The Nation Newspaper

Category: Money

  • ‘Why CBN is tightening cash reserve’

    ‘Why CBN is tightening cash reserve’

    TThe Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, has defended the 75 per cent Cash Reserve Ratio (CRR) on public sector deposits, saying it would guarantee sustainable earnings for lenders.

    He said the policy, which made banks lose over N750 billion of public sector deposits to the CBN, would protect the shareholders funds and ensure that lenders take risks that ensure that year-on-year earnings are sustained.

    The CRR is a portion of banks’ deposits kept with the CBN as reserves. It was formerly 12 per cent for all deposits until last July when the regulator raised that of public sector funds to 50 per cent. It was hiked again to 75 per cent at the January 17 Monetary Policy Committee (MPC) meeting.

    “We want to get away with this boom-burst scenario where banks give very high returns in one or two years, and the next year, they go under,” Sanusi who spoke at the just concluded Standard Bank West Africa Investors’ Conference, said, adding that the CBN will continue with tight CRR as it reduces reliance of banks on volatile public sector funds and ensures sustainability.

    He said a business model in which a bank makes money by going to government, taking billions of naira at zero per cent, and turning round and lending such funds to the government in the form of investments in treasury bills and bonds is no longer feasible, wondering what would happen when those deposits disappear. “What happens when the price of oil goes down, and government does not have the kind of cash that it was used to? The bank will simply go under.”

    He said though some of the policies have taken a little off the profits of banks, they also guaranteed long-term sustainable earnings.

    “So, firstly, we decided that aside restoring the capitals of banks, giving them liquidity and cleaning up the bad loans, we had to ask ourselves how quickly the banking industry can become a real intermediary of savings to the economy. How can we get banks away from the practice of making money by speculating on their assets to one of making money by lending to the real economy? he asked.

    To achieve these feats, Sanusi explained the CBN had in the last four years, improved its commitment to agriculture, the power sector and Small and Medium Enterprises (SMEs), as well as build a good loan book in areas that were considered no go areas in the past.

    “My favourite example is agric, where we have moved from less than one per cent in loan portfolio of banks, to almost five per cent in three years. And we did this by working closely with agencies of government, and understanding what is it that will make banks lend to agriculture. The history before was to sit down and blame the banks for not lending to agriculture, or give banks 100 per cent guarantees for lending to small scale farmers, or give the banks CBN money to lend at CBN rate,” he said.

    “We believe the 75 per cent CRR on public sector deposit is a stop-gap measure on the International Monetary Fund’s (IMF) prescribed Single Treasury Account (STA). If the pressure on the naira persists, we believe the CBN can increase the CRR on public sector deposit even to 100 per cent which would ultimately means it has achieved the objectives of the STA, a tool for consolidating and managing governments’ cash resources, thus minimising borrowing costs,” one analyst said.

    A report by Renaissance Capital (RenCap) showed that across its four sub-Saharan African countries, Nigeria’s banking sector has the highest CRR at 12 per cent for private-sector customer deposits, plus 75 per cent for public sector deposits. It added that it cannot rule out the possibility of further CRR hike as the regulator appears to be using the CRR as the primary monetary tool for mopping up excess liquidity.

    The report reads in part: “Our reading of the above is that the risk of a further hike in the CRR cannot be ruled out if the MPC sees renewed pressure on the naira. The worst-case scenario, we believe, is that the CRR on public-sector deposits could be raised as high as 100 per cent, increasing our estimate of the blended CRR in Nigeria to 23 per cent. On our numbers, the hit to interest income over a year would increase to three to 14 per cent.”

     

  • Governance audit: Ecobank to reconstitute board, Memart

    Governance audit: Ecobank to reconstitute board, Memart

    Ecobank Transnational Incorporated (ETI) Plc plans to reshuffle its board and amend its articles of association as part of extensive review of its corporate governance framework.

    Securities and Exchange Commission (SEC) had advised ETI to undertake comprehensive overhaul of its corporate governance after an investigative corporate governance audit by the apex capital market regulator identified worrisome gaps in corporate governance at ETI.

    SEC had stated that ETI needs to develop a one-year remedial plan with specific measures to address the specific governance gaps. ETI will also need to convene an extraordinary general meeting of shareholders to pass major resolutions on several proposals relating to these.

    The board of ETI at the weekend indicated that shareholders would meet next month to deliberate and adopt the action plan to implement the recommendations of SEC.

