The Nation Newspaper

Category: Money

  • Rand weakens to five-year low

    South Africa’s rand depreciated to the lowest intraday level since March 2009 against the dollar after measures of Chinese manufacturing fell, pushing emerging-market currencies weaker. Bonds declined.

    Bloomberg said a Chinese Purchasing Managers’ Index from HSBC Holdings Plc and Market Economics declined to 50.5 in December from 50.8 the previous month, while a separate gauge compiled by the statistics bureau and logistics federation fell to 51 from 51.4. A reading above 50 signals expansion. China is the biggest buyer of South African raw materials, accounting for about 12 percent of exports, according to government data.

    “Emerging-market currencies are weaker in general on a stronger dollar,” Ion de Vleeschauwer, chief currency dealer at Bidvest Bank Ltd., said by phone from Johannesburg. “Liquidity is thin in the market and moves in the exchange rate are exaggerated.”

    The rand weakened 1.5 per cent to 10.6570 per dollar, the worst performer yesterday among 16 major currencies tracked by Bloomberg after the Norwegian krone and the Brazilian real. The yield on benchmark government bonds due December 2026 rose six basis points, or 0.06 percentage point, to 8.31 per cent, the highest level on a closing basis since December 6.

    Foreign investors bought a net 121 million rand ($11 million) of South African bonds on December 31 and sold a net 301 million rand of equities, according to data from the Johannesburg Stock Exchange.

  • IFC, Financial Times partner

    The Financial Times and International Finance Corporation (IFC), a member of the World Bank Group, have launched an awards programme to showcase business initiatives that can create long-term, transformative solutions to environmental, social, and corporate governance challenges, particularly in developing nations.

    The FT/IFC Transformational Business Awards: Sustainable Solutions to Today’s Development Challenges expand the FT/IFC Sustainable Finance Awards, which established themselves over eight years as the leading global awards for environmentally and socially responsible banking and investment. The 2013 Sustainable Finance Awards attracted a record 254 entries from 221 organizations in 61 countries.

    The new programme will highlight innovative, commercially viable, and replicable products and services that address development needs in areas such as infrastructure, energy, food and water, education and health. It also recognizes the use of technology to empower the poor and efforts to reverse environmental and social degradation.

    Martin Dickson, U.S. managing editor of the Financial Times and co-chair of the Transformational Business Awards judging panel, said: “We’ve made the Transformational Business Awards open to all organizations – financial and non-financial – across both the private and public sectors. They focus on specific projects and transactions and the impact those initiatives have on the problems they are targeting.”

    Nena Stoiljkovic, IFC Vice President, Business Advisory Services, and fellow judging panel co-chair, said: “We want to recognize financial institutions and companies that have developed innovative solutions that can work in many markets with a focus on long-term value creation for businesses”.

    In conjunction with the awards, IFC will be hosting a series of Transformational Business Days in cities around the world from December 2013 to February 2014 to provide more information about the new awards program and to promote best practice in transformational business and finance.

  • Unending reforms as banks step up deposit drive

    Unending reforms as banks step up deposit drive

    In the past 12 months, policy changes under the Central Bank of Nigeria (CBN) Governor, Mallam Sanusi Lamido Sanusi, have been regular, swift and sudden. The CBN’s target is to keep the naira stable, reduce cost of banking operations and shift banks’ interest from public sector deposits to private sector funds.

    During the year, banks’ Net-Open Position Limit (NOPL) was also reduced to one per cent, and a 48-hour limit placed on the use of forex bought from the Retail Dutch Auction System (RDAS). On September 16, the Central Bank said it would, by December 2016, stop playing the implicit role of “banker of last resort” for the Real-Time Gross Settlement System in banking.

    The biggest policy within the year was the CRR hike, which on August 7, took away N1.3 trillion from the financial system.

    The CRR is the portion expressed as a percentage of banks’ deposit balances, which they must have as reserve in cash with the central bank.

    Sanusi said the policy was ignited by worries over the rise in liquidity from banks purchasing short-term government securities using public sector deposits. He was afraid that strong liquidity growth could trigger a rise in inflation, which was at 8.2 per cent in August.

