The Nation Newspaper

Category: Money

  • CRR hike: N750b withdrawal may unsettle market stability

    CRR hike: N750b withdrawal may unsettle market stability

    Market liquidity may be threatened this week following plans by the Central Bank of Nigeria (CBN) to implement its 75 per cent hike in Cash Reserve Ratio (CRR) on public sector deposits tomorrow. COLLINS NWEZE writes on key market developments and impact of the policy on the financial sector.

    The inter-bank rate, which remained steady last week, and continued to reflect improved market liquidity, may be affected by the Central Bank of Nigeria’s (CBN) plan to withdraw N750 billion from the financial system.

    The fund represents about 5.09 per cent of money supply, and will be removed based on CBN’s Cash Reserve Ratio (CRR) policy in which banks must keep 75 per cent of their public sector deposits with the apex bank.

    The CBN at the last Monetary Policy Committee (MPC) meeting raised the CRR on public sector deposits from 50 per cent to 75 per cent. That was after initial increase from 12 per cent to 50 per cent in July last year.

    Last week, the call/overnight and seven-day money market rates were at an average of 10.5 per cent and 10.8 per cent, throughout last week. The three-month Nigeria Interbank Offered Rate (NIBOR) was also steady on 12 per cent, though fewer activities are done on the tenor. The inter-bank secured lending (Open Buy Back) was also broadly steady on 10.2 per cent on January 30.

    Meanwhile, the CBN liquidity management remained active, supported by the change to CRR on public sector deposits on January 21, 2014.

    The naira strengthened 0.3 per cent against the dollar in the Inter-bank but has lost 1.3 per cent of its value on January 30.

    Recent stability was partly driven by CBN’s direct intervention, and to a lesser extent, improved dollar supplies from its twice weekly Retail Dutch Auction System (RDAS) window. It closed at N162.4 to a dollar.

    Meanwhile, the twice-weekly CBN’s RDAS continues to be influenced by 26 Sep circular regarding USD sales to small scale importers. The naira remains under pressure due to structural imbalance between dollar supply and demand; and lower US oil demand.

    Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said the MPC left all other parameters including the Monetary Policy Rate un-changed at 12 per cent, with an asymmetrical corridor of plus or minus 200 basis points. The CRR on private sector deposit was retained at 12 per cent and the liquidity ratio was unchanged at 30 per cent.

    Rewane said the global economic recovery and likely impact of tapering in the US on investment flows, shows some limited amount of vulnerability on the external sector of the economy.

    He said impact of this decision on money markets will be a shock effect in the short run and a re-turn to equilibrium rates within six weeks. “The first time the MPC increased the CRR on public sector deposits in August 2013, an estimated N1 trillion or 6.84 per cent of money supply was debited. At that time, the impact was a spike in interbank rates of approximately 800bps to an average of 21 per cent. Also, it coincided with the failure of two discount houses, which exacerbated the situation,” he explained.

    He said the key variable that drove this decision remains the protection of the value of the naira in the foreign exchange markets. “The CBN Governor expressed some concerns about the declining trend in foreign portfolio flows. This in addition to the leakages and falling fiscal buffers made the CBN take a more aggressive position to defend the naira,” he said.

    According to Rewane, the divergence between the official and parallel markets had widened to N20 or 12 per cent of the official exchange rate adding that the Nigerian economy is more exchange rate than interest rate sensitive. This, he said, means that a depreciating currency will have a direct impact on inflation and could be counter-productive.

    Head, African Research at Standard Chartered Bank, Razia Khan, said in view of increased market liquidity following the AMCON bond maturity in December, as well as an increased spread between the interbank foreign exchange rate and BDC rates, the move is not surprising.

    “It is a clear demonstration of the CBN’s continued commitment to foreign exchange stability, even in a more difficult environment. Should the foreign exchange rate come under further pressure, key threats might be related to quantitative tapering, concern over the transition at the CBN, and ongoing concern about oil receipts as well as Nigeria’s political cycle – then more tightening cannot be ruled out,” she said.

    Currencies analyst at Ecobank Nigeria, Olakunle Ezun, said by raising the public sector deposit CRR the CBN raised concerns about rising inter-bank liquidity and huge cost of monetary operations. “While there was no change to exchange rate policy, the CRR effect will be positive for the naira given the expected reduction in liquidity,” he said.