    According to regulatory filing made available at the weekend, the extraordinary meeting will reconstitute the board of directors of the financial services-holding company and also made major amendments to the company’s articles of association with regards to the number, tenure and meeting of directors.

    Specifically, the meeting will amend the articles of association to reduce the maximum size of the board of directors, set limitation of the tenure of directors and revise the quorum for meetings of the board of directors.

    Besides, the company is expected to include in its articles of association provisions on mergers, acquisitions and disposals.

    Shareholders are also expected to adopt a new resolution on capital raising as the company seeks to consolidate its pan-Africa operations.

    Meanwhile, the Nigerian stock market rode on a topsy-turvy market situation to close last week with a week-on-week average gain of 0.50 per cent. With 46 gainers to 39 losers, the main index at the Nigerian Stock Exchange (NSE)-the All Share Index (ASI), rose slightly from the week’s index-on-board of 40,571.62 points to close at 40,773.50 points.

    Aggregate market value of all quoted equities, which had opened the week at N13.005 trillion, closed at the weekend at N13.070 trillion. The performance of the market was boosted by modest gains in the insurance and oil and gas sectors as well as select highly capitalised stocks. The NSE 30 Index, which tracks the 30 most capitalised stocks on the NSE, recorded a marginal week-on-week gain of 0.03 per cent. The NSE Insurance Index also rallied 2.32 per cent while NSE Oil and Gas Index recorded the highest gain of 7.0 per cent.

    However, the NSE Consumer Goods Index indicated a drop of 0.35 per cent. The NSE Banking Index slipped by 1.64 per cent while the NSE Industrial Goods Index declined by 0.38 per cent.

     

  • Banks may grow assets to $168b, says KPMG

    Banks may grow assets to $168b, says KPMG

    Nigeria’s banking sector is expected to grow to over $168 billion by 2015, a KPMG report has said. The sector was worth $117 billion in 2011, a Customer Service report by the global auditing firm said.

    The report said that while Nigeria may be Africa’s most populous country, only about 20 per cent of the population is banked and two-thirds have never been banked at all.

    KPMG said the sector has recently experienced a number of regulatory changes including a repeal of universal banking licences and the promulgation of more stringent regulations by the Central Bank of Nigeria (CBN) which was aimed at reducing soaring books of non-performing loans and stamp out severe breaches of corporate governance.

    “However, with the establishment of the Asset Management Company of Nigeria (AMCON) to purchase toxic assets of banks and recapitalise troubled banks, some stability has returned to the sector,” it said.

    This development made the leading rating agency Standard & Poor’s (S&P), to upgrade the sector in 2012 to a positive outlook due to the country’s improved asset quality, capitalisation and corporate governance.

    The report posted on the firm’s website said with Automated Teller Machines (ATMs) becoming almost ubiquitous in the cities, it was not surprising that it had become the fastest growing channel in recent years. “Almost eight in 10 customers surveyed use the ATM and nearly two thirds of these people visit an ATM on a weekly basis with cash withdrawal and balance enquiry amongst the most common transactions customers perform via the ATM,” it said.

    However, it said that despite the proliferation of new channels in recent years, adoption of other alternate channels is still comparatively low.

    It also said very few respondents saying they use internet banking (seven per cent), Point of Sale (six per cent), telephone banking (five per cent) and mobile payments (two per cent). Of the respondents that had used internet banking, one- third were private sector employees and 15 per cent, were students.

  • UBA joins Convention on Business Integrity

    UBA joins Convention on Business Integrity

    United Bank for Africa (UBA) Plc was at the weekend admitted as member of the Convention on Business Integrity (CBI).

    Speaking at the signing in Lagos, the bank’s Group Managing Director/Chief Executive Officer, Phillips Oduoza said the exercise remains a significant milestone in the lender’s history.

    He said the bank aligned with the tenets of the convention because they reflect the integral part of its values and vision.

    “We are building customers’ confidence and passion to carry out our business with highest level of integrity. We align with the convention’s principles of promoting integrity and integrity in business,” he said. Oduoza said the CBI codes define a minimum standard for business integrity in the country.

    Continuing, he said integrity is one of the bank’s core values adding that the CBI’s code underscores its unwavering commitment to carrying out its business with the highest sense of integrity and responsibility.

    CBI’s Executive Director, Soji Apampa said UBA has by this venture, shown that it is committed to higher business standards than what the regulators are asking for. He said the CBI was established with the aim of promoting ethical business practices, transparency and fair competition in the private and public sectors. Signatories to the Convention undertake to observe the values of the CBI, both within their own organisations and in their dealings with customers and partners.