    Olakunle Ezun, Currencies Analyst at Ecobank Nigeria, said the policies remained positive as long as they support the naira and reveal the health and soundness of the banking system. He sees them as indirect tightening of loanable funds to banks.

     

    Agent Banking/ Mobile Money

    Besides these policy changes, the CBN also within the year made case for improved financial inclusion.

    The regulator consistently advised banks on the need to provide access to affordable financial services and products for every Nigerian.

    Agent banking and mobile money were part of the policies taken by the regulator to get the message across to the unbanked. Subsequently, the CBN within the year issued Agent Banking Guidelines to reach the people in the grassroots where bank branches are scarce.

    Sanusi said financial inclusion had been defined in different ways around the world but the essence of inclusion is tied to economic development and providing a better way of life for all Nigerians.

    The CBN, he said, had over the years recognised certain barriers to achieving inclusion some of which include; distance to bank branches, cumbersome account opening requirements, lack of awareness of financial products and services amongst others.

    “As a regulator, we also recognise the challenges deposit money banks face in trying to reach the underserved communities which include; the cost incurred by the banks in catering to lower valued accounts and the cost of expanding their branch networks to excluded communities,” he said.

    He said the apex bank has taken a stand therefore to ensure that these barriers are broken down and several steps to address these constraints have been taken. Some of these include agent banking.

    The guidelines for agent banking have been developed and approved by the CBN. The guidelines are to ensure increased agent activity in the delivery of banking services outside traditional brick and Mortar bank branches, through additional financial access points such as existing retail stores, petrol stations, post offices or via technology such as ‘Point of Sale’ (POS) devices and mobile phones.

    The Financial Industry along with other stakeholders decided to make financial inclusion a top priority and launched a National Financial Inclusion Strategy. The strategy has targets to help reduce the number of adult Nigerians who are excluded from formal financial services from 46.3 per cent in 2012 to 20 per cent in 2020 with specific targets for payments, savings, credit and Insurance.

    Sanusi said sustaining Nigeria’s development hinges on ensuring that at least 80 per cent of all adult Nigerians have access to affordable financial services as well as the right environment within which to flourish economically.

     

    Mobile Money

    Acting Chief Executive Officer Etisalat Nigeria Matthew Willsher explained that mobile money remained a convenient, secure and affordable way to send money to friends and family using mobile phone also played dominant role in financial inclusion. He said that regulators like the CBN and National Communication Commission (NCC) need to work together to make mobile money a success.

    Telecommunication companies (Telcos) and banks which are expected to jointly drive the process are working at crossroads. The telcos insist that they should be in charge, and not the banks. They have been advocating for operator-led model instead of bank-led model being implemented by the CBN.

    The bank-led model requires that a bank deploys mobile payment applications or devices to customers and ensures merchants have the required point-of-sale (PoS) acceptance capability to carry out the transaction. Here, mobile network operators’ network merely serves as vehicle through which transactions take place. The model was based on the regulatory framework for mobile payment services issued by the CBN in 2009, which disenfranchised telcos from operating mobile money except through strategic partnerships with licensed operators.

    The Telcos, have consistently advised the CBN to allow them participate in the regulation of the subsector, but nothing has come out of the demand. The apex bank, which solely regulates the business, has given the Telcos little or no opportunity for control. This model has deprived the business the needed technological and infrastructural backing critical to its success.

    Globacom’s Director, Telebanking Unit, Tunde Kuponiyi. He insisted that the current regime of mobile money regulation, which is being bank-driven, is not friendly to telecoms companies who provide the mobile payment platform. He said that though there was a lot that telecoms companies could contribute in a cash-less economy, their current mandate was limiting.

     

    Banks approach

    Some of the banks that embraced agent banking are FirstBank of Nigeria Limited, Sterling Bank, among others. Sterling Bank said it has decided to take the agent banking approach to include the millions of the unbanked Nigerians in the financial system and by so doing, empowering them to become economically viable.

    Sanusi, who launched the bank’s agent banking platform in Lagos, said the lender engages pre-qualified individuals in different locations that are predominantly financially-excluded to serve as agents to the Bank under the CBN approved agent banking model.

