The Nation Newspaper

Category: Money

  • NSITF is Mainstreet Bank’s agent

    Mainstreet Bank has been appointed an agent for the Nigerian Social Insurance Trust Fund (NSITF) Employee Compensation Acts (ECA) for collecting its benefits.

    This is coming on the heels of the Federal Government’s determination to halt the disturbing trend of non-compensation of employees affected by workplace accidents.

    The NSITF is to receive remittances from employers at any of the bank’s branch.

    Anogwi Anyanwu, Executive Director, Operations and IT , said: “Mainstreet Bank has built a tradition of service excellence and the NSITF mandate, as well as various others, are strong testimonials of our renewed resolve to consistently offer our stakeholders the best deal.”

    He added: “The bank recently deployed one of the latest and most robust core banking application, Finacle 10, in improving our products and services, and especially to delight stakeholders with innovative solutions to their business needs. I can assure employers and the public that Mainstreet Bank is ready to support NSITF achieve its mandate in Employee Compensation Acts collections.”

    NSITF, the successor to the defunct National Provident Fund, is the government’s agency vested with providing social security, social protection for the disadvantaged.

    In the past two years the bank has had an impressive track record in the collections business.

  • Enterprise Bank risk management ‘second best’

    The effort of the management of Enterprise Bank Limited of building a sound financial institution was at the weekend recognised and rewarded as second best in the country at the maiden edition of the Nigerian Risk Awards (NRA).

    The award was organised by Conrad Clark Nigeria Limited in collaboration with BusinessDay newspapers and United Kingdom (UK) Institute of Risk Management.

    Also, the Head of Operational Risk Management of Enterprise Bank was also nominated in the “Risk Manager of the Year” category, which was eventually won by the head of Operational Risk Management at Access Bank.

    The NRA is dedicated to recognising and rewarding organisations and individuals who have achieved measurable results through the effective implementation of enterprise risk management principles among other parameters.

    The panel of judges was co-chaired by Dr. Divid Hillson, known globally celebrated scholar from the United Kingdom and Mr. Victor Odozi, former Deputy Governor of the Central Bank of Nigeria (CBN).

  • ‘Nigeria’s CRR highest in Africa’

    A cross Sub-Saharan African countries, Nigeria’s banking sector has the highest Cash Reserve Ratio (CRR), at 12 per cent for private-sector customer deposits plus 50 per cent for public sector deposits, a report by Renaissance Capital (RenCap) has said.

    RenCap, an investment and research firm, said in a report titled: ‘Nigerian Bank – Killing Me Softly: The Impact of Tougher Regulation,’ that countries such as Kenya has a CRR of 5.25 per cent, Rwanda five per cent and Ghana nine per cent.

    RenCap said 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.

    “Our reading of the above is that the risk of a further hike in the CRR cannot be ruled out if the Monetary Policy Committee 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,” it said.

    “What the above suggests is that Nigerian banks are setting aside over twice (2x) the cash set aside by Kenyan banks for every $1 (in local currency) of customer deposits. In addition, Nigerians are setting aside 10x (10 times) the cash set aside by Kenyan peers for every $1 of public sector deposits.

    “From our discussions with the banks, the average exposure to public sector deposits is about 13 per cent. Using this figure, we estimate our weighted/blended CRR for Nigeria at about 17 per cent – well ahead of regional peers. We estimate that the increase in the public sector CRR to 50 per cent will reduce annual interest income for the banks by one to six per cent, holding all other factors constant,” it said.

  • DMO not profitable to economy, says WAIFEM

    DMO not profitable to economy, says WAIFEM

    Director-General, West African Institute for Financial and Economic Management (WAIFEM), Prof Akpan Ekpo has said the creation of the Debt Management Office (DMO) to manage Nigeria’s debt profile is a minus for the economy.

    In a statement, he said such institutions end up impoverishing future generations.

    He said the DMO regularly issues debt instruments which create more debts for the economy and stifle funds that could have gone into infrastructure funding.

    He said in most cases, the raised funds are not channelled into building viable infrastructure that supports economic growth and development but ends up being wasted in frivolous projects.

    Ekpo explained that in 2004, Nigeria’s debt stock amounted to about $46.6 billion, which comprised of $35.9 billion of external debt and $10.7 billion of domestic debt. He said that high debt service costs on Nigeria’s $30.4 billion Paris Club debt had tremendously strained government public finances, crowding out space, for other necessary social expenditure and investments in public infrastructure.

