oil receipts are among the contributing factors to the depletion.

    With over 50 per cent of foreign exchange utilised for the importation of fuel and food, the CBN said policy should focus on a comprehensive backward integration production strategy, while fast-tracking the repair of existing refineries.

    As at October 10, the reserves were at $45.3 billion, as against $46 billion in September 19, and $47 billion in August 19, data from the CBN website showed.

    Further findings showed that reserves were at $47.7 billion on July 1, and dropped to $47 billion on July 15. Reserves also entered August 1 at $47 billion. The foreign currency reserves had five years ago, in August 2008, peaked at $68 billion before the global financial crises impacted negatively on it.

  • Dollar steadies on US private payrolls data

    The dollar was little changed against a basket of major currencies as at yesterday after private payrolls data showed United States businesses shaking off some of the chill on hiring left by harsh winter weather.

    The US dollar index was flat at 80.09, with the dollar unchanged against the yen at 103.61 after trading as low as 103.59 yen shortly after the ADP National Employment Report for March came in slightly below forecasts.

    Employers added 191,000 workers last month, while gains for February were revised upward, according to the report.

    March US non-farm payrolls are scheduled for release by the federal government this Friday. Some currency traders say a strong showing will fuel a rally in the greenback.

    “Everyone’s still waiting for the actual jobs numbers on Friday, and that’s limiting the movement of the dollar,” said Nick Bennenbrock, currency strategist at Wells Fargo Securities in New York. “It’s muted.”

    Major currency pairs have all been stuck in tight ranges since mid-February, with bets for a run higher by the dollar having been thwarted by a combination of nerves over economic slowdown in China and some worse than expected US data.

    That has begun to turn around in the past couple of weeks and dealers are beginning to speculate the nonfarm payrolls numbers on Friday may have the potential to turn the dollar sharply higher. The heart of that argument is the assumption that, should the numbers begin to look more robust, US interest rates will be raised early next year, while those in Europe and Japan will stay flat or be suppressed further.

  • UBA subsidiaries emerge ‘World’s Best’

    UBA subsidiaries emerge ‘World’s Best’

    Three subsidiaries of the United Bank for Africa (UBA) Plc are the World’s Best Emerging Market Banks in Burkina Faso, Cameroon and Senegal.

    In a statement, the bank said UBA Burkina Faso, UBA Cameroun and UBA Senegal were considered the best in their various countries of operations by Global Finance magazine in an exclusive survey on the ‘World’s Best Emerging Markets Banks in Africa 2014’ in the region and in 31 countries.

    It was done by the magazine’s editors with input from industry analysts, corporate executives and banking consultants.

    Publisher and Editorial Director of Global Finance Joseph D. Giarraputo, said: “Faced with slowing growth and volatile markets, these banks are star performers under increasingly challenging conditions.

    “The banks that Global Finance is honoring may not be the largest or oldest, but they are the best at targeting their products and offerings to the specific markets they serve.”

    Criteria for choosing the winners included growth in assets, profitability, strategic relationships, customer service, competitive pricing, and innovative products. In addition, for the first time, a poll of Global Finance’s corporate readership was conducted in order to increase the accuracy and reliability of the results.

    The Global Finance World’s Best Banks 2014 Awards Ceremony will be held during the IMF/World Bank Annual Meetings, on the morning of Saturday, October 11, this year, at The Washington National Press Club.

    Chief Executive Officer, UBA West Africa, Mr. Oliver Alawuba, said the awards in three different countries in Africa testify to the fact that it made the right decision to venture into Africa in the first place.

    He said: ”In this era of slow economic growth, high markets volatility and rapid changes in the regulatory environments across Africa, banks are facing increasingly challenging operational environments, yet UBA country subsidiaries are able to target their products and services offerings to specific markets that drive the economies of their countries of location. That is why many of the UBA country subsidiaries are doing well and would continue to do well in years to come.”

  • Economy still in the woods

    Economy still in the woods

    The economy is not faring well. It is bogged down by huge outflows in foreign direct investments. Portfolio investments face similar crisis, as the steady decline in foreign exchange reserves, investments in equities and bond markets show. This is giving the Central Bank of Nigeria (CBN) and other stakeholders the goose pimples, reports COLLINS NWEZE.