     

    How Agent Banking works

    The use of biometrics-enabled POS with a well-tested application that has been successful in India that shares some similarities with Nigeria; agents that are carefully selected are then authorised to carry Out certain transactions, among others for customers under the scheme Such as the enrolment of new customers in line with the CBN Level KYC requirements, deposits, withdrawals, airtime top-up and bill payment and funds transfer.

     

    Hitches

    However, this cannot be done with the unbalanced distribution of bank branches in the country. According to the Nigerian Deposit Insurance Corporation (NDIC), out of the 869 licensed micro finance banks in the country, 346 or 39.8 per cent are located in the south- west geopolitical zone, 162 or 18.64 per cent in the south east, 158 or 18.8 per cent in the north central while only 63 or 7.2per cent and 32 or 3.6 per cent are located in the north west and north east. Lagos, Anambra and Abuja have the highest number of MFBs.

    Agent banking is part of efforts to increase the level of financial inclusion of the country, according to the Managing Director of the NDIC, Alhaji Umaru Ibrahim.

    Agent banks operate in simple ways such that they can be operated by supermarkets, gas stations, stores and the likes as they are not full-fledged banks. The Kenyan model of agent banks are usually equipped with a combination of point-of-sale (POS) card reader, mobile phone, barcode scanner to scan bills for bill payment transactions, Personal Identification Number (PIN) pads, and sometimes personal computers (PCs) that connect with the bank’s server using a personal dial-up or other data connection.

    Clients that transact at the agent use a magstripe bank card or their mobile phone to access their bank account or e-wallet respectively. Identification of customers is normally done through a Personal Identification Number, but could also involve biometrics. With regard to the transaction verification, authorisation, and settlement platform, banking agents are similar to any other remote bank channel.

    According to the NDIC chief, agency banking would go a long way in reaching out to the largely unbanked population by creating banking representations where banks ordinarily do not have enough resources to establish branches.

    Ibrahim explained that agent banks is a complimentary policy that is worthy of emulation as it would provide simple banking services to a variety of people on behalf of various banks.

    “Agent banking has the potentials to grow access to banking facilities in the country especially uneducated and those in rural areas. Another area where agents could be meaningfully deployed is in the mobile payment system as successfully done in Kenya and some other countries,” analysts said.

    Agent banking, however, comes with its own risks as banks and their customers would be faced with agent fraud, unauthorised fees, loss of customer assets and records, data entry errors, system failures as well as a host of others.

    These, they noted would have negative impact on the image of the banks affected customers’ confidence in them would water down, lowering their customer and profit base.

     

    Cash-less banking

    The year also ended without the CBN being able to fully resolve the connectivity challenge facing cash-less banking. CBN Deputy Governor, Operations, Tunde Lemo said the CBN has licensed 21 mobile money operators but the challenge remains how to link mobile money to the PoS among other issues.

    “That is a challenge that we are also working on. If mobile phones can serve as a touch point, our transactions would go up rapidly. So these are some of the things we are looking at, hoping that by next year, as we roll out more PoS machines, we have to see how we integrate the mobile phones into the network because in the hinterlands, the challenges would be more. We hope to roll-out to all the state capitals by the second quarter of next year,” he said.

  • Banks get marching orders on money laundering

    The Central Bank of Nigeria (CBN) has reviewed its Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) plans.

    In a letter to all banks and other financial institutions, CBN directed that money laundering issues be reported to its AML/CFT Division in its Banking Supervision and Other Financial Institutions Supervision Departments.

    This, it said, followed the establishment of the AML/CFT division in those departments.

    The letter titled: ‘Re: Rendition of AML/CFT Returns to CBN’ was signed by Duniya Y.B., on behalf of the Director, Financial Policy and Regulation Department, CBN.

    “Following the establishment of AML/CFT Division in Banking Supervision Department (BSD) and Other Financial Institutions Supervision Department (OFISD) of the Central Bank of Nigeria (CBN), the AML/CFT off-site activities (hitherto carried out by its Financial Policy Regulation Department –FPRD) will now be undertaken by these departments. With effect from January 31, 2014, all deposit money banks, merchant banks and discount houses are required to render their AML/CFT returns to BSD while other financial institutions should render same to OFISD,” it said.

