The Nation Newspaper

Category: Money

  • Mortgage financing to cost N25tr

    Mortgage financing to cost N25tr

    ABOUT N25 trillion is needed to bridge the housing gap estimated at 18 million units and growing by two million yearly, a report by Consolidated Discount Limited has indicated.

    The report, tagged: “Retrogressive view on the Mortgage Refinance Company (MRC),” said the company, established by the Central Bank of Nigeria (CBN) to assist bridge mortgage funding gap, was expected to issue N60 billion bond, which would boost the bond market.

    The MRC supports mortgage originators, such as Primary Mortgage Banks (PMBs) and Deposit Money Banks (DMBs), to increase lending by refinancing their mortgage loan portfolios.

    It said the capital market provides an important opportunity in closing this gap and, to a huge extent, has led to the development of the fundamentals associated with countries with strong mortgage systems.

    According to the report, the growth in the mortgage/housing sector through construction, is a vital means of generating employment and has played a pivotal role in enhancing productivity of the populace in countries with a sound mortgage model.

    The MRC is to provide short-term liquidity and medium to long-term funding and guarantees to mortgage finance lenders. It is expected to increase annual mortgage origination in Nigeria to 200,000 from an average of 20,000 mortgages within the next few years, representing an increase of 900 per cent.

    The firm is expected to act as an intermediary between originators of mortgage loans and the capital market which are typically looking for long-dated high quality securities. Also, the operations of the MRC are expected to enhance the development of the secondary mortgage market which is still at its infancy.

    Already the World Bank has committed $300 million interest-free capital to the project, while other local investors have equally shown interest.

    Also, Resort Savings and Loans, said it would commit N200 million to the proposed MRC. The implication of these commitments and other interests, it said, is increased funding to the mortgage/housing sector.

    “Our forecast also indicates there will be a need to access funds from the capital market if the PMBs and DMBs can pull together more mortgage originations. To a large extent, this may help to deal with one of the twin issues confronting a viable mortgage system in Nigeria,” it said.

    It said the impact of the existing land use act may constrict potential gains that would accrue from the establishment of the mortgage refinancing mechanism. The Nigerian Land Use Decree of 1978 nationalised all land in the country and notionally handed over its administration to committees constituted at state and local government level and these constitute a huge constraint to business. This limitation would have to be removed if the level of investments desired in the housing sector is to be attained.

    The report said the mortgage market in Africa is relatively small which has led to pent up demand that could serve as a major growth driver for housing in the continent. The performance of mortgage market in Africa has been strongly linked to the performance of the various economies. South Africa is the biggest economy in Africa and equally has the most decent (size and structure) mortgage system. Mortgage accounts for 26 per cent of South African’s GDP while it accounts for a one of Nigeria’s.

    Nigeria which is sub-Sahara Africa’s largest economy after South Africa has struggled to deliver housing to the population because of the high prices of the homes in the market. This constricts demand for housing in the country while also exposing mortgage finance institutions (MFIs) to increased risk of default as mortgages are priced at unhealthy double digit rates.

    Across the continent home financing has become largely accessible by mainly the upper class and the upper middle class. This can be traced in large part to the preference of the mortgage lenders for mainly corporate clients while individuals are left to access mortgage finance at exploitative rates.

    The report forecast that interest rate on mortgage from lenders to home owners (borrowers) will be cut by 50 per cent from the present 24 per cent to 12 per cent. However, it said this may not necessarily translate to affordable housing for the huge low-income population that are the most affected in Nigeria’s housing problems.

    Also, there have been no comprehensive plans on what would happen to the entities entrusted to coordinate mortgage activities in the country Federal Housing Authority (FHA), Nation such as Housing Fund (NHF) and Federal Mortgage Bank of Nigeria (FMBN).

     

  • ‘How to deepen microcredit’

    The Central Bank of Nigeria (CBN) financial inclusion policy is to deepen microcredit scheme and support gender-based lending in the country, Managing Director, Renaissance Credit Nigeria, Olusegun Akintemi, has said.

    He spoke at the Quarterly Chief Executives meeting of the Finance Houses Association of Nigeria (FHAN) in Lagos.

    The theme was: Consumer lending in Nigeria: Funding, dynamics and challenges.

    Financial inclusion policy entails the promotion of grassroots banking and development of alternative payment channels mainly via e-payment to encourage broad-based transactions among bank customers.

