The Nation Newspaper

Category: Money

  • ‘Cash-less policy has reduced cost of fund’

    Interswitch, an electronic transaction switching and payment processing company, has said the cash-less policy of the Central Bank of Nigeria (CBN) has reduced the cost of banks’ operations.

    It said the direct cost of handling, processing and managing cash across the nation as at 2009, stood at N114 billion and could have increased if the cashless policy had not been introduced.

    Responding to e-mailed questions, the firm said cardholders must be constantly educated on keeping their banking details protected.

    “The good thing we have also done as stakeholders in the e-payment industry are to also introduce solutions that would drive adoption of the cash-less policy. These solutions have been designed to address the specific needs of the ordinary Nigerian towards the adoption of e-payment,” it said.

    The firm said it is seeking for an upgrade in the technology processes and systems for early detection of fraud.

    This, it said, had become imperative because fraudsters were developing new mechanisms to circumvent new security measures.

    Interswitch said as a second layer of defence, it has introduced Scorebridge, which is a fraud management system that enables Electronic Financial Transaction (EFT) messages to be processed through predefined Artificial Intelligence in order to determine the transaction’s risk and probability of a fraud.

    It said: “Banking security has got so many banks thinking about safety and reliability of their networks. What steps do you think that lenders need to take to guarantee customers’ transaction security and trust? Over the years, the banks have invested a lot in different security measures to guarantee customer transactions, but as a minimum, all banks should have the following measures in place: Defining a baseline security standard (such as PCIDSS) Educating customers on safe security practices when using their cards Investing in a fraud management system.”

     

  • Banks’ N320b romance with power

    Banks’ N320b romance with power

    About N320 billion of the N400 billion realised from the sale of Power Holding Company of Nigeria (PHCN) assets came from the banks. With such a huge commitment, banks are having a stranglehold on power financing. COLLINS NWEZE reports.

    Banks’ credit to the economy is expected to rise by 20 per cent in the year, with a significant contribution from the power sector. This will cushion banks’ dwindling earnings over tough regulatory policies by the Central Bank of Nigeria (CBN).

    Findings showed that the lenders coughed out N320 billion of the N400 billion earned by the Federal Government from the sale of the Power Holding Company of Nigeria (PHCN) assets.

    Nigeria, in its desire to be among the top 20 economies of the world by 2020 is targeting an 40,000 mega watts (MW) of electricity.

    With a 167 million population, its current maximum electricity generation capacity – approximately 4,500MW – is inadequate to meet the demand estimated at 10,000MW.

    The Chairman/Chief Executive Officer of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, said to meet the generation targets set for 2020, significant private sector investment was required in the supply chain, including generation, gas-to-power infrastructure and distribution networks. He identified inadequate financing, especially with regards to the distribution companies, as one of the major challenges facing the power sector.

    Amadi said improvement in the industry was necessary to sustain the political will behind the power project. He said the role of banks in solving this crisis, by providing the needed financial backbone to the projects, cannot be overemphasised.

    The World Bank and other local and international lenders have showed renewed commitment to power sector funding. Zenith Bank Plc said it expects to increase loans to the privatised power companies. In Bloomberg report, the lender said loans to the power sector may rise to 10 per cent of the bank’s loan book by this year, up from 4.3 per cent in the third quarter and 1.3 per cent at the end of June.

    Its Chief Executive Officer Mr Godwin Emefiele, said: “Opportunities in power opened up and we took advantage of it. It is a very essential utility that we all need for our survival.”

    The value of Zenith Bank’s loans to power firms was about N40 billion in the third quarter after the handovers, said Emefiele. Zenith Bank gave loans to companies including Eko Electricity Distribution Company and Ikeja Electricity Distribution Company.

    There was a $350 million infrastructure financing agreement for Africa between global infrastructure giant General Electric and Standard Bank. The bank explained that the partnership would provide affordable access to power infrastructure meant to augment traditional large scale grid capacity development. The partnership will target Nigeria, Angola, Tanzania, South Africa and Ghana. Others are Kenya, Mozambique, Uganda, Ethiopia and South Sudan. Financing activity will center on project finance, equipment finance, trade finance and advisory.

    Speaking at a ceremony to announce the partnership, President/Chief Executive Officer of GE Africa Jay Ireland said the partnership comes at the right time when there are concerted efforts to boost access to energy across the continent. He said partnerships of this nature would certainly support efforts by respective governments in finding captive power solutions to meet the growing demand for alternative fuels.