    However, he said that as part of the successful debt negotiation process with the Paris Club, Nigeria paid its creditors outstanding arrears of $6.4 billion, received debt write – off of $16 billion on the remaining debt stock (under Naples terms), and purchased its outstanding $8 billion debt under a buy back agreement at 25 percent discount for $6 billion.

    The debt relief package totaled $18 billion, or a 60 per cent write-off in return for $12.4 billion payment of arrears and buyback.

    He said the exercise involving the buyback was unprecedented and represented an “unnatural” solution under the Paris Club protocol for a low-income country; it was the second largest – debt relief operation in the Club’s 50-year history.  Such was the debt exit deal that succeeded in eliminating Nigeria’s external debt overhang syndrome.

    Meanwhile, Nigeria’s total debt now stands at N8.32 trillion ($53.42bilion), the DMO has said.

    The latest statistics released by the DMO on its website last Monday showed that as of September 30, this year, the total debt comprised the external debts of the Federal Government and the state governments as well as the domestic debt component of the Federal Government.

  • IFRS: Uphill task for insurance firms

    IFRS: Uphill task for insurance firms

    In line with the on-going financial reforms, significant public interest entities and companies listed on the Nigerian Stock Exchange were mandated to prepare their financial statements in line with the International Financial Reporting Standards (IFRSs), which replaced the Statement of Accounting Standards issued by the defunct Nigerian Accounting Standards Board. But from all indications, adoption of the IFRS remains a herculean task for insurance operators, reports Omobola Tolu-Kusimo.

    The transition from the accounting standard instituted by the defunct Nigerian Accounting Standards Board to the International Financial Reporting Standards (IFRS) by insurance operators , has been a challenge for many industry players.

    NAICOM had in its bid to ensure that the industry is accepted and can compete globally, raised the stake in 2011 when it introduced, in line with global trend, the IFRS and mandated operators to adopt the new system in preparing their 2012 reports.

    The Commission also enforced the IFRS, in line with the Federal Government’s FSS: 2020 Insurance Vision. The thrust is to bring the insurance market in Nigeria to the platform of global players, as well as position them as the first choice in Africa. Under this dispensation, their operations will be transparent, efficient and safe, in accordance with global practices, and as well attain to the 15th position in world insurance premium generation by the year, 2020.

    IFRS is a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements that help users, globally to make economic decisions.

    However, to ensure seamless transition, the Commission embarked on training and guidance programmes to assist the players. It urged chief executive officers, chief finance officers and other board members of insurance and reinsurance firms to be IFRS compliant within the shortest time possible.

    In spite of this, most of the operators did not anticipate the enormous work to be done to prepare an IFRS account. Some even believed it was business as usual and did not take the regulatory body as seriously as they should.

    The IFRS has brought to the fore the limitation of the accounting method under NASB in shielding accounting data. The new IFRS which encourages full disclosure, has brought the sector under the searchlight, by ensuring transparency and accountability. This has however tasked the resilience of some operators to their health, with some insurers’ operations and activities slowing, as many are struggling to adjust to the new accounting method one year into the current financial year, 2013.

    It is worthy to note that the banking sector has since moved on beyond adopting the IFRS since 2012 with little or no problem in getting their accounts approved by the Central Bank of Nigeria (CBN).

    According to NAICOM 2012 Financial Statements Submission Status of Insurance Companies as at November 26, 2012, 10 insurance companies out of the existing 60 companies have not submitted their 2012 audited accounts and annual returns while 21 have submitted but have not gotten approval. Only 28 out of the 60 companies have got approval.

    Except for Mansard Insurance PLc, ADIC Insurance Limited, WAPIC Insurance, Consolidated Hallmark Insurance, Oasis Insurance and FBN Life which got the IFRS system correctly and their accounts were approved as at June 30 submission deadline, others like Continental Reinsurance Company, AIICO Insurance, Leadway Assurance Company, were able to get approval three months after deadline.

    Crusader General Insurance Limited, Crusader Life Insurance Limited, UBA Metropolitan Life Insurance Company, Zenith Insurance Company Limited, Unitrust Insurance Company Limited, Unity Kapital Assurance Plc, Standard Allied Life Assurance, Custodian & Allied Insurance. Plc, Regency Alliance Company, Royal Exchange Assurance Plc, Sovereign Trust Insurance Plc, Zenith Life Insurance Limited, Royal Prudential Life Assurance Plc, Sterling Assurance Nigeria Limited, Prestige Assurance and FIN Insurance Law Union& Rock Insurance Company, Cornerstone Insurance Plc, Oceanic Life Assurance Plc (Old Mutual) got approval for their accounts more than six months into the new financial year.