    Akintemi said unlike the developed world, excluding South Africa, credit markets in sub-Saharan Africa for the most parts are still immature. He said with over 170 million people of which 57 per cent are aged within 18 and 65, Nigeria was well positioned to explore opportunities in sub- Saharan Africa consumer markets.

    He said Nigeria has one of the highest urban growth rates, with cities ranked among the fastest growing in the world.

    “On a micro level, the presence of and access to micro credit to meet consumption and short-term needs of a massively growing labour force, many of which do not have bargaining power on interest rates, would enhance the financials of organisations providing credit,” he said.

    He said the middle class was estimated at 23 per cent of the population, making case for retail lending which thrives on numbers. He described the group as reasonably educated, highly aspirational and strongly optimistic about the future.

    “They have an increasing interest in getting post graduate foreign education as this is perceived to improve chances of securing better paying jobs. Also, buying property or starting a business is largely regarded as a major investment outlet rather than equity, bonds or other asset classes. The average income of this group is put at between N900,000 to N1.2 million annually,” he said.

    Akintemi said an estimated 70 per cent of the emerging middle class have bank accounts which they operate mainly for savings. However, a huge number do not consider commercial banks helpful with regards loans and would rather borrow from friends and relatives.

    He said consumer lending if structured correctly, would present the target market the platform to satisfy their diverse needs, the providers of capital would benefit from increased risk portfolio returns and investors.

    Akintemi said aside the macro level issues of polity stability, a mono product economy vulnerable to swings in international oil markets, corruption, infrastructure deficits, insurrectionists and terrorist insurgencies, issues that would help consumer in the country are still not addressed.

    He said of great concern to market participants are the questions on pricing of credit, funding sources, customer verification database, unemployment/low income levels, payment system infrastructure among other issues.

    He said that consumer lending in Nigeria will play key roles in deepening the economy. “Addressing the challenges mentioned above should stir this market segment in the right course. There is need for further financial inclusion of the bankable populace.

    The approach to credit should be thorough enlightenment on the concept of credit and how its use can benefit the consumer rather than an attempt to lock people into impoverishing commitments,” he said.

    He said that not only is Nigeria experiencing one of the fastest rates of urbanization in the world, its experience has come with developmental challenges for the government including infrastructure, cultural adjustment, security and the environment.

    Despite the unpleasant issues of urbanisation, he said there are positives in demographics with the influx of youthful workers to join the labor pool needed to drive a weak industrial base.

     

  • Nigeria, Ghana drive Ecobank’s growth

    The profit of Ecobank Transnational Incorporated (ETI) is driven largely by its Nigeria and Ghana operations, Afrinvest West Africa Plc has said.

    A half-year report of the ETI Group released on the floor of the Nigerian Stock Exchange showed that the lender performed impressively in first half of 2013, with significant improvements in both top and bottom line results.

    The investment and research firm said Nigerian operations continue to drive the group’s activities, contributing 43 per cent of total revenue, followed by Ghana. Noticeable improvements can also be observed in other regional African countries i.e. Southern and Central African region, while the East Africa region was dampened by results from Kenya.

    “The 2012 consolidation of the group and the acquisition of Oceanic Bank has boosted the bank into the Tier-1 sphere of the Nigerian banking space and it continues to enjoy benefits of the inorganic expansion strategies of the group,” Afrinvest said.

    The bank’s revenue grew 19.4 per cent to N195.3 billion while bottom line or net profit grew 94.2 per cent to N26.9 billion. It said the increase can be attributed to performances in Net Interest Income (20.3 per cent year-on-year growth) and other operating income (27 per cent year-on-year growth).

    The Group’s Cost to Income ratio (CIR) moderated by 3.1 per cent from 58.1 per cent in half-year 2012 to 55 in half year 2013 compared to 72 per cent recorded for 2012 fiscal year.

    This brings to fore the Group’s conscious effort to curtail its cost in the near term. The recent inorganic expansion strategy (acquisition of Oceanic Bank) of the bank significantly grew the bank’s loan and deposit.

    The Group’s customers’ loan to deposit ratio grew three per cent from 63 per cent to 66 per cent in half year 2013 on the back of a 24 per cent increase in loans and advances to customers (N1.6 trillion from N1.3 trillion). There was also a marginal reduction in loans to banks, and an 18 per cent growth in deposits to N2.4 trillion.