    The Financial Action Task Force (FATF) had in October, last year, removed Nigeria from the list of countries identified as jurisdictions with significant deficiencies in their AML/CFT regimes.

    The body said Nigeria had taken the right steps including the establishment of legal and regulatory framework that will assist it meet its anti-money laundering initiatives.

    “The FATF welcomes Nigeria’s significant progress in improving its AML/CFT regime and notes that Nigeria has established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in February 2010. Nigeria is, therefore, no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process,” it said.

     

  • Standard Bank to dispose assets outside Africa

    Standard Bank Group, Africa’s largest lender, is to sell a controlling stake in its global markets business outside the continent.

    “The principal legal entity that would form part of a transaction is Standard Bank Plc, the group’s London banking operation,” the Johannesburg-based lender said in a statement to Bloomberg. The bank said it would retain a minority stake to ensure access to the business for its African network and clients.

    Standard Bank said in July it was exploring closer cooperation with its biggest shareholder Industrial & Commercial Bank of China on its global markets and commodities businesses. Standard Bank’s renewed focus on Africa and withdrawal from other emerging markets weakens the case for keeping some of the investment banking operations it runs from London, where it has been cutting jobs to reduce costs.

    Standard Bank needs to “finally wrap up the process of exiting non-core regions and repatriating the capital,” Neville Chester, who helps oversee the equivalent of $44 billion at Coronation Fund Managers Ltd in Cape Town, said.

     

  • Chike-Obi: AMCON won’t invest N500b Sinking Fund

    Chike-Obi: AMCON won’t invest N500b Sinking Fund

    The Banking Sector Resolution Cost Fund (Sinking Fund) standing at about N500 billion is being kept with the Central Bank of Nigeria (CBN), Chief Executive Officer of the Asset Management Corporation of Nigeria (AMCON) Mustafa Chike-Obi has said.

    He told The Nation that there is no possibility of investing the fund because it was established solely to pay down AMCON bonds.

    Banks contribute 0.5 per cent of their total assets to the Sinking Fund, in line with the regulatory requirement setting up the corporation. Last year, the fee was increased from 0.3 per cent to 0.5 per cent.

    Chike-Obi, who faulted shareholders and stakeholders for querying the contribution, said banks had benefited so much from it since it was set up.

    “Let me say this to you, show me any bank in Nigeria that made more money in 2009 to 2010 than they are making now, even with the 50 basis points. If there is no AMCON, most of those banks will not be in existence today. So any shareholder that is complaining, it’s almost like somebody goes to the hospital and you cure him, and the doctor said, here is your bill, and he says, why are you asking me to pay now that I am healthy?

    “These banks, most of them would have died, the shareholders would have lost everything. We have banks making over N100 billion profits today, no bank ever dreamt of it before AMCON was created,” he said.

    Chike-Obi said he doubted if any bank would complain about the fee. “I don’t even think the banks are complaining. I think it is fringe people, shareholder activists that want to eat their cake and have it. Banks today are better off because of AMCON, even with this fee,” he said, arguing that the alternative was to let the banks fail, and the same shareholders will complain that we let the banks fail.

    “I am not sympathetic to any bank that says the 50 basis point is too much. I want to see the bank that says it was making more money in 2009/2010 than it is making today. Tell me that bank,” he added.

    He said it was important to ensure that the banks that created the problems solve them through their contributions to the Sinking Fund. “What we are doing is giving them time to pay over a long period of time, instead of asking that they pay immediately and create another bigger problem.”

    Chike-Obi said: “As soon as AMCON bonds are fully repaid, there will no longer be a Sinking Fund. It is not there to build bridges or anything else. It is designed for AMCON bonds, only,” adding that the Corporation plans to improve on its pace of loan recovery in 2014 as well as ensure that it retires another N1 trillion bonds within the year.

    On Monday, AMCON retired N1 trillion, out of the N5.7 trillion of its bonds held by investors. About N3.6 trillion of the bonds are being held by the CBN. The bonds were issued to defray the cost of long years of insider loan abuses, bad loans and declaration of false profits by banks which took the average non-performing loans (NPLs) for the industry to as high as 35 per cent.