    Meanwhile, companies such as Equity Assurance Plc, Lasaco Assurance Plc, Crystal Life Insurance PHB Insurance Plc, Great Nigeria Insurance, Niger Insurance, Oceanic Insurance Company, Wapic Life Assurance, Nem Insurance Plc, Lasaco Life Assurance, Linkage Assurance Plc, Union Assurance, Nigeria Reinsurance Corporation, Universal Insurance Company, though have submitted their accouts, but they were queried by the regulator.

    Others in this category are Staco Insurance, Capital Express, Standard Alliance Insurance, Mutual Benefits Assurance, Mutual Benefits Life Assurance, African Alliance Insurance Plc, Anchor Insurance, Nigerian Agricultural Insurance Corporation.

    The list of companies which are yet to submit are Industrial & General Insurance Plc Alliance & General, Alliance & General Life Assurance, Goldlink Insurance, Guinea Insurance Plc, International Energy Insurance, Unic Insurance Plc and NICON Insurance including Spring Life Assurance and Investment & Allied Assurance which has been taken over by the regulator.

    These companies are still facing challenges in getting their IFRS based accounts across to NAICOM for approval.

    Besides, the companies risk cancellation of their operating licence. Section 26 of the Insurance Act 2003 states that failure to file annual returns constitutes a ground for cancellation of operating license and an insurer shall be deemed to have failed to file its annual returns if the provisions of Section 26 of the Insurance act 2003 are not met 12 months after the end of the financial year.

    Worried that majority of the insurers would not be able to make it; the commission drew the attention of the insurers to major mistakes it identified in the IFRS accounts and ask them to learn from those who were already IFRS complaint.

    The Commission also said it has invited all insurance and reinsurance companies whose financial statements had been audited to take advantage of its IFRS help desk facility for a risk-free review of their IFRS conversion outcomes.

    In a circular to all insurance companies titled: “Common Issues Observed in the Pre-Submission Review of 2012 IFRS Financial Statements” the Commissioner for Insurance, Fola Daniel, said “this circular is issued to draw the attention of companies that are yet to submit their returns to the commission, to the major mistakes and areas for improvement that our reviews had revealed so as to be guided accordingly.”

    The commission explained that the information on “operations and activities” for insurance business are to incorporate items such as business acquisition, underwriting, claims, investments, while information on other businesses should be guided by the same rule.

    “Being the year of first adoption, companies is expected to provide information on the basis of the conversion of financial statements prepared under Nigerian Gap to IFRS 1. Some companies did not indicate which of the adjustments required by IFRS were made in Nigerian GAAP assets and liabilities derecognised, assets and liabilities not recognised under Nigerian GAAP now recognised and items in Nigerian GAAP Balance sheet reclassified into appropriate IFRS categories”.

    The Commission advised that all information required by IFRS 1 that are relevant to each company should be provided as part of the basis of preparation of the IFRS financial statements in the section for accounting policies.

    The commission also revealed that some accounts submitted by some companies did not add up and expressed displeasure at auditors who endorse the account.

    NAICOM Director of Supervision, Mr Nicholas Okpara in Ilorin told journalists that henceforth auditing firms who collide with insurance companies by passing incorrect financial statements will be blacklisted from the industry.

    Okpara said: “NAICOM will maintain a black book where the names of auditors who consistently fail to leave up to their responsibilities will be entered. Once this is done, the auditor will be barred from auditing financial statements of insurance companies. We are working on it because something has to be done for them to stop endorsing false accounts.

    “The financial statement of a company is a joint responsibility by the board and management of that company and the auditor that provides the quality assurance and to the extent the auditor will certify the account is more or less taking responsibility that account contains no error and is the true and fair view of the financial position of the company.

    “It is disturbing that some auditors of some insurance companies who ought to have discovered if there is an error and display professional roles fail to do so and we are surprise at this kind of behavior.”

    Managing Director, Custodian and Allied Insurance Plc, Mr. Wole Oshin said the IFRS has opened up the Nigerian insurance market to the world and will boost Foreign Direct Investment (FDI).

    For him, it is one of the best thing that has happened to the industry noting that it will enable operators participate in businesses globally.