    Ezun said there was no immediate impact of the policy in interbank rate, since market liquidity is still over N1 trillion. According to him, the short end of the curve remain attractive, as concerns over naira and inflation outlook continue to influence CBN’s monetary policy regime in short term.

     

    GDP rebasing

     

    Chief Economist, Renaissance Capital (RenCap), Charles Robertson, has said that Federal Government’s plan to rebase the Gross Domestic Product (GDP) by next month could raise this year’s budget deficit by N400 billion to N1.9 trillion.

    In an emailed report, the economist said the GDP revision may affect the 2014 budget too. “It does nothing to improve budget revenues or expenditure. It does mean, however, that a nominal federal government budget deficit of N912 billion could be raised by about N400 billion to N1.3 trillion and still remain at 1.9 per cent of GDP, using the new 2014 GDP estimate we have. This may be very tempting to politicians in pre-election mode,” he said.

    Robertson said the wider budget deficit would then require additional borrowing, via either Eurobonds which Nigeria’s debt office is trying to move towards, or domestic debt. Higher supply might offset the benefit to debt holders of the improved debt ratios and a possible rating upgrade.

    “We must emphasise that while per capita GDP would appear to rise from around $1,700 to $2,400, in fact the National Bureau of Statistics (NBS) is just doing a better job in measuring the output that is already happening. No one in Nigeria should suddenly find 53 per cent more naira in their pocket,” he said.

     

    Forex market

     

    The maximum weekly forex sales to Bureau De Change (BDC) operators were, removed by the Central Bank of Nigeria (CBN). The action, contained in circular to Authorised Dealers and BDC operators said the action was meant to shore up liquidity in the forex market. Dollar scarcity in the market had affected naira exchange rate in recent months, hence, the policy review.

    The circular, signed by CBN Director, Trade and Exchange, Batari Musa, said the policy review followed the circular of September 26, last year in which a limit of $250,000 was put in place.

    “All authorised dealers are hereby informed that the provisions of paragraph (1) of the circular under reference have been reviewed with immediate effect. Consequently, the limit of $250,000 as the maximum weekly forex sales to BDC is hereby removed to shore up liquidity in that segment of the foreign exchange market,” he said

    Henceforth, authorised dealers are free to sell forex to BDCs subject to compliance with the provisions of extant Anti-Money Laundering/Financing Terrorism laws and regulations in the disbursement of forex. “Furthermore, all transactions between authorised dealers and BDCs as well as the latter and end-users must be supported with appropriate documentation,” he said.

    Musa said authorised dealers and BDC operators are to continue to render weekly returns on their transactions to the CBN and other relevant regulatory agencies, failing which appropriate sanctions, including revocation of operating license shall be imposed.

     

    Finance Houses

     

    New guidelines for Finance Houses (FCs) operations said operators in the sub sector are allowed to raise funds from foreign investors or parties for recapitalisation of their entities, but such funds are subject to CBN’s approval.

    The draft guideline obtained exclusively by The Nation at the weekend, said the FCs were envisioned to operate within the middle tier of the financial system, with a focus on the Micro, Small and Medium Enterprises (MSMEs) segment.

    The sub-sector was to play complementary roles to banks, bridging financing gaps and meeting the financial needs of its target customers. However, Finance Companies have not demonstrated the necessary capability to thrive in this space, which has resulted in a largely under-performing sub-sector – a situation of concern to the CBN and other key industry stakeholders.

    It said as part of the initiatives to establish financial stability within the financial eervices industry and the Finance Company sub-sector in particular, the CBN undertook a review of the Guidelines for Finance Companies. These Revised Guidelines are issued by the CBN in exercise of the powers conferred on it by the CBN Act of 2007 and the Banks and Other Financial Institutions Act of 2004 (BOFIA).

    The Revised Guidelines are to regulate the establishment, operations and other activities of Finance companies. It said the Revised Guidelines replace the existing Guidelines for Finance Companies and should be read in conjunction with the provisions of the CBN Act, the BOFIA, as well as written directions, notices, circulars and guidelines that the CBN may issue from time to time.

     

    Agric credit

     

    The Federal Government plans to double agriculture’s share of banks’ credit to 10 per cent in two years as it seeks to cut food imports, Agriculture Minister Akinwunmi Adesina said.

    “We made a fundamental shift that agriculture is not a developmental activity, agriculture is a business. And so it 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 in a report.