    “The increased loan to deposit ratio and improved cost income ratio is indicative of the gradual synergies of the recent acquisition of Oceanic Bank and an improvement in the bank’s asset quality. We remain optimistic in the medium to long term on the prospects of ETI based on its diversified business model and the expected economics of scale. The aggressive expansion in the South, West and Central part of Africa buttressed our positive outlook,” it said.

     

  • Enterprise Bank promo debuts

    Enterprise Bank promo debuts

    Enterprise Bank Limited at the weekend launched its ‘Brazil 2014 BetaLife Promo’, which will enable six of its customers win an all-expense-paid trip to Brazil next year. The bank said in a statement that the programme is part of its quest to continually delight its customers.

    It said the promo, which will run from August 2013 to March 2014 provides opportunity for customers of the bank to visit and have a feel of the land of soccer, samba and carnivals.

    Subscribers for the Small and Medium Enterprises (SMEs), Elite and Individual Accounts of the bank are expected to be winners of the trip to Brazil.

    To qualify for the draw, customers, or prospective customers of the bank are to open either the SME Account with N150, 000; the Elite Account with N75, 000, or Individual Account with N15, 000 and maintain the corresponding amount in the account every month from August, this year till March next year.

    The bank said winners will emerge from these three categories of customers of SME, Elite and Individual accounts. Many participating customers will also win mouth- watering consolation prizes.

    “The launch of the ‘Brazil 2014 BetaLife Promo’ is a further effort by the management of Enterprise Bank to continually seek new ways of delighting the customers and improving the lives of all stakeholders. The draw will hold April 2014,” it said.

  • Equities open on cautious sentiments

    Equities open on cautious sentiments

    Investors should not expect an exceedingly bullish market in the period ahead, though stocks could pose strong capital gains in the topsy-turvy expected to characterise the market trend till year-end.

    As the stock market opens today, most pundits will adopt cautionary approach than the overtly bullish disposition many expect the market to close around its current year-to-date return.

    The All Share Index (ASI), the common value-based index that tracks all equities on the Nigerian Stock Exchange (NSE) and doubles as benchmark return index for the NSE and Nigeria, opens today with average year-to-date return of 35.47 per cent after it lost 1.0 per cent in consecutive declines that pervaded the three trading days last week.

    Many analysts have reechoed the tepid market outlook as equities struggle with profit-taking transactions and belt-tightening monetary policy changes.

    Analysts at Financial Derivatives Company (FDC), headed by Bismarck Rewane, said investors should not carry the optimism of the previous months’ performance to the coming months as the market might have exhausted the steam for such excited return.

    “Macroeconomic events will shape investor behaviour. Declining inflation, a stable naira and interest rates at current levels bear favourable tidings for the market. However, we believe it is unlikely that the market repeats the strong bull run of H2’12. The gains of the year appear to have been made. There will be bright spots here and there but the market will stroll at a tepid pace,” FDC stated in its latest review made available at the weekend.

    Analysts at FDC noted the delicate mixture of surprises and disappointments that have greeted recent earnings reports by quoted companies, which have failed to prompt strong positive rally and activities.

    Economist and investment advisor, Sterling Capital Markets Limited, Sewa Wusu, said there were many variables that could adversely affect the stock market in the period ahead, leading to portfolio rebalancing in favour of the fixed-income market.

    According to him, the increase in cash reserve ratio for public sector funds to 50 per cent by the Central Bank of Nigeria (CBN), will likely lead to increase in deposit and interest rates, which would enhance the attractiveness of money market instruments.

    He noted that high-interest rate in the midst of a tepid stock market will limit the inflow of funds to the capital market.

    In a preview of the second half, analysts at Investment One Financial Services Limited had described the outlook for the stock market in the second half as “neutral”, a reference to subdued performance.

    According to analysts, the equities market could benefit from above-forecasts earnings reports in the second and third quarters as well as stable macroeconomic fundamentals and attractive valuation of the Nigerian stock market relative to developing and emerging market peers.

    Analysts noted that renewed foreign investors’ appetite for the Nigerian market on the back of prolonged monetary easing in the United States could boost market performance.

    They, however, said the market performance could be undermined by weak inflow of external funds on improving economic fundamentals in the USA as well as poor corporate earnings that fail to meet market-wide expectations and end of year sell-off.

    Equities had consolidated their bullish rally in July as improved first-half earnings drove the market to a seven-month average return of 35.03 per cent. Equities closed the seventh month on a high note, trotting back to N12 trillion after adding N581 billion capital gains in July.