    The drop in Foreign Direct Investments(FDI) and portfolio investments is giving the government and the private sector a sleepless night. The impact of investment reversals is felt in foreign exchange reserves, investment in the equities market and bonds.

    FDI is a direct investment into production or business in a country by an individual or company from another country. This is done either by buying a company in the target country or by expanding operations of an existing business. FDI is in contrast to portfolio investment which is a passive investment in the securities of another country, such as stocks and bonds.

    According to the Nigerian Stock Exchange (NSE), there has been a negative spike in foreign portfolio transactions this year, with more funds moving out than coming in. The NSE’s maiden foreign investment report said total foreign outflow was N50.14 billion in January as against inflow of N39.53 billion during the period, bringing total foreign transactions to N89.67 billion.

    In January, last year, foreign inflow was higher at N40.96 billion against outflow of N20.50 billion.

    Also, data from the CBN showed that gross external reserves as at December 31, 2013 stood at $42.85 billion, representing a decrease of $ 0.98 billion or 2.23 per cent compared with $43.83 billion at end- December 2012. The reserves have further dipped to $38.79 billion as at March 12 after dropping by $3 billion in one month.

    The reserves were at $42.77 billion on February 3, and dropped to $39.72 billion on March 3. It has further dropped to $37.8 billion in March 28. Analysts said the reserves declined as imports of fuel and foods soared.

    CBN explains drop in reserves

    The decrease in the reserves level was driven largely by the increased funding of the foreign exchange market in the face of intense pressure on the naira and the need to maintain stability.

    CBN said the pressure on external reserves was deemed to be consistent with the seasonal annual payment of dividends to foreign investors.

    Oil prices remained relatively high while production was improving, and there were signs of accretion to external reserves. The CBN also expressed concern over the sudden surge in domiciliary account balances which may offset the gains from imposing 75 per cent cash reserve ratio (CRR) on public sector funds.

    It expressed concern over the continued depletion of the Excess Crude Account (ECA) which balance stood at less than $2.5 billion on January 17, this year compared with about $11.5 billion in December 2012. According to the CBN, the absence of fiscal buffers increased its reliance on portfolio flows thus, constituting the principal risk to exchange rate stability, especially with uncertainties around capital flows and oil price.

    On the depletion of fiscal buffers, it decried the continuous fall in revenue from oil despite stable price of oil and production last year.

    It said accretion to external reserves remained low while much of the previous savings have been depleted, thereby undermining the ability to sustain exchange rate stability. The apex bank, therefore, urged the fiscal authorities to block revenue leakages and rebuild fiscal savings needed to sustain confidence and preserve the value of the naira.

    It said the reduction of the United States (US) stimulus, especially, could in addition, trigger capital flow reversals and put greater pressure on the naira exchange rate. It also expressed concern about the widening gap between the official and the Bureau De Change exchange rates, noting that this could precipitate speculation and round-tripping.

    The CBN also noted that the decrease in the reserves level resulted largely from a slowdown in portfolio and FDI flows in the fourth quarter of last year resulting in an increased funding of the foreign exchange market by the CBN to stabilise the naira.

    The regulator expressed concern over the continued depletion of the ECA which balance stood at less than $2.5 billion during the last Monetary Policy Committee (MPC) meeting on January 17, compared with about $11.5 billion in December 2012.

    “This absence of fiscal buffers increased our reliance on portfolio flows thus, constituting the principal risk to exchange rate stability, especially with uncertainties around capital flows and oil price,” the CBN said.

    Other stakeholders’ view

    Emerging markets strategist at Standard Bank Group Ltd, Samir Gadio, said there is a difference between current depletion in reserves and the sharp slide in late 2008 when oil price collapsed and foreign investors pulled out. He said the difference in the current reserves erosion is that the oil price has remained robust in recent years and that capital outflows have been somewhat less extreme.

    “Nevertheless, drastic steps will be required to stop or slow the erosion of foreign reserves and restore confidence in the Nigerian market. In our view, a sharp tightening of monetary and liquidity conditions is urgently required if the CBN still wants to protect current dollar/naira levels,” he said.

    He said the naira to dollar rate at the interbank exchange rate appears to have found a new level in the N164 to N165 threshold, but would have probably trended higher without direct CBN dollar sales to the banks.