  • Enterprise Bank, ICAN partner on payment schemes

    Enterprise Bank, ICAN partner on payment schemes

    Enterprise Bank has been named a lead bank as well as collecting bank for various payment schemes of the Institute of Chartered Accountants of Nigeria (ICAN).

    A letter from the institute to its stakeholders, titled: ‘Appointment of Enterprise Bank as collecting bank for the Institute of Chartered Accountants of Nigeria (ICAN),’ stated thus: “We are pleased to inform you that Enterprise Bank has been appointed as a Lead Bank as well as Collecting Bank for various ICAN payment schemes. The schemes include student registration fees, annual subscription, examinations fees, and practising licence fees.

    In a statement, the bank said it will process the institute’s payment schemes using the Pay-Direct platform. All branches of the bank have been enabled to seamlessly participate in the collection.

    It said the appointment indicates an expression of the institute’s confidence in the lender, adding to the growing list of collections the bank undertakes on behalf of the federal and state governments, parastatals and other institutions.

    Apart from ICAN, the bank also acts as a collecting bank for the Nigerian Ports Authority (NPA) charges, Power Holding Company of Nigeria (PHCN), Joint Admission and Matriculation Board (JAMB) and other educational institutions like the West African Examination Council (WAEC) as well as the National Examination Council (NECO).

    The rest include the Federal Inland Revenue (FIRS) taxes, state internally generated revenue (state taxes), export levies, Nigeria Export Supervision Scheme (NESS) fees, Custom and Excise duty and DSTV, among others. While thanking ICAN for the confidence reposed in the bank, the statement, added that Enterprise Bank will deliver on this assignment with all seriousness on its way to becoming a top collecting bank in the country.

    With this development, Enterprise Bank, the statement said, will continue to play a leading role in advancing the implementation of the cashless policy as part of the effort to be the bank of choice to all Nigerians.

  • Former Credit Direct chief heads Media Perspectives

    Former Credit Direct chief heads Media Perspectives

    Media Perspectives, a leading advertising media planning agency has announced the appointment of former Credit Direct Chief Operating Officer (COO), Dr. Tayo Oyedeji as its Managing Director.

    In a statement, the firm said Oyedeji will provide strategic leadership and oversee the day-to-day operations of the agency. He brings 16 years of corporate and academic work experience spanning media advertising, management consulting, and financial services in Africa, Europe, and North America to the job.

    Credit Direct Limited is one of Nigeria’s top financial services companies with annual turnover in excess of N15 billion. While at Credit Direct Limited, Oyedeji was responsible for managing the operations of about 1,500 employees in 50 branches across 24 states.

    Dr. Oyedeji was also previously an Assistant Professor of Media Management and Economics at the University of Georgia, United states for three years and is an accomplished media scholar whose research on branding and brand equity management has been published in reputable journals like the American Behavioural Scientists, The International Journal on Media Management, and The Journal of Media Business Studies.

  • Ecobank among top African brands

    Ecobank Transnational Incorporated (ETI), has been named the most valuable brand in Africa – outside South Africa – in the annual ranking of the global banking and financial magazine, ‘The Banker.’

    The recognition came in the magazine’s current special edition, Brand Finance Banking 500.

    In a statement, the organisers said the lender has taken advantage of its spread to increase its brand value of 15 per cent in one year. The ranking which was recently made public estimates the value of the brand to $ 243 million and boosts the Group to the 367th place in the top 500 most valuable brands in the global banking industry, a jump of 32 places from last year.

    According to The Banker / Brand Finance Banking 500, if such performance is sustained, Ecobank could soon start to challenge the South African banks in the ranking of the top five brands with strong value on the African continent. The Banker is part of the London based ‘Financial Times”.

    The bank’s Group Chief Executive Officer, Thierry Tanoh said: “Our understanding of Africa’s cultural diversity, our deep attachment to the values of pan-Africanism, and our ability to innovate contribute to our alignment on topical market issues and to respond satisfactorily to the aspirations of the African peoples regarding banking products and services. This award confirms that we remain a landmark for African businesses and individuals alike.

     

  • CBN orders MRCs to keep 50% investments in bonds

    The Central Bank of Nigeria (CBN) has said Mortgage Refinance Companies (MRCs) are required to have a minimum of 50 per cent of their investments in debt obligations issued or guaranteed by the Federal Government of Nigeria or any of its agencies.