    Aggregate year-to-date return thus improved from six-month value of N2.45 trillion to N3.03 trillion by the end of July. After the downtrend in June, the market was particularly spectacular in July with a month-on-month average return of 5.08 per cent.

    Meanwhile, total turnover at the NSE last week stood at 1.1 billion shares worth of N9.10 billion in 17, 076 deals. Financial services stocks accounted for 856.03 million shares valued at N6.01 billion in 9,872 deals; representing 78 per cent of aggregate turnover for the week.

    The financial services sector rode on the back of strong demand for United Bank for Africa (UBA) and Sterling Bank, which boosted the contribution of the dominant banking subsector.

     

     

     

     

     

     

     

  • Nigeria, Brazil bilateral trade volume hits $9b

    The volume of bilateral trade between Nigeria and Brazil in the last four years has hit $9.1 billion, Nigeria’s former Ambassador to Brazil, Ambassador Kayode Garrick, has said.

    Garrick who spoke at a quarterly breakfast meeting organised by the Nigerian-Brazilian Chamber of Commerce and Industry (NBCCI), in Lagos, last week, said the trade balance which constantly has been in favour of Nigeria, is traceable to the Brazilian importation of crude oil.

    “Brazilian exports to Nigeria are mainly sugar, rice, vehicles and spare parts, chemical products, aircrafts, paper, iron and steel, machinery among others,” he said, adding that there was need for Nigeria to tap from the Brazilian experience in various areas of development.

    “Today, Brazil is the world’s sixth largest economy by nominal Gross Domestic Product (GDP), and one of the fastest growing major economies in the world with an average annual GDP growth rate of over five per cent.”

    He said a few years ago, Brazil was a net food importer like Nigeria, but today, she feeds herself and exports to various parts of the world, suggesting that the country borrows a leaf from the Brazilian agricultural model.

    “The Bi-National Commission set up by the two countries during the recent state visit to Nigeria by the Brazilian President, Ms. Dilma Rousseff, is a practical effort by the two governments to boost economic and cultural relationship,” he said.

    He said the NBCC1 is providing the vehicle for the realisation of this effort, adding that the Chamber plans to embark on a trade mission to Brazil in November. The mission will cover agricultural and agro-allied, technology, infrastructure, power, mining, oil and gas, construction, commerce, aviation, finance/banking, women empowerment, among others.

     

     

    He said the NBCCI is inviting high net-worth companies and individuals in the country to take advantage of the planned mission to secure business deals with Brazilian conglomerates, who are willing and eager to do business with Nigeria.

  • CIBN chief harps on professionalism

    The Chartered Institute of Bankers of Nigeria (CIBN) has re-emphasised the need for professionalism and acquisition of needed skills by bankers.

    Speaking at the induction of 817 new graduates in Lagos, CIBN President/ Chairman of Council, Segun Aina, said banking thrives on professionalism and ethical practices as there are no short cuts.

    The inductees comprise 13 persons for Certificate in Banking; 162 new Associates (Chartered Bankers) and 642 Micro-finance certified bankers, who have successfully completed the qualifying examinations of the Institute.

    Aina said graduation and inductions are special occasions as they simultaneously signify both an end and a beginning for most bankers.

    He said the exercise logically conclude the formal professional examinations process and provide occasions for fulfillment for the students, their families and the Institute. As a beginning, such exercise provides the opportunity for the next and most important stage of practising with distinction, the knowledge and skills acquired through the examination process.

    According to him, the exercise marks the transition from bank workers to Chartered Bankers or Certified Bankers as the case may be for the inductees.

    He said the banking industry requires every practitioner to constantly add value and credibility to his institution in an ethical manner as well as continuously improve and add value and dignity to oneself.

    “A greater level of versatility and intellectualism is required of today’s banking professionals. As your qualification of today is just a beginning; you need to participate in the Compulsory Continuing Professional Development Programmes (CCPD) of the Institute.

    The CCPD is provided to ensure that your capabilities keep pace with standards both nationally and globally. You have to stay relevant, up to date and customer-centric in the face of ever changing and competitive banking environment,” he said.

    Aina said the competency framework recently rolled-out by the Central Bank of Nigeria and Bankers Committee requires bankers to attain necessary competencies to stay abreast of global developments. Under the Financial Sector Strategy (FSS) 2020, the Institute is pursuing the drawing up the framework for attracting and developing world class talents within the banking industry.