    The CBN, he said, has intervened more proactively, and at an earlier stage even on an intra-day basis, especially as it sought to reassure the market after the change of leadership at the apex bank. The CBN has also continued to provide dollar via its Retail Dutch Auction System (RDAS) window and resumed forex exchange forward sales to reduce the immediate pressure on the currency.

    The key question is obviously how long the CBN can afford to defend the recent level of the exchange rate amid a deteriorating foreign reserves reserve position. With a heavily managed currency regime, an unsustainable downward trend in foreign reserves is generally the prelude to devaluation, as a qualitative drop in confidence and positioning against the local unit eventually force the central bank to adjust the exchange rate anchor.

    But Eurasia Group’s Africa Director, Philippe de Pontet, said despite the upheaval at the CBN, Nigeria’s economic fundamentals remain strong compared to other frontier markets given a relatively low debt-to-GDP ratio and budget deficit. The economy is forecast to grow around seven per cent this year.

     

    Multiple taxation

    President, Chartered Institute of Taxation of Nigeria (CITN) Mark Dike said multiple taxation is a disincentive to FDI and therefore hinders economic development. He said multiple taxation is hindering economic development and social emancipation.

    “There is no doubting the fact that taxation is inevitable because it provides the resources for government to provide infrastructure for its citizens, but when taxes are severally replicated on the income of an individual, then there is a big cause for concern. For instance, some state and local governments request people to pay for registration of business premises and licence of business premises,” he said.

    Dike explained that the above example is one of the same as the only difference is the change of name. He regretted that governments, unfortunately, seemed not to have the wherewithal to enforce discipline and sanctity in the tax system as it is obvious that all levels of governments today are bent on collecting any taxes, anyhow.

    He said clients and policy makers have continued to look up to us in their constant search for solutions to these various taxation and fiscal policy problems.

    “For instance, there had been several agitations from some quarters for an upward review of property tax. This call, though, seems good on the surface but definitely not the major solution or panacea to the problem of insufficiency of revenue or eradication of corruption which has eaten deep into the fabric of the system,” he said.

    The CITN boss said the success of a unified tax system depends largely on the government’s use of tax professionals who are its members to handle their tax matters in order to eliminate quacks in the tax system.

    “The regulation of the tax practice and administration in any country is necessary to discourage sharp practices. This apart, the low level of tax education among the populace has made voluntary compliance quite difficult, hence, the need to consult members of a regulatory body like the CITN for professional tax advice and guidance,” he said.

    Despite these challenges, the World Bank calculates that Africa received $48.2 billion capital inflows in 2011, an increase of $8 billion, and notes that the continent remains an investment destination.

     

    Solutions to the problem

    To check this trend, the CBN is looking at possibilities on taxing FDIs and other capital transfers to check capital reversals by short-term investors.

    CBN Deputy Governor, Operations, Dr. Kingsley Moghalu, said the apex bank and other emerging markets were worried over ‘Faustian bargain’ with short-term portfolio investors and, therefore, looking at explicit measures to stem capital outflows in wake of Federal Reserve’s quantitative easing programme.

    Capital transfers involve the acquisition or disposal of an asset, or assets, by at least one of the parties to the transaction and are made in cash or in kind.

    Moghalu’s position was obtained from a report by ‘Central Banking-Daily briefing’, a journal on Central Banks Policy, Regulation, Markets and Institutions.

    The Deputy Governor told The Nation in an emailed response to enquiries that he was “looking at possible options for emerging market economies, not necessarily what Nigeria will do” to check capital reversals.

    Moghalu last year said Africa needs the right skills, education to attract needed FDI. He said the continent needs to direct FDI according to their priority, not according to that of foreign investors.

    He said African countries will not jump into prosperity until they have developed strong manufacturing base driven with developed information technology. He said it is only through industrilisation that the over 20 per cent unemployed rate in Africa will reduce.

  • World Bank, IMF, AfDB move to improve Nigeria’s GDP

    World Bank, IMF, AfDB move to improve Nigeria’s GDP

    The World Bank, International Monetary Fund (IMF) and the African Development Bank (AfDB) have begun data validation ahead of Nigeria’s Gross Domestic Product (GDP) rebasing in May at the World Economic Forum.