    He said: “For every sacrifice, there is a benefit and our industry today is known worldwide. Today we can proudly take our account anywhere in the world.

    “Shareholders are also happy because now they can clearly see and understand all operations and activities of the company,” he said.

    Chairman Regency Alliancy Plc, Justice Adolphous Karibi-Whyte, while speaking on impact of IFRS implementation, added that its implementation had significant impact on computation of reserves and valuation and measurement of assets and liabilities.

    Managing Director, Anchor Insurance, Mr. Mayowa Adeduro stated that it was a difficult year in terms of regulation especially with of the adoption of the IFRS.

    He said: “There are a lot of issues that we did not envisage. There was the need for us to learn and understand how to prepare an IFRS account but there is a gap in people that have the experience and knowledge.

    “For instance, you need an actuary and this comes at a huge price. There were also few actuaries in the country.”

    Director-General Nigeria Insurers Association (NIA), Mr. Sunday Thomas said the operators are doing all they can to be IFRS complaint.

    He noted that the ongoing reform especially on regulation has required the operators to have to comply with a lot of rules and guidelines.

    He also said next year would be different as they would have fully adjusted and everything can go smoothly for the industry.

  • Nigeria eyes $1.4tr Islamic finance market

    Nigeria eyes $1.4tr Islamic finance market

    Despite the global economic crisis and pressure on conventional banking in Western countries, Islamic finance is doing well. Nigeria is eyeing this booming global financing system, COLLINS NWEZE  reports.

    Undeterred by the uncertain recovery elsewhere in the world’s financial markets, global growth of Islamic finance market has continued unabated this year.

    The Shariah-compliant assets of the finance model are estimated at over $1.4 trillion and it is likely to sustain the double-digit growth in the coming two to three years.

    Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi said the country should not ignore Islamic finance which has become a household name in Europe and America. He cited the United Kingdom’s Prime Minister, Mr. David Cameron recent resolve to make London the global hub of Islamic finance adding that Nigeria should wake up to opportunities presented by the the finance system.

    According to Standard & Poor’s (S&P), Islamic finance remained a demand-driven market, with scarce supply, still hampered by a limited range of Islamic financial centres and their various regulatory frameworks.

    The rating agency said it believed that regulatory efforts to accommodate Islamic finance and the establishment of additional industry bodies at national levels will take centre-stage starting next year. Interestingly, newcomers in the industry — such as Oman, Turkey, and Nigeria, for instance — have started to trace the footsteps of fast-growing pioneers, such as Malaysia.

    “Right behind the newcomers, a long line of countries is aspiring to enter the market, with the continent of Africa in the forefront,” it said.

     

    Nigeria’s perspective

    Nigeria’s profile as Africa’s most liquid debt market after South Africa has been rising since JP Morgan and Barclays included its bonds in their sovereign bond indices in the last year, encouraging greater foreign participation in its debt market.

    The use of Islamic finance in Africa could grow further as several north and sub-Saharan African countries, including Morocco, Tunisia, South Africa and Kenya are laying the legal groundwork to issue sukuk, an Islamic finance bond.

    In Nigeria, Osun State recently floated the country’s first Islamic bond, taking a major step towards developing an Islamic finance industry in the country. Analysts said the Sharia-compliant bond, while relatively small at $62 million, signaled the start of a trend.

    The Sukuk is based on an Ijara structure, a common leasing arrangement in Islamic finance, which bans payment of interest. Sukuk have become an increasingly popular investment globally, particularly among cash-rich funds in the Gulf and Southeast Asia.

    Also, the Islamic Development Bank also is lending $150 million through Sharia-compliant facilities for the new Lekki port in Lagos.

    Sanusi said Islamic finance products also have the capacity to ensure financial inclusion of significant segment of the population. He stated that when properly harnessed, Islamic finance could contribute significantly in turning the country into a major international financial centre.

    Sanusi said: “Islamic finance has shown its potential in achieving financial inclusion in many economies by bringing in large under-banked populations, especially Muslims, into the urbanised financial sector.

    “We have so far registered Jaiz bank, and we have given a licence to Stanbic IBTC Bank to operate some window. We have given an approval in principle to Sterling Bank to operate an Islamic window and a microfinance bank that has applied for Islamic banking licence.

    “This is in addition to the work being done by National Insurance Commission to promote Takaful, an Islamic insurance product.”

    He said many Islamic financial markets had established their presence in all the major financial centres and were playing key roles in deepening the financial markets with products across the globe.