    However, analysts have insisted that the AMCON bonds related liquidity increase could undermine the naira and add pressure on the CBN to raise Monetary Policy Rate (MPR) this year.

    CurrencyAnalyst at Ecobank Nigeria, Olakunle Ezun, said the MPR needed to rise to counter higher spending that would stoke inflation in the lead up to 2015 election. MPR is the benchmark rate by which the CBN determines interest rate, while Cash Reserve Requirement (CRR) is a portion of banks’ deposits kept by banks with the apex bank. The CBN has kept its benchmark rate unchanged since October 2011 to help stabilise the naira and keep inflation under control.

    But Chike-Obi said the bonds will not have adverse impact on the economy. “I think one, the money has been sitting with AMCON for a while, so, I don’t think we will use it to buy treasury bills, and I expect that the recipients of this money will invest it. I don’t think there will be much of monetary impact,” he said.

    He, however, said that redeeming the bonds has boosted people’s confidence on the Corporation. “I think it sent a very positive message to Nigerians and other people across the world that we are serious with what we are doing, and that any money we get will be used to retire our liabilities, and will not be diverted. This is probably the first time, a Nigerian institution, has returned this amount of money, and reduces its liabilities, voluntarily and willingly,” he said.

     

  • ‘World Bank’s survey enhances equity value’

    Chief Economist, Renais-sance Capital (RenCap), Charles Robertson, has listed the benefits countries derive by improving their Ease of Doing Business rankings. In an emailed report, he said the 2014 survey, which saw Nigeria dropping nine points to 147, is important for equity valuations as many factors drive market price earnings ratios.

    Also, Kenya fell seven positions to 129 and Ghana, five places to 67. However, South Africa maintains its position at 41. Rwanda continues on its ‘Singapore of Africa’ path, rising 22 places to 32.

    The World Bank’s annual Ease of Doing Business survey for 2014, ranks 189 countries, providing a simple benchmarking of the business environment across developed, emerging and frontier markets; and importantly, acts a guide as to the direction and pace of reform in different countries.

    Robertson said the figures are important because despite the survey’s drawbacks some countries specifically target metrics examined by the survey. He said the survey provides a useful global barometer of which countries are pushing forward on reform, and progress to date.

    He explained in a report that within a relatively wide dispersion, countries with higher rankings tend to support higher equity valuations. “The correlation suggests that a 10-position move in the Ease of Doing Business ranking could support a 0.4 times increase in a market’s price earnings, all else remaining equal,” he said.

    The survey measures 11 factors, including ease of enforcement of contracts, connection to electricity, access to credit, tax payments and cross-border trade, among others.

    Russia climbs 19 places to 92 in the 2014 survey, and is now the leading BRIC country. The country’s ambitious target is to reach a top-20 position by 2018. Elsewhere in the CIS, Ukraine showed the biggest improvement of all countries in ranking, up 28 places to 112. Georgia stays in the top 10, rising one place to eight. In Emerging Europe, Turkey and Poland both rise three positions, to 45 and 69 respectively; while the Czech Republic slips seven positions to 75, and Hungary slips two places, to 54.

    He said 11 areas benchmarked by the Ease of Doing Business survey Complexity and cost of regulatory processes include starting a business. Here issues relating to procedures, time, cost and paid-in minimum capital requirement dealing with construction permits Procedures, time and cost are considered. Another factor also considered is getting electricity, paying taxes, protecting investors and resolving insolvency.

     

  • CBN sees financial exclusion rate drop to 20%

    CBN sees financial exclusion rate drop to 20%

    The Central Bank of Nigeria (CBN) and other stakeholders intend to implement a National Financial Inclusion Strategy (NFIS) that will reduce the percentage of adults that are excluded from financial services from 46.3 per cent in 2010 to 20 per cent by 2020. COLLINS NWEZE reports.

    The number of Nigerians included in the formal sector will increase from 36.3 per cent in 2010 to 70 per cent by 2020. This goal will be pursued through a broad range of coordinated interventions with high priority on transformation of existing Know Your Customer (KYC) regulations into a simplified risk-based tiered framework that allows individuals who do not meet formal identification requirements to enter the banking system.