    Head of Research, Standard Chartered, Razia Khan, said the rebased data would take Nigeria’s economy from $270 billion to about $400 billion, adding that GDP statistics have not been rebased since 1990.

    Khan said the low weights given to rapidly growing sectors, such as telecoms and financial services in current GDP measures, most likely meant that activity in the sectors was understated.

    She said key positive expectations from the rebasing implies that GDP would be revised substantially higher; the oil sector’s share of GDP is likely to rise from the estimated 14 to15 per cent while Debt-to-GDP ratios, which are already benign, are likely to fall further as a result of the rebasing.

    Khan also said the average per-capita income is likely to be revised higher which she sees as likely to be positive.

    According to her, some rating negatives are also likely to emerge. For instance, survey data suggests that as many as 64 per cent of Nigerians live on a dollar per day. The difference between average and median per-capita income is likely to widen, revealing greater inequality.

    Also, non-oil revenue as a percentage of GDP is likely to fall from an already-low seven per cent to below five per cent, showing how much work remains to be done on revenue mobilisation.

    Khan explained that even with much larger measured GDP, Nigeria will remain dependent on oil, its key commodity export.

    “The level of oil savings measured against GDP is likely to appear even more inadequate, and Nigeria’s current account surplus will be smaller as a percentage of GDP. Important vulnerabilities will remain. Passage of the 2014 budget is still awaited The IMF expects continued robust performance in Nigeria’s non-oil sector, with overall GDP growth of 7.3 per cent in 2014.

    “Our expectations are more subdued. The non-passage of the Petroleum Industry Bill and uncertainty over future fiscal terms mean that conditions will remain difficult for the oil sector. Delays in the passage of the 2014 budget are an additional source of uncertainty,” she said.

    Khan explained that under Nigerian law, at least 50 per cent of the recurrent budget expenditure allocated in the previous fiscal year can be used for spending in the new year without requiring a new budget to be passed. Also, should last year’s spending levels be maintained, this should be enough to see the country through the first six months of this year.

    Alternatively, if recurrent spending is set at half of 2013 levels, this could theoretically see the country through a whole year.

    “With elections approaching in February 2015, few stand to benefit from a postponement of capital expenditure plans. Officially, the 2014 budget aims to reduce the budget deficit to 1.9 per cent of GDP (from 2.17 per cent in 2013). Our higher estimates reflect our doubts over whether the oil output levels assumed in the budget, of 2.39million barrels per day, can be sustained. Augmentation of revenue, using windfall oil savings from the Excess Crude Account (ECA), is likely to be required. Ahead of an election, there is always a risk of further fiscal deterioration if spending plans are increased,” she said.

    Khan said revenue shocks arising from constrained oil output will cause the mix of recurrent to capital expenditure to fall short of plans in the medium-term expenditure framework (MTEF) which aims to create more room for investment spending.

    However, this is seen as a temporary departure from MTEF plans, as it is typically easier to cut capital than recurrent expenditure when revenue is pressured. She said efforts to mobilise non-oil revenue in more meaningful quantities in the coming years will be key to Nigeria’s credit strength, and the economy’s ability to reduce its oil dependence.

  • CBN bars mortgage banks from leasing

    CBN bars mortgage banks from leasing

    The Central Bank of Nigeria(CBN) has spelt out operating modalities for microfinance banks (MfBs), primary mortgage institutions (PMIs) and finance companies.

    In a statement, the CBN said PMBs shall maintain a minimum ratio of 50 per cent of mortgage assets to total assets, 75 per cent of which must be residential mortgages.

    Also, a minimum of 60 per cent of PMBs’ loanable funds, defined as total deposits plus on-lending loans, shall be devoted to the creation of mortgage assets.

    According to the CBN, the PMBs are not to engage in leasing business or take proprietary position in real estate development.

    “The maximum loan from a PMB to an individual shall not exceed 5.00 per cent of its shareholders’ funds unimpaired by losses and 20 per cent in the case of a corporate body. All PMBs shall be required to comply with the uniform underwriting standards for mortgages and commercial real estate financing,” it said.