    Chief Executive, Stanbic IBTC Holdings, Mrs Sola David-Borha said the bank was committed to partnerships of this nature that help energise the sector. She said the power challenges identified in the focus countries for this partnership were opportunities for growth through sustainable investment. Mrs She also disclosed that through the partnership, financing will also be available for off-grid solutions that rely on cleaner fuels such as biomass and biogas across sub-Saharan Africa.

    Another international lender, Ecobank Nigeria said it will invest $25 billion in five years to help solve Nigeria’s power sector crisis. Ecobank Country Head, Power & Energy, Olufunke Jones said the investment is in line with its policy to support the growth and development of the power sector in Nigeria.

    She said it has played a major role on the buy-side of the power sector privatisation exercise by providing financial advisory services, lead arranger role, acquisitioning financing and guarantees to Distribution Companies (DISCOS), Generating Companies (GENCOS) and National Integrated Power Plants (NIPP).

    She said: “Nigeria has one of the largest gaps between demand and supply for electricity. To bridge this gap the country requires a combination of favorable government policies, private sector participation and Foreign Direct Investment (FDI) as well as transparency and persistent monitoring that will guarantee an improved business environment.”

    According to her, the power reforms have created opportunities for Capital Expenditure (CAPEX) and Operating Expenditure (OPEX) funding, a consequence of the handover to the new owners. “There is the urgent need to rehabilitate the distribution networks in order to make them robust and flexible enough to accommodate the nation’s demand for power,” she said.

    Local Account Manager, Corporate Banking Group, Mrs. Funmilola Ogunmekan said the power sector is faced with the challenges of upgrading mostly obsolete equipment and processing under a traditional technology framework. This, amongst others, is the immediate challenge before the potential of the industry is fully manifested.

    Mrs. Ogunmekan reiterated that this year, the lender will leverage its position as a bank with the third largest branch network to provide effective Utility Collections and Cash Management services while providing the required additional CAPEX/OPEX funding requirement for at least five of the Distribution Companies across the country.

    Likewise, the United Bank for Africa Plc (UBA) said it has so far extended $700 million, about N113 billion, in funding to different investors towards the acquisition of power assets in Nigeria’s recently privatised power sector. Its Group Managing Director/ Chief Executive Officer, Phillips Oduoza said: “It is a growth sector we are playing very big.”

    World Bank’s role

    The Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala said the World Bank is providing $1.4 billion to Nigeria to support power infrastructure.

    She said the global lender was planning to set up an infrastructure facility and that Nigeria would be among the first set of countries to benefit from it, given the nation’s large size and the scope of its infrastructure needs.

    “They want to concentrate on power, and are already actively working with several private sector companies that want to invest in Nigeria. They are promising to give Nigeria about $700 million under the International Bank for Reconstruction and Development (IBRD) guarantees for the power sector, as well as a willingness to invest another $700 million to support transmission,” she said.

    She explained that the power infrastructure support finance was derived from the initiative of the World Bank Group and its affiliate, the International Finance Corporation (IFC) which lists Nigeria as one of the focused countries in Sub-Saharan Africa to benefit from such funding.

    Also, the Board of the African Development Bank Group (AfDB) has approved an African Development Fund (ADF) Partial Risk Guarantee (PRG) programme of $184.2 million to support the power sector privatisation. It also provided an ADF loan of $3.1 million, for capacity building for the country.

    The Director of the AfDB’s Energy, Environment and Climate Change Department, Alex Rugamba, said the PRG programme in Nigeria would increase the country’s electricity generation by catalysing private sector investment and commercial financing in the power sector through the provision of PRGs.

    “The PRGs will mitigate the risk of the Nigeria Bulk Electricity Trading Plc (NBET), a Federal Government of Nigeria entity established to purchase electricity from independent power producers (IPPs), not fulfilling its contractual obligations under its power purchase agreements with eligible IPPs. This in turn will increase the comfort level of private sector financiers and commercial lenders investing in the power sector privatisation programme,” he said.

    Continuing, Rugamba said an effective and steady power supply is critical to the sustainability of Nigeria’s development path. The Board’s decision today will allow the AfDB to support the Nigerian Government’s efforts to reform the power sector and position the country for sustainable and inclusive growth.

    Bonds to the rescue

    Banks have also drawn huge funds from the bond market to fund power projects. Four banks raised $1.45 billion in the last three years through Eurobonds to assist them in meeting their power sector funding obligations, Debt Management Office (DMO) Director-General, Dr. Abraham Nwankwo said.

    GTBank issued $500 million; Access Bank issued $350 million while Fidelity Bank and FirstBank issued $300 million each.