    According to the CBN report released at the weekend, development and implementation of a regulatory framework for agent banking to enable financial institutions to bring banking services to the unbanked in all parts of the country will remain a key strategy to be explored.

    It said development and implementation of a National Financial Literacy Framework that would increase awareness and understanding of financial products and services, with the ultimate goal of increasing sustainable usage as well as a comprehensive Consumer Protection Framework to safeguard the interest of clients and sustain confidence in the financial sector.

    The CBN said continued pursuance of Mobile Payment System and other cash-less policies to reduce the cost and increase the ease of financial services and transactions including providing credit enhancement schemes/programmes to empower micro, small, and medium enterprises (MSMEs).

    According to the regulator, the list of beneficiaries also include Micro, Small and Medium Enterprises Development Fund (MSMEDF), 60 per cent of which will support loans from microfinance banks and institutions to women and women-owned enterprises

    The Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), Entrepreneurship Development Centres (EDCs), Restructuring and Refinancing Facilities for SMEs, SME Credit Guarantee Scheme are also steps the regulator has taken to enhance financial inclusion plans.

     

    Financial exclusion

    statistics

    The CBN also said Nigeria lags behind some of its peers in Africa when it comes to the provision of financial services, adding that only 36.3 per cent of the country’s adult population, representing 30.7 million out of 84.7 million is served by formal financial services. This is low when compared to 68 per cent in South Africa and 41 per cent in Kenya, the apex bank loamented.

    It said 21 Deposit Money Banks (DMBs)are serving about 20 million clients through a network of about 6,000 branches and 10,000 Automated Teller Machines (ATMs).

    “With an adult population of over 84.7 million, this shows that a large part of the banking market in Nigeria is still untapped. This has the potential to become a major funding base through the mobilisation of savings and a source of profit for commercial banks and other financial services institutions,” it said.

    The CBN said the population of Nigeria is distributed unevenly, with an average population density of 150 per square kilometres, adding that densely populated states include Lagos, Anambra and Akwa Ibom. It said the urbanisation rate was estimated at 49 per cent in 2009 and is expected to rise to 75 per cent by 2050.

    “By this time, Nigeria is expected to be among the 20 most urbanised countries in the world. Financial inclusion is most advanced in Nigeria’s urban areas, especially in the Southern parts of the country. Northern Nigeria is particularly disadvantaged, with 68 per cent of adults excluded in both the North-East and North-West regions,” it said.

    The CBN said formal inclusion rates range from 49 per cent in the Southwest Region to only 19 per cent in the Northwest Region. The “informally included” primarily live in the Northcentral region, where 23 per cent of adults have access to only informal services.

     

    Point of Sale (PoS)

    The cash-less project has gained wide acceptance at both the formal and informal sectors of the economy, with daily transaction on Point of Sale (PoS) terminals crossing N3.6 billion mark, CBN Governor, Sanusi Lamido Sanusi has said.

    The governor, who spoke at the Chartered Institute of Bankers of Nigeria (CIBN) yearly meeting in Lagos, said the level of acceptance is so high that nomads now use the PoS to conduct their businesses. He said daily PoS transaction rose from N5 million last year to N3.6 billion as at November.

    The PoS is device that enables a customer make payment to the merchant in exchange for goods or services. At the point of sale the retailer would calculate the amount owed by the customer and provide options for the customer to make payment. The merchant will also normally issue a receipt for the transaction

    Sanusi said: “The perfect is often the enemy of good. And it will get you worried. The cash-less Lagos was a very good example. When we targeted cashless Lagos, there were serious concerns about network, service quality and having operations around PoS working. If we had listened to those complaints, we would have abandoned cash-less Lagos after three weeks.

    “When we started in January 2012, let’s use PoS as an example, we were doing like an average of N5 to N10 million daily on PoS. On November 25, we were did N3.6 billion daily transaction on PoS. We also moved from less than 5,000 terminals to over 150,000 terminals. And even if only 20 per cent or 30 per cent of these terminals are really active, that is good result.”

    He said the apex bank has taken steps to simplify banking, making it available in both the rural and urban areas. He said both the literate and illiterate could now open and run accounts on the agent bank model by simply allowing the agents to take their fingerprints.