    For MfBs, the CBN said the sector’s loan portfolio would, at all times, comprise a minimum of 80 per cent micro-loans and a maximum of 20 per cent macro-loans. The maximum loan by an MfB to any individual borrower, director or related borrower is not exceed one per cent of the shareholders’ funds unimpaired by losses, while a maximum of five per cent is prescribed for group borrowers.

    Also, insider-related loans shall not exceed five per cent of the shareholders’ funds unimpaired by losses. For this purpose, loans under a staff scheme shall not be taken into account. State and local government’s equity participation in MfBs is allowed under the revised guidelines to facilitate financial inclusion.

    However, all such investments must be gradually divested to private-sector investors within a maximum of five years.

    In addition to the Head Office, Unit MFBs are allowed to have not more than one branch within the Local Government Area approved for their operation. This is subject to the availability of free funds (shareholders’ funds unimpaired by losses, less fixed assets and long term investments) of at least N20 million and maintenance of the prescribed minimum prudential requirements.

    The minimum capital requirement for finance companies (FC) during the programme period shall be N100 million only. All existing FCs shall be required to comply with this requirement 18 months.

    The minimum amount that a finance firm can borrow from any one person or corporate organisation is N50,000. Conversely, the maximum loan by a finance company to any person or maximum investment in any venture shall be 20 per cent of its shareholders’ funds unimpaired by losses.

  • African capital market worth $300b, says CSCS chief

    African capital market worth $300b, says CSCS chief

    African capital markets is worth over $300 billion, the Chief Executive Officer, Central Securities Clearing System (CSCS) Kyari Bukar, has said.

    Bukar, who spoke at the Finance Correspondents Association of Nigeria (FICAN) bi-monthly forum hosted by CSCS , said the on-going West African Capital Market Integration would help boost the market and create more opportunities for investors. He said integration process we have started is going to be in phases.

    He urged investors to be careful in choosing their portfolio managers to ensure their resources are entrusted with credible, efficient and well capitalised operators.

    Bukar, who spoke on the theme: ‘Role of Central Securities Clearing System in the nation’s financial sector,’ said investors needed to be informed about the market and companies where they are putting their capital.

    He said: “The most important thing for a market like this is to have an informed investor. The investors needed to be informed for them to exercise their choices. There is need to enlighten investors to enable them make the right choices for the future.”

    According to him, there is also need for investors to regularly check their accounts with the CSCS, as such would update them on the performance and position of their investments with brokers.

    He said the automation of brokerage business has reduced the cost of operation for most operators. Automation, he said reduces cost of operation for companies.

    “The most important thing is that investors should be in control of their money or go for collective investment scheme. Still, investors need to beware and invest in portfolio managers that are credible, efficient and have all the necessary capital to be in the position to sale their assets,” he said.

    He said both the big and small operators have gone retail, meaning that they can accommodate both big and small investors after getting their processes fully automated.

    “Previously, if it is not large volume, brokers may not efficiently service the system. But with automation of operations, some of the big stockbrokers have through automated system, have realised that servicing the customer, whether they have N1, 000 or N10 billion, is usually the same. Stock brokers now require very little efforts in servicing the investors. There must be a code that the industry must develop to serve all investors,” he said.

    Kyari explained that the CSCS is implementing the transaction cost analysis because it wants to understand the total cost of each transaction to an investor.

    He said investors buy shares to make money and are always concerned about fees and other cost of transaction that follow each deal.

    “Investors pay fees when they are buying shares and when exiting. We need to benchmark ourselves, against other markets. Since foreign investors look at the various markets, and apportion their resources to them accordingly, depending on many criteria, there is need to be competitive with cost,” he said.

    According to him, investors may also be looking at how free or open the market is, how easy it is to go in and out, and the riskiness of the country, especially whether it is democratic or not among other factors.

    He said there are other investors that consider other elements like the transaction costs before they go in.

  • On a higher pedestal

    On a higher pedestal

    •Agric financing on front burner

    In the past, banks shied away from agric financing. Things have changed with the Agriculture Transformation Agenda (ATA) of the Federal Government. The Central Bank of Nigeria (CBN) has introduced policies to enable farmers secure loans with ease. Banks now treat agric financing the way they handle other business transactions, reports COLLINS NWEZE.

    In the spirit of competition, banks are wont to outdo one another. From the drive for cheap deposits to financial literacy for the youth and now agricultural financing, the buzz is on and no one is being left behind.