    “In the face of the growing interconnec-tedness of the global financial system and its integration, it is thus unrealistic for any existing or aspiring financial centre to be oblivious of this development.

    “Prime Minister David Cameron announced his government’s plan to make London a capital for Islamic finance to the Western world. He said it would stand alongside Dubai and Kuala Lumpur as one of the great capital of Islamic finance. The UK is embarking on this plan, despite the fact that it is a non-Islamic country,” Sanusi argued.

    Chairman, Advisory Committee of Experts on Non-Interest Banking, Sterling Bank Plc, Sheik Abdulkader Thomas said deposits from non-interest banking could be deployed into infrastructure funding and other developmental projects.

    Thomas, who is an American living in Kuwait, described Nigeria as a huge market for non-interest banking given its large population base. He said the banking concept is a viable means of gathering huge deposits, adding that although Nigeria’s infrastructure is seen as weak, deposits from non-interest banking could be used to fix it.

    He said: “We have to look at a country like Nigeria from a different perspective. Kuwait has small population, with very high wealth. But Nigeria has very large population. We believe that non-interest banking will be very important to gather savings from the grassroots population.”

    According to him, the billions of dollars in the non-interest banking accounts globally cannot find its way into Nigeria, rather, the country should generate its own funds to finance key projects and create wealth for its citizens.

    Islamic banking is growing at a fast pace around the world. It is asserting itself as a key player in the global financial system with its global assets currently stood at $1.3 trillion, he added.

    The CBN guidelines on non-interest banking put the minimum capital base of N10 billion for National Islamic Banks and N5 billion for regional Islamic Banks. However, CBN allows deposit money banks to offer non-interest banking products, using existing structure such as the branches, even manpower.

     

    African Development Bank

    According to African Development Bank (AfDB), improving Nigeria’s infrastructure could boost the country’s Gross Domestic Product (GDP) by about four per cent. Some of the sectors that require attention include power, road, rail, information communications technology (ICT) and transportation. However, access to finance, to fund the development of most of these critical sectors has remained a challenge.

    According to the AfDB, Nigeria has an infrastructure deficit of $360 billion and Islamic finance can be of great help in fixing the infrastructure gap.

    It said banks will require a substantially larger annual level of investment in infrastructure, a significant increase in annual allocations for routine and periodic maintenance to ensure reliable infrastructure services, and increased attention to the institutional arrangements that support the infrastructure network of the country and the related services.

     

    Debt position

    With Nigeria’s total debt stock at N8.32 trillion as at September 30, 2013, analysts have warned that the growing domestic debt may result to a debt crisis if not checked. Others have advised the government to look for cheaper alternatives to finance infrastructure development. One of the cheaper alternatives is Islamic finance, which is interest free. While regular bonds are essentially debts to be repaid at a future date, with Islamic bonds, that is not the case.

    In essence, Islamic finance can be described as finance under Islamic law. Islamic finance being an emerging sector of the overall economic system is rapidly expanding.

    The Islamic model uses money as a measuring tool for value and not as an asset in itself, so income is not received from money as this is seen as exploitative and usurious. Investment vehicles through the Islamic finance structure are based on shared business risk.

    The growth of Islamic finance globally also means there is an increasing demand for new ways of identifying Islamic compliant business activities. Presently, the London Stock Exchange is working on the creation of new indices. This means the creation of a new way of identifying Islamic finance opportunities – a world-leading Islamic Market Index.

     

    Lessons from London

    Speaking at the World Islamic Economic Forum, Cameron, expressed his desire for London to be one of the greatest capital of Islamic finance. According to him, steps had already been taken to open up London for more Islamic financing activities.

    “Already London is the biggest centre for Islamic finance outside the Islamic world. “But today our ambition is to go further still. I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world.

    “And we are already taking big steps to open up the City of London to more Islamic finance. Today we have more banks compliant with the principles of Islamic finance than any other Western country.

    “We have over 25 law firms supplying services in Islamic finance and 16 universities or business schools offering MBAs or similar qualifications in Islamic finance, including the new programme for senior executives announced by Cambridge University last week,” he explained.

    He said the move was to attract more investment into London. The UK prime minister noted that Islamic finance was growing at 50 per cent faster than traditional banking, adding that global Islamic investments was set to grow to £1.3 trillion by next year. As a result of this, he expressed his preparedness to make sure that a large proportion of that investment would be in Britain, adding that some of the infrastructure in Britain were developed through Islamic finance.