     

    Rebasing of GDP

    Rebasing of Nigeria’s Gross Domestic Product (GDP) expected by year-end would take the figure from the current $283 billion to $400 billion, Managing Director, Financial Derivatives (FDC) Limited, Bismarck Rewane has said.

    He said the telecoms and entertainment industries are key sectors that would be added to the GDP when the rebasing exercise is done. He explained that Nigeria has a total debt portfolio of $53.42 billion (N8.3 trillion) as at September 30, according to the Debt Management Office (DMO) adding that the total debt to GDP ratio is estimated at 19.3 per cent, according to the Economic Intelligence Unit (EIU) and is projected to decrease to 13 from 14 per cent with a rebased GDP.

    An FDC Economic Report for November released at the weekend said rebasing will entail changing GDP’s mode of calculating growth in output and using a more recent base year of 2010 from 1990 prices.

    This, Rewane explained, was meant to portray a better picture of the size and composition of the economy, by taking into account new sectors such as telecoms and the movie industry that have emerged over the years.

    He said GDP rebasing has been done by several countries such as Ghana, South Africa and Malaysia, and has significant implications on the structure of an economy.

    Nigeria, with a five-year average yearly growth rate of seven per cent, has been using a 1990 base year to calculate the growth of its real GDP. “In nominal terms, this is estimated to be $283 billion in 2013,” according to the EIU.

     

    Biometric solution

    Plans by the CBN to institute nationwide Biometric Solution for the financial system would be a game changer for financial inclusion, Special Adviser to the CBN Governor on Sustainable Banking, Dr. Aisha Mahmood has said.

    Speaking to The Nation on the matter, Dr Mahmood said the CBN has been making steady progress on how to get more people into the financial system especially with the institution of agent banking model.

    “The Biometric Solution Project of CBN to start in 2015 will authenticate banks’ customers, PoS terminals and Automated Teller Machines (ATMs) and hence, is a game changer for financial inclusion,” she said.

    Mahmood said the facility is also expected to help those who are not educated to use biometric to be part of the payment system.

    The biometric solution pilot phase was expected go live on February 14, 2014. The new system, when it goes live, will promote the use of thumbprint as major means of identification in banks and ATMs.

    According to the apex bank, with the biometric solution, the CBN, banks, Nigeria Interbank Settlement System (NIBSS) and at least one branch of each bank would have been connected few months after the take off date.

    However, it cautioned that “it will take a few months to go all over the country and register customers of every bank and we will get to the microfinance banks”.

     

    Bank to bank report

    Access Bank Plc, International Finance Corporation (IFC) and other signatories of the Nigerian Sustainability Banking Principles (NSBP), have advocated a holistic implementation of the policy in order to contribute to the development of the society.

    In a statement, the bank noted the need to encourage knowledge and experience sharing among industry players and other international organisations if the objective of the NSBP would be achieved.

    According to the Chairman of the committee, Dr. Gregory Ovie Jobome, who also serves as Access Bank’s Chief Risk Officer, “the conference was convened to foster a holistic implementation of the NSBP by encouraging knowledge and experience sharing among industry players and other international organisations like the IFC and Sustainable Finance Ltd”.

    Also, shareholders of Unity Bank Plc have approved the lender’s plan to raise N40 billion additional capital through Rights Issue and Special/Private placement of its shares.

    The shareholders, who endorsed the plan at an Extraordinary General Meeting (EGM) of the bank held in Lagos, also said the capital raising plan was part of the bank’s business expansion strategy in the retail segment of the financial market.

    The Acting Managing Director of the Bank, Rislanudeen Mohammad, said the resolutions reached at the EGM are expected to pave way for a fresh injection of huge capital into the institution, currently ranked among the top 10 banks in the country in terms of branch network. This, he said, was geared towards making the lender attain top-of-mind recall with customers as their retail bank of choice.

  • Fitch rates Western Union’s $250m unsecured notes ‘BBB+’

    Witch Ratings has assigned a ‘BBB+’ rating to The Western Union Company’s proposed $250 million, 5.5-year senior unsecured note offering.

    According to Reuters, proceeds from the offering will be used for general corporate purposes, including repayment of indebtedness. Fitch expects proceeds will effectively refinance a portion of the company’s $500 million 6.5 per cent senior unsecured notes due February 2014.