    Nwankwo said the funds will be instrumental in helping Nigeria meet its infrastructural needs especially power adding that ambitious banks can explore the funding opportunities that the power sector presents.

     

  • FRC: Auditors will be liable for banks’ indiscretions

    Internal auditors will, henceforth, be held accountable for discrepancies in banks’ books after being examined by the Financial Reporting Council of Nigeria (FRC), The Nation has learnt.

    To this end, FRC will begin audit quality inspection of banks before the end of this month.

    In a report titled: “The role of FRC in promoting investors’ confidence in Nigeria,” FRC Chief Executive Officer Jim Obazee said there was need to check what the auditors were doing always.

    “We are to look at who is checking the checker (internal auditors). This will be done through the external auditors, but there are international audit control rules that must be followed,” he said.

    Auditors, who sign-off their jobs, he said, were expected to put their FRC numbers and the names of their firms instead of the current tradition of just writing the names of their audit firms in small letters.

    Obazee urged auditors to be more circumspect in doing their jobs, as they risk personal liability for misbehaviour.

    Audit quality inspections, he said, were in line with its desire to become a member “of the International Forum of Independent Audit Regulators (IFIAR), adding that this will be a booster to the capacity of the Council to monitor audit quality.”

    He said the “first phase of the adoption of International Financial Reporting Standards (IFRS)in Nigeria has started producing enhanced perception for Nigeria, adding that the FRC is currently carrying out IFRS readiness test for entities in the second phase- (Other Public Interest entities, including Not-for-Profit Organisations).”

    He said FRC was convinced that the national Code of Corporate governance would be operational in the first quarter of the year.

    This, he said, would strengthen compliance with Section 44 (3) of the FRC Act and enhance the inflow of Foreign Direct Investment and stir greater interest from local investors.

    The body, he said, is also to address current institutional weaknesses in regulation, compliance and enforcement of standards and the development of robust arrangements for monitoring and enforcing compliance with financial reporting standards in the country.

    He said the implementation of the FRC Act is expected to lead to increased management credibility, more long-term investments, lower cost of capital, improved access to new capital and higher share values. “For investors and lenders, better disclosure provides more relevant information for making sound investment decisions and risk assessment. This is especially so because merchants do not have a country,” he said.

    Obazee said the FRC is carrying out International Financial Reporting Standards’ readiness test for entities now in the second phase for other public interest entities including not-for-profit organisation.

     

  • How banks can increase profits

    Banks and other firms can reduce their cost of opera-tions and raise profits by deploying sound Business Process Management (BPM) tools in running their businesses, Managing Director, SPNS Consulting, Debo Adebayo, has said.

    Speaking during a breakfast meeting with key industry operators on how to implement BPM processes, he said strategic success comes not simply from crafting sound strategy and implementation plans.

    He said both are essential ingredients, but results come from activities that people engage in.

    Adebayo, who spoke on the theme: ‘Discovering the value of business process management for business productivity and profitability’, said company’s staff can only deliver strategic results if their actions are closely aligned with those of their employers on the course, direction, implementation plans, and priorities established in their strategic planning process.

    He said a business process is a set of logically related business activities that are combined to deliver something of value to the staff and company. Adebayo said the combination of task that constitutes an activity flow tailored towards achieving a set process goal.

    He said business process management helps company owners to determine how to direct, monitor and measure company resources.

    It has the capacity to reduce costs, enhance efficiency and productivity, and minimise errors and risks – thereby protecting and optimising corporate resources.

    “It increases accountability and helps avoid waste, improves reliability, simplifies regulatory compliance and promotes safe working conditions while protecting company resources and information,” he said.

    He said BPM also enables organisations to align internal business functions with customer needs. He said there is need to continuously evaluate customers’ needs and how they want them met.

     

  • I’ll consolidate on my predecessor’s success, says Fidelity Bank CEO

    I’ll consolidate on my predecessor’s success, says Fidelity Bank CEO

    The Managing Director, Fidelity Bank Plc, Nnamdi Okonkwo has said he will build on successes and achievements of his predecessor, Reginald Ihejiahi to take the bank to enviable heights.

    Speaking at the weekend during a valedictory and welcome dinner in Lagos for the bank chiefs, Okonkwo said the bank knows where it is going, and would not forget its past.

    The new Fidelity Bank chief said his former boss laid solid foundation on which his team would build on.

    “I have to consolidate the achievements of my immediate past managing director. I will also build on on that and take the bank to the kind of level, that when he looks back three to five years from now, he will be happy with the bank’s achievements,” he said.