    Loans to agriculture as a share of total credit rose to N320 billion ($2 billion), or five per cent, at the end of last year from less than one per cent in 2011, Adesina said.

    He said the Agriculture Ministry is partnering the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL), a unit of the CBN to provide credit guarantees to enable banks lend to farmers.

    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, President Goodluck Jonathan said in July.

    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.

     

    Bank to bank report

     

    FBN Holdings Plc has unveiled a refreshed corporate identity for the group, including all its subsidiaries.

    Designed to reflect the company’s strategic direction and position it to meet the future needs of the market, the identity will be rolled out across all the group’s operations, including First Bank of Nigeria Limited.

    Speaking at the event, the Chief Executive Officer, FBN Holdings, Bello Maccido, said the business environment is getting tougher and there is need to review the brand in line with realities.

    He said refreshed identity will preserve the lender’s heritage as a leading player in the financial services sector, which also plays major role in the retail market segment.

    United Bank for Africa Plc (UBA) has extended $700 million (about N113 billion) in funding to different investors towards the acquisition of power assets in Nigeria’s recently privatised power sector.

    The bank’s Group Managing Director and Chief Executive Officer, Phillips Oduoza, made this known this at the sidelines of this year’s World Economic Forum (WEF) in Davos, Switzerland.

    “It is a growth sector we are playing very big” said Oduoza. Besides power, he said UBA is also heavily involved in Nigeria’s telecommunications sector where the bank has taken part in most of the major big ticket transactions.

    ‘’On agriculture, the UBA Chief Executive said the bank has continued to channel resources to the sector, given that it remains the mainstay of most economies in Africa.”

  • Hard times ahead for tier-two banks, says RenCap

    •Diamond, Fidelity, Stanbic, others assessed

    As the Central Bank of Nigeria (CBN) continuously tightens monetary policy environment, tier two banks have struggled to improve their returns and will definitely face difficult times ahead, Renaissance Capital (RenCap), an investment and research firm, has said.

    According to a report released at the weekend, some of the tier-two banks include: Diamond Bank, First City Monument Bank, Fidelity Bank, Stanbic IBTC Bank, and Skye Bank, among others. It said that some top performers have emerged and made best use of a bad situation in the evolving Nigerian banking landscape.

    It said Diamond Bank and Stanbic IBTC Bank have been the positive outliers among the tier two banks, delivering 20 per cent Return on Equity (RoE) in 2013.

    However, the significant tightening of monetary policy since then has made it tougher for the other tier two banks to deliver improved returns. “Nevertheless, these two have beaten the odds – with a combination of strategic focus, driving scale in their respective niches and improving asset quality, they managed to reach the 20 per cent RoE mark,” it said.

    RenCap said that tier two banks not only need to have a clear strategic focus, but they also need to communicate this clearly to investors. It said success in this area is a function of management having both clear strategic business goals and the right people in place to drive the communication process.

    “Although we think the tier two banks ideally must lead the drive into retail/Small and Medium Enterprises, given that they are structurally disadvantaged on funding costs, this is not the golden ticket. They need to realise that with the high level of market concentration at the top, tier two banks cannot compete successfully simply by replicating the tier one banks’ model on a smaller scale,” it said.

    It said Diamond Bank has successfully built an enviable business by remaining focused on the SME/retail segment, even when other banks repeatedly changed their strategic focus.

    “With 80 per cent of its deposits sourced from SME/retail and 75 per cent of its deposits in current and savings accounts in September 2013, Diamond Bank operates with a 3.4 per cent funding cost, which compares favourably with all tier one banks,” it said.

    It also said Stanbic has solid non interest revenue-generation capabilities built on its market-leading non-banking subsidiaries. “We have observed that niche plays on a small scale will not move the needle for the tier two banks; they must start developing these niche focus areas today, particularly the pure-play commercial banks,” it said.

    “We have identified an underlying cost focus and, upon looking more closely at the tier two banks’ efficiency metrics, concluded that there simply has not been enough focus on cost control while pursuing revenue growth. Overall, Diamond Bank has delivered the biggest bang for its buck over time, while Fidelity and Stanbic have the most room to catch up with peers in terms of efficiency,” it said.

    It said 2013 was a remarkable year for Stanbic, being the first year since the Standard Bank takeover that it recorded RoE in the 20 per cent range. Also, strong capital market performance and solid trading revenue were the key drivers.