    Ten years ago, no lender would give loans to farmers. Such loans would be considered lost from the date of approval. But today, the lenders have started a scramble for agric businesses, having seen the potential and knowing how much a well-priced loan can add to their profitability.

    The Central Bank of Nigeria (CBN) set the tone when it introduced the Nigerian Incentive-Based Risk Sharing Agricultural Lending (NIRSAL) to the banks. Under the policy, banks can lend to the agricultural sector and its value chains without fear of losing such funds. NIRSAL is already being implemented by the banks and is expected to drive agricultural revolution in the country.

    The CBN said NIRSAL, unlike previous schemes, emphasises lending to the value- chain and to all sizes of producers.

    The Federal Government also plans to double agric sector share of banks’ credit to 10 per cent in about two years. The loans to agriculture as a share of total credit, rose to N320 billion, or five per cent at the end of last year from less than one per cent in 2011.

    Agriculture and Rural Development Minister, Dr. Akinwunmi Adesina, said the Federal Government has made a fundamental shift that takes agriculture away from the realms of developmental activity to business. “The CBN has shifted the mind-set of the banks. It’s a new agriculture sector in which they can actually invest money and make money,” Adesina said.

     

    CBN’s views

    Already, lenders and the regulator are discussing how to increase lending to the sector. For the apex bank, the government needed to pay more attention to agriculture, which still has one of the greatest potentials in growing the economy.

    CBN Acting Governor, Dr. Sarah Alade, said one way of achieving this, is by collaborating with the banking system to fix the problems of the value-chain in the agricultural sector. She said economic development was about enhancing the productive capacity of an economy by using available resources to reduce risks, remove impediments, which otherwise could hinder investment.

    Speaking at an international conference on agricultural value-chain financing in Lagos, she said the CBN has so far committed about N1.169 trillion to different intervention schemes being promoted by the Federal Government.

    Alade said the funds were committed by the CBN in collaboration with the Federal Government into key economic schemes for economic development.

    She listed the schemes as the Agricultural Credit Guarantee Scheme (N69 billion); Commercial Agricultural Credit Guarantee Scheme (N200 billion); NIRSAL (N200 billion); Small and Medium Enterprises Credit Guarantee Scheme (N200 billion).

    Others are the SMEs Restructuring and Refinancing Scheme (N200 billion) and Power and Airlines Intervention Fund (N300 billion). Alade, who was represented by CBN Director of Research, Charles Mordi said the schemes were meant to address the challenges confronting agriculture and agric business in the country.

    She said the government and the apex bank instituted the intervention programmes to enable key players in the economy to have access to finance, adding that access to credit remains important to the agricultural value-chain.

    She said the Agricultural Credit Guarantee Scheme was introduced in 1978 to encourage lending to the agric sector, adding that the scheme has up to date, supported the sector by guarantying loans to over 800,000 beneficiaries.

     

    Stakeholders’ views

    A report by the Alliance for a Green Revolution in Africa (AGRA), showed that agriculture accounts for roughly 41 per cent of Gross Domestic Product (GDP) in Nigeria and 50 per cent of the economically active population in the country. Figures revealed by the report showed that if the Nigerian government is sincere in its poverty reduction campaign, it absolutely has to fix agriculture.

    It also showed that the country has 70 per cent of its population in rural areas living on less than one dollar a day. It attributed the 70 per cent population figure still living on one dollar a day to the fact that the nation was yet to revive its agricultural sector. It stated that since 2000, agriculture has been the slowest growing sector, growing roughly at about 5.1 per cent per annum.

    According to Adesina, who was formerly, the Vice President for Policy and Partnerships, AGRA, the subsector’s development has to be encouraged to transform the economy, generate jobs and equitable growth.

    Adesina who spoke at a Bankers Committee meeting to discuss funding needs for the subsector said: “When you look at the history of the agriculture sector, in the 60s, we used to have the groundnut pyramid; we used to have palm oil, cocoa among others. Nigeria was known as an agricultural basket, not only in the country, but globally. Today, we have lost all that. So we are actually importing inflation because as global commodity prices are rising, we are importing food and by that we are driving inflation in the country.”