    Cameron said: “Britain is a country ready to welcome your investment, a country that values your friendship and a country which will never exclude anyone because of their race, religion, colour or creed. But if investing in London is good for you, then opening up London to your investment is just as vital for our own success here in Britain.

    “We are backing our businesses, seeking new markets and banging the drum for Britain to show we are a first class destination for trade and investment. Islamic investment is already fundamental to our success.

    “But we’re not going to sit here and rest on our laurels. We know there is much more to do for London to reach its full potential as a great world centre of Islamic finance.

    “This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond. So the Treasury is working on the practicalities of issuing a bond-like Sukuk worth around £200 million and we very much welcome the involvement of industry in developing this initiative which we hope to launch as early as next year.”

     

  • Nigeria, others get $12b private equity fund

    Nigeria, others get $12b private equity fund

    Private equity firms have invested about $12 billion in Nigeria, South Africa and other African countries. The firms have also raised almost $10 billion, a study by Ernst & Young and the African Private Equity & Venture Capital Association (AVCA), has shown.

    A private equity firm is an investment manager that makes investments in the private equity of operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital.

    Often described as a financial sponsor, each firm will raise funds that will be invested in accordance with one or more specific investment strategies.

    The firms will raise pools of capital, or private equity funds that supply the equity contributions for these transactions and will receive a periodic management fee as well as a share in the profits earned from each private equity fund managed.

    Reuters report said many private equity firms are adamant that Africa is the next hot spot for the industry as its burgeoning middle class continues to bloom, but the pension and endowment funds who invest in private equity funds are more cautious.

    It is not hard to see what has attracted them to the continent. Over the last 10 years, Africa’s economic output has increased three-fold to $2 trillion and six African countries have been among the fastest-growing economies in the world.

    Principal at private equity firm Hamilton Lane, Daniel Schoneveld, told a conference earlier this month. And because of the uncertainty and many risks involved, many pension funds are hesitant.

    As Alona Ponomareva, principal portfolio manager for the World Bank Pension Plan, said: “Africa is kind of the last frontier for us. I am gradually taking us in the direction of Africa.”

     

  • Bank strengthens internet grid

    Bank strengthens internet grid

    Guaranty Trust Bank (GTBank) Plc has an-nounced the upgrade of its internet banking platform for all customers. In a statement, the bank said the upgrade incorporates a new look and additional technical functionalities.

    It said the upgraded Internet Banking platform provides customers with a more user friendly way to carry out their online transactions and manage their services.

    It also offers customers an account information reporting service via its new homepage dashboard as well as an enhanced security feature with its improved login keypad functionality. With its new responsive design, customers can use Internet Banking conveniently on computers and mobile devices.

    The bank’s Internet Banking platform supports an an array of service offerings that include bills payments, own and third party transfers and foreign exchange transfers to any bank account in the world.

    Speaking on the development, Sina Ayegbusi, Head of Guaranty GTBank’s Technology Division stated that the bank’s commitment to superior customer service experience drives it to ensure that it utilises revolutionary technology to simplify and secure the online banking transaction and experience of its customers.

    He further stated that the upgrade to ‘’our Internet Banking platform gives our diverse costumers various on-the-go banking options due to its responsive design that makes it convenient for use on computer and mobile devices’’.

    The bank’s alternative banking channels were given a Payment Card Industry Standards Council (PCISSC) certification in 2011, implying that the channels meet acceptable technical and operational requirements to prevent fraud.

     

  • Eight ‘big’ banks’ assets to cross N20tr

    Nigeria’s banking sector is gradually evolving into a “game of size”as scale economies become the competitive differentiator, report by Afrinvest West Africa Limited, an investment and research firm has said.

    The firm’s report projected that the industry’s assets would be N26.4 trillion by next year, with the top eight banks in control of about 80 per cent or N20.8 trillion of the total assets. These banks are also expected to control 76.3 per cent of the industry’s gross earnings by 2014 result.

    The top five banks include FirstBank, Zenith Bank, Guaranty Trust Bank, United Bank for Africa and Access Bank. The other three banks are Skye Bank, Diamond Bank and Ecobank.

    According to the report titled: ‘Nigerian Banking League-The Fate of Small Players’, the bigger banks, with an average total assets of N2.6 trillion, appear more competitive in squeezing out higher earnings compared to tier-2 (smaller banks) with N900 billion of total asset as at September. However, the operating expenses margins and cost funds for the bigger banks are rising.