    “We will monitor progress on this front as we think it is core to Stanbic’s RoE remaining comfortably north of 20 per cent going forward. On our cost of equity estimate, we believe the market is pricing Stanbic on 26 per cent sustainable RoE,” it said.

    RenCap said that in July 2012, it took a closer look at the tier two banks following a series of mergers and acquisition activities, and concluded that competition would be more intense for the tier two banks; returns were set to improve; and the deposit mix will be a key earnings differentiator among tier two banks in the emerging banking landscape.

    The Nigerian banks have had to operate in an environment of tightening monetary policy for the past three years, which in relative terms has been unfavourable to the tier two banks. Their heavier reliance on term deposits has left them competitively disadvantaged as against the scale banks, and the concentration of market share by tier one banks has forced tier two banks to work harder to deliver improved returns in this environment.

  • ‘BPM can assist banks reduce costs’

    Banks and other companies can reduce their cost of operations 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 & 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 optimizing 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.

  • Sterling Bank unveils business initiatives

    Sterling Bank unveils business initiatives

    Sterling Bank Plc has resolved to invest in new business initiatives and nurture them to become viable Small and Medium Enterprises (SMEs).

    In a statement, the bank’s Group Head, Strategy & Communications, Mr. Shina Atilola said the exercise is part of efforts to facilitate real growth in the economy. The bank said small businesses remain the catalyst for real economic development anywhere in the world.

    He explained that national economic development prospects in any country was hinged on the entrepreneurial energy of vibrant SMEs as most big business concerns grew from small scale to become big icons.

    Atilola declared: “Many economies, developed and developing, have come to realize the value of small businesses. They are seen to be characterised by dynamism, witty innovations and efficiency as their small size allows for faster decision making process. Small businesses are believed to be the engine room for the development of any economy because they form the bulk of business activities in a growing economy like that of Nigeria.”

    He noted that a team of seasoned consultants were engaged by the bank to carefully scrutinise proposals received from members of the public.

    He said the bank decided to launch the project in order to support those who have come up with business plans as part of their New Year engagement’. He said that already, 50 contestants have qualified for the second round of the on-going “Meet the Executive” Project sponsored by Sterling Bank Plc.

    Atilola noted that over 1,000 business plans were received from Small Business Owners (SBO) aspiring to become big entrepreneurs. He said: “The “Meet the Executive” project is designed to support new and aspiring entrepreneurs.

     

  • $184m AfDB loan for power coming

    The Board of Directors 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 Nigerias power sector privatisation.

    It has also provided an ADF loan of $3.1 million, for capacity building for the country.

    It said the PRG programme in Nigeria aims to 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 Nigerian power sector privatization programme,” it said.

    The Director of the AfDB’s Energy, Environment and Climate Change Department, Alex Rugamba, explained the potential impact of the programme: “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.”

    It said Nigerian PRG programme is expected to lead to increased productivity, economic activity and growth, and reduced poverty. In the short to medium term, the project will yield an increase in the maximum electricity supply and consumption per capita.

    According to government statistics, power outages cost Nigeria about three per cent of its GDP annually. It is anticipated that the IPPs eligible for coverage under the program could generate an additional 1,380 MW of power by 2016, thereby contributing to increasing the population’s access to more reliable and affordable electricity (from 41 per cent currently to 50 per cent by 2016).

     

     

     

     

     

     

     

     

     

  • CBN sets N5b capital base for Mortgage Refinance Companies

    •Violators to pay N5m fine

    The Central Bank of Nigeria (CBN) yesterday, set N5 billion minimum capital base for Mortgage Refinance (MRC) companies. In a regulatory and supervisory framework for the subsector released yesterday, the apex bank said each MRC should present evidence of payment of the sum via Nigeria Interbank Settlement System (NIBSS).

    However, the fund will be refunded with interest after the proposed institution obtains its final licence. Part of the guidelines also said credit policy that describes the credit products that the MRC offers to its borrowers, including the terms and conditions for issuing advances must be defined.

    The CBN also said MRC operators that submit false/inaccurate information to regulators will pay N5 million fine while all the officers involved will be sanctioned. Also, operators that fail to publish their annual accounts or failure to disclose contraventions and penalties in the audited annual accounts will pay a fine of N2.5 million.