    Continuing, Okonkwo said : “When investors invest in a company, they do so because they expect returns. We have to generate the kind of revenues that pays our dues, as well as return a profit. And from there, we pay dividend. So, we are not unmindful of this.”

    He said the lender has for years, kept a track record of unbroken dividend payment, and do not intend to discontinue that culture. “My Vision is to ensure that they do not only get dividend, but get higher divided than they have been getting in the past,” he said.

    Ihejiahi said his experience in the past 10 years with the bank has been interesting and challenging.

    “My 10 years experience was interesting and challenging, because that’s the nature of the banking industry. We have alongside executive and board, built a strong brand, and I think that’s very important. We have competent staff that are sensitive to the need of the customers,” he added.

    Ihejiahi added: “The wish of every leader is that the institution he left behind survives and excels in whatever it is doing. There is a great future for Fidelity Bank and we believe in its continued progress.”

  • Sterling Bank initiates education agenda

    Sterling Bank initiates education agenda

    Sterling Bank Plc has initiated the “One Sterling Education!” to mark this year’s Financial Literacy Week under the Global Money Week.

    In a statement, the bank said the yearly event would further consolidate its strategic focus on education and its commitment to youth empowerment, as stipulated in the Financial Literacy Policy of the Central Bank of Nigeria (CBN).

    The bank said it would adopt select schools and deploy trained staff under the Sterling Volunteers Programme (SVP) in educating the children specifically on financial literacy.

    The bank also said it sponsored this year’s edition of the “We are The Future of our Nation” (WATFON) programme, an initiative of Edumark Consult, with more than 3,500 final year pupils from various secondary schools attending it.

    The WATFON programme, billed to hold at the ‘Ten Degrees Events Centre in Oregun, Lagos on March 25, provides young Nigerians with the opportunity to meet and interact with accomplished professionals as well as national leaders, who have excelled in their chosen endeavours in the society.

    The bank’s Group Head, Strategy & Communication, Shina Atilola said the sponsorship of WATFON was based on the need to invest in “our collective future and enable society, particularly the children in accordance with the bank’s Corporate Social Responsibility focus or objectives”.

    According to him, the event provides an opportunity for children to meet accomplished Nigerians who will later become their role models.

  • Bank customers group launched

    The Bank Customers Association of Nigeria (BCAN) was at the weekend, launched in Lagos.

    The BCAN is expected to help bank customers belonging to the group address grievances against their banks and regulators of the financial services sector.

    Speaking at the event, its President, Dr. ‘Uju Ogubunka said the forum will help both bank operators and regulators collaborate with customers in settling disputes that arise in the course of banking transactions.

    This, he said, would help in achieving financial inclusion needed for the benefit of the citizenry and the growth of the economy.

    He described the group as a consumer protection focused organisation that recognises the inter-dependence of providers and consumers of banking products and services.

    Ogubunka said the group would promote and protect the rights and interest of its members. It will also educate the public on the advantages inherent in the operations of efficient banking policies and the need to develop a healthy banking culture.

    Also, the BCAN is expected to provide credible and common platform for customers of banks in the country to consider, take decisions and actions on matters of common interest to them.

     

  • Why CBN may not cut MPR, by RenCap

    Why CBN may not cut MPR, by RenCap

    The Central Bank of Nigeria (CBN) will, rather than reduce the Monetary Policy Rate (MPR) from current 12 per cent, be compelled to hike it by one percentage point in the fourth quarter, Renaissance Capital (RenCap), has said.

    The investment and research firm said in an emailed report titled: Pan-African Banking: ‘A Comprehensive Guide to Sub-Saharan African Banks’, the Monetary Policy Committee (MPC’s) hawkishness in the January statement makes it believes that any risk to policy change in the short term, is on the upside.

    The report released, at the weekend, said low fiscal savings the excess crude account had $2.5 billion at December last year, a quarter of the $9.9 billion that was in the account a year earlier.

    It said an increase in the exposure of foreign exchange reserves to portfolio inflows suggest that further tightening may be required to keep the naira from depreciating and to sustain low inflation.

    It said the suspended CBN Governor Sanusi Lamido Sanusi’s firm policy stance had been effective at slowing inflation to eight per cent year-on-year in December, from 12 per cent year-on-year earlier.

    “It remains to be seen whether his strict policies will remain in place. The CBN’s benign inflation outlook of six to nine per cent for this year and four to seven per cent in 2015 – suggests that the risk to interest rates is to the downside,” it said.

    RenCap however, doubts rates cut, adding that such would trigger capital flight, weaken the naira and push up inflation. It said the real Gross Domestic Product (GDP) growth in 2014 would improve to 6.9 per cent, from 2013 estimate of 6.7 per cent, under the current GDP series.