    Nigeria, he said, is trying to reverse decades of neglect of its farming industry and push agriculture as its “new frontier for growth” because it can no longer depend on oil to drive its economy.”

    The government’s efforts to boost food supply by 20 million metric tons from 2011 to 2015 has seen the country’s food import bill drop by more than half to $5 billion from $11 billion two years ago, Adesina said.

    Also, the Managing Director, United Bank for Africa, Phillips Oduoza, said the bank has continued to channel resources to the sector, given that it remains the mainstay of most economies in Africa. “UBA has a deliberate policy to continue to fund agriculture. Our lending to the sector is already above the industry average. We are doing about seven per cent of our total portfolio in agriculture,” he said.

    He commended the fact that lending to agriculture is generally on the upward trend from Nigerian banks, disclosing that banking sector funding to agriculture has moved from just about 0.5 per cent of total industry portfolio prior to 2009 to about 4.9 per cent of banking industry loan book currently.

    “Interestingly, the non-performing loans coming from agriculture lending is lower than most people would have thought,” he said.

    Oduoza also explained that UBA is expanding its electronic banking products to improve the way it serves its more than seven million customers. He said the bank has rolled out an array of electronic banking products, from cards to point of sale terminals, which is helping to reduce the cost to income ratio of the bank while making a positive impact on the bottom line.

    Group Managing Director of Union Bank of Nigeria Plc, Emeka Emuwa urged Nigeria and other African countries to make agriculture more productive in their fight to end the scourge of poverty in the continent.

    He spoke at the International Conference organised by the African Rural and Agricultural Credit Association (AFRACA) sponsored by the bank.

    In his welcome address to the conference which had “Propelling Economic Development through Functional Agricultural Value Chain Financing Models: Lessons Learnt and Emerging Opportunities” as its theme in Lagos, Emuwa advised African nations to redouble their efforts to make agriculture more productive.

    “If you can get agriculture to become more productive, you will be better positioned to tackle the scourge of poverty in the continent. It is unfortunate that there has been a decline in the sector due to the emergence of other economic sectors in Africa,” he said.

    Citing of Nigeria, Emuwa told the conference that the emergence of oil and gas stunted the agricultural sector.

    He said Union Bank has been supporting agriculture over the years ;stressing that in the current financial year, the bank will be engaging directly with farmers in order to have a deep understanding of the entire segments of the business so as to inject more funds than have been invested in the past.

    “We will continue to invest in agriculture. In the past years, agriculture has played a significant part in our business but we want to look at the entire value chain more intently. We want to engage with the rural farmers directly and not just from policy level”, he emphasised.

    Ecobank Nigeria has equally said it will grow its agriculture support loans to over N50 billion in the next one year. The bank said the plan is in line with its policy to support the growth and development of the agriculture sub-sector of the economy, as part of its contribution to the Agricultural Transformation Agenda of the Federal Government.

    Ecobank Country Head, Agric and Export Finance, Abel Ajala, who made this known, said the lender has introduced concessionary interest rates for its agriculture finance scheme, as well as created agriculture and export units manned by professionals for easy loan risk assessment, ensuring that beneficiaries utilise fund given to them judiciously.

    He noted that Ecobank is supporting the agriculture value chain that comprises the producers, the processors and markets/exporters of agricultural products. He said the focus on the agric sector has become necessary to stem an impending food crisis on the continent.

     

    NIRSAL performance

    According to the CBN, NIRSAL is also expected to be a catalyst for innovative risk management strategies, long-term financing for agribusiness and significant job creation by new entrepreneurs.

    “The mandate of NIRSAL is to act as the custodian of all credit guarantee schemes, interest draw back schemes, and commercialisation initiatives related to an integrated value chain approach to agriculture and agribusiness in Nigeria,” the CBN said. Under NIRSAL, there are five pillars to be addressed by an estimated $500 million that will be invested by the CBN, according to the programme document.

    There is also a Risk-sharing Facility of $300 million, planned to address banks’ perception of high-risks in the sector by sharing losses on agricultural loans. There is equally an insurance facility of $30 million intended to expand insurance products for agricultural lending from the current coverage to new products, such as weather index insurance, new variants of pest and disease insurance. Besides, there is also a Technical Assistance Facility amounting to $60 million meant to equip banks to lend sustainably to agriculture, producers to borrow and use loans more effectively and increase output of better quality agricultural products, among others.