    Also the procedures and criteria to be used in granting a licence to the MRC shall be the same as specified for banks under the Banks and Other Financial Institutions Act, CAP B3, Laws of the Federation of Nigeria, 2004 and any other regulations issued by the bank.

    It said the establishment of a MRC is primarily aimed at increasing the liquidity within the mortgage sub-sector and availability of mortgage credit in the country, 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.

  • Investor prefers Nigerian banks to South African peers

    Mark Mobius, chairman of Templeton Emerging Markets Group, is picking Nigerian bank stocks ahead of South African peers as Johannesburg-based lenders battle rising bad-debt charges while trading at higher valuations.

    Bloomberg quoted him saying: “The banks up north are cheaper. The big challenge with banks” in South Africa was a surge in loans not backed by assets, which caused risks in the industry to increase.

    Guaranty Trust Bank Plc, Nigeria’s largest lender by market value, is trading at 8.5 times historical earnings, compared with Johannesburg-based Standard Bank Group Ltd. (SBK), Africa’s biggest, which trades at a price-to-earnings ratio of 11.6, according to data compiled by Bloomberg.

    Banks in Nigeria are benefiting from financing oil, gas and power projects in the continent’s second-largest economy, while bad debts fall. South African lenders are struggling with stagnant mortgage growth and rising non-performing loans as the continent’s largest economy buckles under an almost 25 percent unemployment rate and the slowest expansion since the 2009 recession.

    The six-member FTSE/JSE Africa Banks Index slumped 11 per cent this year, with FirstRand Ltd. (FSR) leading the decline with a 14 per cent drop. The Nigerian Stock Exchange Banking 10 Index fell 7.5 per cent over the same period.

    South African Reserve Bank Governor Gill Marcus on Wednesday raised the nation’s benchmark repurchase rate by 50 basis points to 5.5 per cent, the first tightening since 2008. The rand has lost 7.2 per cent this year, making it the worst performer among 16 major currencies tracked by Bloomberg. The naira has weakened 1.6 percent this year through, with the Central Bank of Nigeria keeping its benchmark rate at a record high of 12 per cent.

    “For South African banks it’s pretty much a case of wait and see what the impact is going to be of the interest-rate hike,” said Johan Meyer, Templeton’s managing director for South Africa. “The currency issue will always be something we’ll look at.”

     

  • CBN gives finance houses 18 months to recapitalise

    CBN gives finance houses 18 months to recapitalise

    • Rift over minimum capital base persists

    The Central Bank of Nigeria (CBN) has given finance houses 18 months to raise their capitals to a yet-to-be disclosed amount. This is contained in a guideline released by the bank, which was obtained by The Nation, at the weekend.

    The CBN and operators have been bickering over the issue. An insider at the Finance Houses Association of Nigeria (FHAN), who asked not to be named, said operators want the capital base raised from N20 million to N100 million, but the CBN prefers N200 million.

    The source said investors were interested in knowing the capital base before putting in money.

    In 2012, CBN reviewed finance houses’ operations, resulting in the closure of 47 “inactive” firms.

    Fifty-five were found to be active and four undergoing restructuring. The CBN, in statement, said it recognised only the 59 finance companies with CBN licenses.

    The affected Finance Houses included Asset Management Group; Cal Finance Investment Limited, Capri Martins Finance Limited; Corporate Finance Group Limited; Equator Capital Assets Management Limited; Eston Funds Limited; First Bond Finance Limited; First Spring Finance and Investment Limited; Grand Bond Finance & Securities Limited; Intel Trust Limited and Leo Investment Limited among others.

    The CBN, therefore, commenced comprehensive reforms of the Finance Houses subsector. The regulator said the sector, still wallowing in neglect and lacking clearly defined operational structure, has been relegated to the background in recent years.

    It said it now wants to see Finance Houses that are strong, efficient and able to perform their constitutional roles in the economy. Achieving this requires comprehensive reforms of the subsector that would enable it carve a niche for itself in the financial services sector.

    Finance companies provide services to consumers, industrial, commercial and agricultural enterprises. They give consumers, individuals and Micro, Small and Medium Enterprises (MSMEs) credit and loans.They also manage funds for customers/clients on agreed tenor and rate.

    They assist customers to finance infrastructure/industrial projects through a loan structure that relies primarily on the project’s cash flow for repayment. But they do not accept deposits.