    “We expect an increase in government spending, due to election-related expenses that will help spur an increase in economic activity. Upside to the oil price, on the back of a stronger global economy, is positive for Nigeria’s consumer. Moreover, lower inflation should also support stronger household consumption,” it said.

    It said the upside risk to Nigeria’s growth projection, is a significant improvement in oil production on the back of a slowdown in oil theft. “We expect growth in 2014 to improve to 6.9 per cent from our 2013 estimate of 6.7 per cent, under the current GDP series. We expect an increase in the government spending, due to election-related expenses that will help spur an increase in economic activity,” it said.

  • NSIA manages $1.15b for Fed Govt

    The Nigerian Sovereign Investment Authority (NSIA) is managing accounts worth $1.15 billion for the Federal Government, its Managing Director/CEO, Uche Orji has said.

    Speaking yesterday during meeting with journalists in Lagos, he said the breakdown of the funds showed that Federal Government allocated $550 million to it to manage; then another $350 million is also being managed under the Stabilisation Fund while $250 million is managed under the Infrastructure Fund.

    Orji said the firm is also in the process of securing additional $550 million from government adding that all the funds are profitable as of December last year.

    According to him, the NSIA has been implementing multi-sectoral investments in infrastructure among other decisions related to overall funds mandate.

    He said active investment activities by the firm started in October last year, but before then, it was designing the organisational, governance, management and enterprise risk imperatives needed for running a best practice organisation.

    He said allocation of funds to the NSIA is 20 per cent of the Stabilisation Fund; 40 per cent of the Future Generation Fund and 40 per cent Infrastructure Fund.

    He said the firm has invested in NSIA Motorways Company, NSIA Power Investment Company, NSIA Healthcare Investment Company and NSIA Real Estate Investment Company.

    He said: “We allocated $100 million to the power sector and have an agreement with a private equity company to match us 2:1 on equity. “We are still looking at opportunities both for Greenfield and secondary investments.”

    He said the firm has also invested in the Second Niger Bridge, making it the lead financial partner in the consortium with responsibility to invest its equity and attract other equity partners to raise debt for the project.

    The NSIA also made an investment in the Mortgage Refinance Company as a core equity investor.

    “We are also in negotiations with a state government as well as Federal Capital Territory for an affordable housing programme, which we plan to execute later this year, if we can agree on favourable terms,” he said.

  • Nigeria, France launch trade, target N2tr

    Nigeria and France yesterday launched the Nigeria-France Trade and Investment Council, setting a target to double trade flows between both countries from the current N1.049trillion to about N2.098trillion in four years.

    The agreement of the launch of the Council was signed in the presence of President Goodluck Jonathan and his counterpart, French President Francois Hollande during the Nigeria-France Business Forum, on the sidelines of the Centenary celebrations in Abuja.

    Apart from doubling trade, the Council also has the mandate to increase investment flows between both countries by 50 per cent in the next four years and will be co-chaired by the Vice-Chairman of the Nigeria-France Chamber of Commerce and Chief Executive Officer of Leadway Assurance, Mr. Hassan Odukale; and the Chief Executive Officer and Chairman of PAI, Mr. Lionel Zinsou.

    The two presidents also witnessed the signing of a memorandum of understanding (MoU) on a $170million power financing deal between the Ministry of Finance and the AgenceFrancaise Developpement (AFD); and a 13MW solar power construction MoU between the Osun State Government and VergnetGroupe.

    Jonathan, who encouraged French companies to invest in Nigeria in order to cement the ongoing favourable trade and investment relationship between both countries, noted that the people of France, under the leadership of President Hollande, had shown an unprecedented level of commitment to Africa.

    The president said, “Nigeria has come of age economically, and this is the time to invest. We have made significant progress in our political, social and economic development. I always say that Nigeria’s economic transformation will be the strongest legacy of our generation, which is why we have invited all you investors here today.

    “A strong Nigerian economy will create wealth, improve living standards and ensure a stable political and social environment. This is why my focus since this administration assumed office in 2011 has been to fundamentally restructure and diversify the Nigerian economy, to ensure sustained growth and create jobs for our teeming youth.”

    Jonathan noted that this century was Africa’s century, adding that over the last 100 years, the French people and French businesses had always been engrained in the Nigerian story.

    The French President, who pledged increased investment by French companies in Nigeria, said his country was committed to boosting the strategic partnership between both countries.

    “We have set a goal of increasing our market share in Nigeria. Three of our companies contribute to about 15,000 jobs in Nigeria but we have to invest more in the country.