    It said extensive domestic and growing international agent network with a strong worldwide brand; revenue stability from strong global diversification and consumer exposure and an asset-light business model with a largely variable cost structure due to the company’s network of agents which generally own and operate the retail locations supported the rating.

    However, credit concerns include new payment technologies could challenge traditional remittance services, particularly if certain economies broadly adopt cashless payments, but this trend will likely take years to materially impact Western Union, if at all.

    There is also the compliance risks associated with regulations governing Western Union’s business in numerous jurisdictions worldwide.

    It also cited significant foreign currency exposure given broad international diversification although natural hedges in the cost structure of the business essentially protect profitability as a percentage of revenue.

    There event risk dominated by shareholder friendly actions as the ratings incorporate Fitch’s expectation that Western Union will use the majority of its excess free cash flow for stock buybacks and acquisitions while on longer-term, Western Union is likely to face increased competition from regional and multi-national banks entering the remittance market.

    However, Western Union’s relatively unique customer base represents a potential asset to financial institutions looking to offer traditional services to migrant workers which the company may be able to monetise in the future.

    Future developments that may, individually or collectively, lead to negative rating action include the potential for Western Union to increase leverage to fund future acquisitions or shareholder friendly actions among other factors.

     

  • CIBN chief inaugurates Advisory Board

    An Advisory Board of the Centre for Financial Studies (CFS), a subsidiary of the Chartered Institute of Bankers of Nigeria (CIBN) and Lagos Business School of Pan African University was inaugurated at the weekend.

    CIBN President/Chairman of Council, Segun Aina who commissioned the board said it was meant to assist in producing new breed of bankers with requisite knowledge and skills to drive the financial services sector.

    He said the board has reputable personalities experienced in the banking profession. The members of the board include Central Bank of Nigeria (CBN) Deputy Governor, Economic Policy, Dr. Sarah Alade who serves as the Chairman; Vice-Chancellor, Ahmadu Bello University (ABU), Zaria, Prof. Abdullahi Mustapha; Director-General, Nigeria Institute of Social and Economic Research (NISER), Prof. Olufemi Taiwo; Managing Director/Chief Executive, First Bank of Nigeria Plc, Mr. Olabisi Onasanya; Rector, Federal Polytechnic, Nekede, Owerri, Dr. Mrs. Cele Njoku; and Registrar/Chief Executive, Dr. ’Uju Ogubunka. The Administrator of the Centre, Mr. Habila Amos, serves as the Secretary of the board.

    The CIBN has equally entered into strategic partnership with Lagos Business School/Pan Atlantic University, with a view to improving the quality of manpower in the financial services sector.

    This is coming on the heels of the signing of an Affiliation Agreement between the CFS, a subsidiary of the CIBN.

    Aina said the affiliation will among other things enable CFS and LBS/PAU to strategically engage in a number of activities to achieve the objectives of the CFS. Such roles include engaging in research on topical and contemporary issues in the banking and finance industry with a view to advancing the frontiers of knowledge.

    It will also enable both parties engage in policy advocacy by generating position papers on relevant and topical issues in banking and finance; serve as a game changer in the quest for upgrading the competencies of banking and finance executives not only in Nigeria.

    Aina noted that the CFS was set up to address the identified gaps in the banking and finance industry. “After identifying the gaps, we saw the needs to improve the skills and competencies of future executives in Nigerian banking and financial services industry and that was what prompted the Institute to set up the CFS which is aimed at being a game changer in education and learning in the banking and finance industry,” he said.

    On the other hand, Dean, Lagos Business School, Enase Okonedo explained that the development would enable the two affiliating institutions to focus more on research and seminars that would enhance the development of professionalism in the industry and indeed, the economy.

    “The collaboration would help prepare bankers to adequately deal with the challenges posed by the peculiarities in the Nigerian banking and finance industry”, she assured.

    Dr. Alade applauded the development noting that it would further revolutionalise research in the industry while providing financial institutions the opportunity to have access to enough skilled workforce.

    “I am happy that this is happening at this time when the banking industry has put together a competency framework that defines the competency standards for people that want to occupy top positions in the industry,” she said.