    It said the era of real banking appears to be gradually re-emerging as traditional sources of high income continue to face significant threat from tighter regulation and increased competition.

    Tier-2 banks on the other hand are faced with the challenge of expanding their local franchise, to absorb cheap deposits and aggressively generate more risk assets. This has left Tier-2 banks with the option of either “Specialise” or “Expand inorganically.”

    It said as expected within the last nine months, the sector has been characterised by a “policy induced” earnings shrink, in addition to the aggressive competition for cheaper deposits.

    “While most banks are hinged on product differentiation strategy using innovation to remain afloat; we keep a keen watch on the industry’s competitiveness as events unfold. Nevertheless, the future of banking is set to take a dramatic turn,” it said.

    According to the report, the era of double digits earnings growth in the banking industry has gradually begun to thin-out.

    “The numerous liquidity tightening policies introduced by the CBN has constantly exerted pressure on the banks’ profitability within the last few months. A review of the banking industry’s last nine months Profit before Tax (PBT) revealed an average nine per cent decline across the Tier 1 banks, and a 6.3 per cent growth within the Tier-2 echelon,” it said.

    The analysis also revealed that Tier-1 banks accounted for 82 per cent of the total income in the banking industry; with GTBank and Zenith Bank leading with a nine-month Profit After Tax of N69.2 billion and N69.8 billion respectively as at September.

    It said a further review spots the downward trend in Tier-1 bank’s Net Income Margin from 7.9 per cent in 2012 to 7.1 per cent in June and 6.1 per cent in September 2013.

    This it explained, could be attributed to a reduction in the industry wide interest and non-interest income. In the same vein, the net profit margin for Tier-1 banks shrank quarter on quarter to 23.3 per cent in September from 24.3 per cent in June this year.

    It said constant liquidity tightening rhetoric as reflected in the CBN’s policy stance has had a significant impact across Nigerian banks (Tier-1 and Tier-2). The hawkish policy designed in 2013, targeted at price and exchange rate stability, have consistently squeesed the earnings of the banks, particularly the 50 per cent Cash Reserve Ratio (CRR), which effectively removed approximately N1 trillion from the financial system.

     

  • How AMCON saved banks in 2010, by Sanusi

    How AMCON saved banks in 2010, by Sanusi

    The Asset Management Corporation of Nigeria (AMCOM) acquired N5.7 trillion bank debts when it was established three years ago, Central Bank of Nigeria (CBN) Governor Lamido Sanusi has said.

    The debts came from long years of insider abuses, bad loans and declaration of false profits by some banks, Sanusi said at the 50th anniversary at the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.

    He said AMCON bonds held by banks would be retired in 2015, adding that N1 trillion of the bonds will be retired by December 31, this year.

    Another N1.1 trillion would be retired next year, he said, adding that none of the banks will hold the corporation’s bonds beyond 2015. CBN, he said, held N3.6 billion of the bonds.

    According to him, the CBN has so far achieved its monetary policy objectives, based on the level of stability in the economy and financial services sector.

    The bank under his leadership, he said, had achieved exchange rate stability, banking sector stability and achieve single digit inflation target.

    He said the CBN ensured that throughout the resolution of the banking crises, no depositor lost money. Corporate governance and risk management issues that threatened the financial system, he said, had been addressed, adding that banks now understand and are aware that there are consequences in crossing certain lines.

    On November 19, investors wrote to AMCON, seeking to know how the N1 trillion bonds will be retired.

    AMCON’s Chief Executive Officer, Mustafa Chike-Obi said such decision would guide CBN’s liquidity management plans in the coming months.

    Meanwhile, a report by Renaissance Capital (RenCap), an investment and research firm, titled: Nigerian Banks: Killing Me Softly” said most lenders that invested in the bonds would face challenging earnings this year.

    “We believe this will remain a challenging year for Access given the nature of its balance sheet (large exposure to illiquid AMCON bonds). We think 2014 should be a year of stronger growth for Access, as most of the AMCON debt matures at the end of this year and will be redeemed for either cash or t-bills – giving Access the opportunity to earn better returns on its assets,” the report said.

    The report also said tougher regulation by the CBN would make it difficult for banks to deliver improved earnings.

    “We think it will become harder for some of the banks to deliver returns in excess of their cost of equity – especially some of the smaller banks,” it said.