    The directive is contained in a regulatory framework issued by the CBN for the agency.The policy allows MRCs to issue guarantee for mortgage loans as part of its off-balance sheet engagements. The MRCs are also to issue bonds and notes to fund their purchase of eligible mortgages as well as engage in other activities as may be prescribed by the CBN from time to time.

    The report said MRCs are not allowed to engage in granting consumer, or commercial loans, originating primary mortgage loans, accept demand, savings and time deposits, or any type of deposits. They are also not to be involved in financing real estate construction and undertaking estate agency or facilities management, among other roles.

    The CBN said the establishment of MRC is primarily aimed at increasing the liquidity within the mortgage sub-sector and availability of mortgage credit in the country, it will also help reduce mortgage and related costs, and make residential housing more affordable.

    According to the CBN, the benefits of such mortgage liquidity facilities are well documented and globally acknowledged. “As a financial institution, the MRC would be under the regulatory and supervisory purview of the CBN. This regulatory framework is, therefore, designed to ensure that the MRC operates in a safe and sound manner, on internationally accepted principles, standards and best practice in mortgage liquidity facilities,” it said.

    The CBN said the regulatory framework is drawn pursuant to the provisions of the CBN Act 2007, Banks and Other Financial Institutions Act (BOFIA) CAP B3, Laws of the Federation of Nigeria (LFN) 2004, other relevant Laws, and extant CBN Guidelines and Circulars.

    The Framework prescribes the basic regulatory requirements for the MRC’s principal line of business of re-financing credits to borrowers on the security of residential mortgage assets and other qualified collaterals. It also sets the capital adequacy requirements for the MRC, including its minimum paid-up capital, maximum leverage limit, and the minimum risk-weighted capital requirement.

    Furthermore, it specifies the types of collateral that a borrower can pledge for the MRC’s advances, and the discount that the MRC shall apply in determining how much it can lend against any qualified collateral. It also prescribes procedures for the management of the MRC’s interest rate risk, its permissible investments and liquidity requirements.

    The guideline said the CBN is empowered license the MRC; determine the MRC’s capital adequacy standards and requirements; supervise its business operations, which include prescribing rules and conditions upon which the MRC may extend credits to borrowers.

  • Govt to double GDP share for manufacturing

    The Federal Government plans to more than double the contribution of manufacturing to the economy in the next three years through policy stimulus and investments, Trade and Investment Minister Olusegun Aganga,has said.

    The Minister spoke at the just concluded Standard Bank West Africa Investors’ Conference in Lagos. Bloomberg quoted him as saying Nigeria would increase manufacturing from an abysmal four per cent of the gross domestic product to over 10 per cent, by 2017. This, he said, would add N3.5 trillion to the economy and annual revenue of N5 trillion to manufacturing, the minister said.

    Nigeria depends on oil exports for about 80 per cent of government revenue and more than 95 percent of foreign income. Most of its industrial goods as well as refined petroleum are imported, making the country vulnerable to downward swings in prices of crude. With about $12 billion of investments planned for the petrochemical industry, “the expectation is that by 2017 our country will no longer need to import petroleum products.”

     

  • Cooperative wins Unity Bank’s promo car

    The Immigration Cooperative IPCI Limited yesterday, won the star prize car for the ongoing Unity Bank’s Aim Save and Win promo. The winner emerged during a zonal draw held in Lagos.

    Other winners that emerged are Ajayi Emmanuel who won Motor bike; Ojo Adekunle, Adeleye Sunday, Adesina Bamidele Blanton Victor among others.

    Winners in the Unity Kids account category were David Ayomide, Abolade Emmanuel, Onifade Bukola, Adikan Adeola among others.

    The bank’s Zonal Executive Director, Elems Mahmud Umar said the bank is committed to rewarding its customers. He said: “We have found time to reward our customers. We want to delight our customers and that’s why we have provided consolation prizes too,” he said.

    The Lagos Southwest zonal draws is the last for the star prize presentation, previously held in Northwest (Kano); Northeast (Gombe); South (Owerri) and Central (Abuja).

    He said that four customers in other zones emerged as star prize winners of the car (Kia-Rio). The students also won scholarship awards, while others won empowerment tools.

    He said new customers are to open and maintain the required balance for a minimum period of 45 days in any different savings accounts. “To qualify for a particular prize category, customers are to maintain a minimum of N250,000 to win cars, N100,000 for scholarship, empowernment and sound proof generator and N10,000 for LED Television,” he said.