    The improvement in the sector’s was linked to access to credit through the new policy focused on increasing private sector participation, emphasis on the entire agriculture value chain, and using agriculture to boost employment, wealth creation and food security.

    Analysts have commended the performance of Nigerian banks as demonstrating their fate in the capacity of agriculture to transform the economy. The CBN explained that with the credit trend emanating from the banks, Nigeria might be close to winning its economic diversification objectives that will lead to less dependence on oil.

     

    Years back

    Analysts said the structural imbalance of the Nigerian economy has over the years, remained a source of concern to the government, stakeholders and investors who insist that the economy has to be diversified. The discovery of oil in the early 1970s diverted government’s attention from agriculture to oil. This has adversely affected the performance of the agricultural sector over the years, but opened calls for the diversification of the economy, beyond oil revenues.

    Therefore, the dismal performance of the agricultural sector in terms of its contribution to Nigeria’s yearly total revenue in the last four decades prompted the CBN, in conjunction with the Bankers’ Committee to deliberate on ways of increasing lending to agriculture.

    This prompted the CBN, in collaboration with the Federal Ministry of Agriculture and Water Resources to establish the Commercial Agriculture Credit Scheme (CACS) in 2009. The CACS was meant to finance agricultural value chain from input supply to marketing. The scheme commenced operations on April 23, 2009 with the approval of the Federal Government.

    The establishment of N200 billion CACS was meant to fast-track the development of the agricultural value sector of the economy through the provision of credit facilities at a single digit interest rate to large-scale commercial farmers.

    There has been, in recent years, huge flow of funds from abroad to the agricultural sector. Nigeria attracted agricultural investment worth more than $8 billion in the past 18 months ended June, 2013 Adesina said. Still, only 40 per cent of its 21 million hectares of arable land is cultivated. Agriculture employs 70 per cent of Nigeria’s population, Marie-Francoise Marie-Nelly, the World Bank Country Director for Nigeria, said.

    These statistics, analysts said, remain a pointer to the immense opportunity that he agric sector represents, which the banks and government at all levels need harness for overall good of the people.

  • FirstBank to give out duplex in Big Splash Promo

    First Bank of Nigeria Limited will be giving out a Terrance Duplex to a grand prize winner in its ongoing Big Splash Promo. The promo, which commenced in July 2013 and runs till July this year, was designed to coincide with the lender’s 120 years anniversary of banking services in the country.

    FirstBank’s Head, Marketing & Corporate Communication, Folake Ani-Mumuney, said the promo was designed to reward customers for their patronage and loyalty to the brand over the years.

    She said the exercise was also designed as a platform for enhancing savings culture in the nation and encouraging the youths as well as the unbanked to embrace the financial services. She said the promo has so far produced six winners of brand new Toyota corollas.

    The winners are Dickson Dyaji of Zaria branch; Ajadi Oladunni of Ogbomosho branch, Onyeani Ebugheme of Aba Factory Road Branch, among others.

    She said the exercise has also produced 1,080 lucky winners with 360 of them winning refrigerators, 360 gas cookers and 360 cash prizes of N50, 000 each.

    Oladunni, a petrol attendant who won one of the cars, said: “I didn’t believe it when I was called and told I had won a brand new car from saving money with FirstBank until the branch manager took me to Lagos to pick the car. I was very excited and I couldn’t hide my excitement until I started driving the car back home,” he said

    Ani-Mumuney said the grand prize a Terrance Duplex located in Ajah axis of Lagos will be won at the finale draw. She said the winner will have the opportunity to live among the high net worth individuals within the affluent environment.

    She explained that to qualify for the promo, customers are to operate a savings account and increase it with the sum of N10, 000 monthly the balance of which should be maintained for a minimum of 30 days to qualify for the bi-monthly draw.

    She said: “While fresh savings account holders will need to maintain the sum of N 10,000 monthly and maintain this balance in his account for 30 days to qualify for the bi-monthly draw.

    “For the quarterly and grand finale draws, account holders need to maintain incremental balances of N20, 000 every month for three consecutive months to qualify for the semi-annual draw or maintain a balance of N60, 000 over the quarter to qualify for the semi-annual draw.”