    They can only source funds from shareholders, private equity companies, development finance institutions (DFIs) and other institutional investors.

    He said there are several investors, who have carried out due diligence on the strengths and weaknesses of some of the finance houses, but could move in funds because the regulation in the sub-sector remains unclear.

    The on-going reform in the subsector is expected to look at the regulatory framework that will govern finance lease practice; institutionalise a funding pool to stimulate lending activities and structure programmes to address the reputation and poor visibility challenges, among other issues.

    According to the guidelines, finance companies can access SME funds subject to compliance with minimum prudential norms, as defined by the CBN and may assist clients access SME funds. This can be done through vehicles such as the SME Credit Guarantee Scheme, MSME Development Fund and the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) funds for clients in the Agric value-chain business.

    It also said that in addition to the specific requirements defined for the SME funds, these funds may only be accessed for asset finance, working capital and export finance transactions.

    It said compliance with the provisions of the Code of Corporate Governance and the Approved Persons Regime Finance Companies must demonstrate compliance with the CBN Code of Corporate Governance and show evidence of a competent, independent, unimpaired and uncompromised Board.

    The CBN had in March 2012 given a 30-day notice to 47 finance houses closed or inactive, to submit evidence of their existence and/or operations, or lose their operating licences. The order expired on Tuesday, April 18, 2012 and the banking watchdog is yet to conclude decision on the matter.

     

     

  • Drop in FDI depletes reserves to $43b

    the gross external reserves

    which stood $44.6 billion on

    December 5, has declined to $43 billion as at January 23, due mainly to a drop in portfolio and foreign direct investment (FDI) inflows, the Central Bank of Nigeria (CBN) has said.

    In a report to stakeholders, the apex bank said the reserves which stood at $42.85 billion as at December 31, 2013, as against $43.83 billion recorded in end-December 2012, represented a decrease of $0.98 billion or 2.23 per cent.

    The CBN said the decrease in the reserves level resulted largely from a slowdown in portfolio and FDI flows in the fourth quarter of 2013 resulting in increased funding of the foreign exchange market by the CBN to stabilise the currency.

    It expressed concern over the continued depletion of the Excess Crude Account (ECA) which balance stood at less than $2.5 billion as at January 17, 2014 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 the 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.

    Although it acknowledged output losses due to theft and vandalism, it nevertheless remarked that such could not wholly explain the magnitude of the shortfall in revenue.

    It said accretion to external reserves remained low while much of the previous savings have been depleted, thereby undermining its ability to sustain exchange rate stability. The Committee 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 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.

     

  • Standard Bank’s confab targets power sector funding

    Key issues on Nigeria’s economic develop ment and securing adequate funding for power sector projects, will be discussed at the fifth Standard Bank West African Investors Conference, holding in Lagos, next month.

    Speaking at a press briefing in Lagos to announce the event billed for February 4 to 6, the Chief Executive Officer of Stanbic IBTC Holdings Plc, Mrs Sola David-Borha, said the Standard Bank Group has an obligation to help rebuild confidence in the Nigerian economy by highlighting opportunities in power, energy and the food value chain, that investors could explore to derive optimal value for their investments.

    She said this year’s conference, titled: “Nigeria: Time to deliver”, presents opportunity to deepen discourse on quickening the development of the country’s growth sectors and to further highlight the opportunities therein in order to sustain the attractiveness of Nigeria as a preferred investment destination in Africa.

    She said: “The rationale for selecting this year’s theme is that the economic reforms are critical levers for economic development and it is time for all stakeholders to support the government in accelerating growth. In summary, it is time to execute.”

    Chief Executive Officer of Stanbic IBTC Stockbrokers Limited, Mr. Oladele Sotubo, stated that the conference aims to facilitate direct information exchange between institutional investors and the executive management of companies listed on The Nigerian Stock Exchange, as well as non-listed companies, to facilitate the inflow of capital into Nigeria by fund managers with keen interest in investing in Africa.

    “Besides the direct impact which these exchanges will make on the Nigerian capital market, the conference will provide both local and international investors with opportunities to meet with some of the companies they have investments in, or in which they hope to make investments. It will also serve as a bridge to connect these investors to opportunities inherent in Africa’s growth sectors, for example Nigeria’s power sector which was recently opened up for private sector participation” he stated.