  • Private sector leads in pension contributions

    Private sector leads in pension contributions

    The private sector has surpassed the public sector in pension contributions, FBN Capital report has shown.

    It indicated that the private sector contributes about 60 per cent of the N3.4 trillion pension assets under the management of Pension Fund Administrators (PFAs).

    The research firm said data released by the National Pension Commission (PenCom) showed that as at end of March, this year (when pension assets were N3 trillion), the private sector contributed N1.8 trillion to the scheme. Also, the public sector’s contribution from ministries, departments and agencies (MDAs) of the federal and some state governments, was N1.2 trillion. This, it said, was a marked change from its composition in 2004 when the Act kicked off.

    FBN Capital said the increase to N3.4 trillion as at the end of May was largely due to the filing in of 12 states into the contributory pension scheme, although only six states had collected and remitted contributions in compliance with the provisions of the Pension Reform Act (PRA) 2004.

    It said the number of registered contributors has grown to 5.5 million with an average monthly contribution of N30 billion.

    “Given that only seven per cent of the nation’s 80 million workforce has joined the scheme, there exists a huge potential for growth in the coming years,” it said.

     

  • Western Union, eTranzact partner

    Western Union, eTranzact partner

    The Western Union Company and eTranzact International Plc, an electronic payment processing firm, have announced the launch of a new mobile money transfer service.

    In a statement it said consumers in Nigeria who use the eTranzact Mobile Money platform now have the option of receiving a Western Union Money Transfer transaction on their mobile phones.

    The facility allows consumers to receive funds from money transfer transactions initiated at Western Union transactional websites in 23 countries, or Western Union Agent locations around the world.

    “Western Union continues to introduce new service offerings to complement our multi-product, multi-channel strategy,” said Aida Diarra, Western Union Regional Vice President for North, Central and West Africa.

    She said the firm is excited to partner with eTranzact to increase the number of access points for consumers to use its services worldwide, facilitate financial inclusion, and provide convenient mobile solutions for those who want new methods for money transfer transactions.

    “To date, we have 19 active mobile money transfer deployments in 17 countries, and remain committed to expanding our mobile service offerings in key regions,” she said.

    eTranzact Mobile Money is a mobile payment solution that has multi-network interface capabilities with third-party payment programs. Upon receipt of their funds via a Western Union Money Transfer transaction, subscribers can use PocketMoni, the eTranzact Mobile Money platform, to pay utility and cable television bills, make merchant payments, top-up their mobile phone credits and/or make third party transfers.

    “We are excited to work with Western Union and leverage the power of their global network on behalf of consumers across Nigeria,” Mr. Valentine Obi, Managing Director and Chief Executive Officer, eTranzact, said.

    He said eTranzact Mobile Money service such as PocketMoni, is specifically designed to transform a user’s mobile phone into a highly interactive, feature-rich payment device.

    He said the firm’s relationship with Western Union will allow for daily access to money transfer transactions.

    He said adding Western Union money transfer capability to the platform is another step in building a comprehensive suite of mobile services, and enhances our customer value proposition.

     

  • Depositors warned on dud cheques

    F rom the Central Bank of Nigeria (CBN), has come a warn-ing to issuers of dud cheques: stop or face the consequences of your actions.

    To ensure that their customers do not fall victims, banks have started sensitising them on the CBN directive.

    They have been sending text messages, emails and letters to their customers, drawing attention to the CBN circular on the issue.

    According to the CBN, the volume of dishonoured cheques in the financial system is rising and has shown no signs of declining. Guaranty Trust Bank (GTBank), in an emailed statement low confidence in the acceptance of cheques, adding that it also adversely affected the cash-less policy aimed at reducing the volume of cash based transactions.

    “As part of efforts to address the issuance of dud cheques, CBN has directed all banks to identify customers who have issued dud cheques on three instances with effect from July 5, this year. Banks have also been directed to send details of customers together with copies of dud cheques to CBN.

    “The apex bank will, in turn, forward such details to the Economic and Financial Crimes Commission (EFCC) for further investigation.

    “Our esteemed customers are therefore advised to make sure that their accounts are funded before issuing a cheque to a third party and to also confirm all cheques via our internet banking platform or relationship managers, as this will ensure the cheque is honoured,” the bank said.

    The CBN said bank customers issued dud/dishoured cheques worth N166 billion last year. It said over 167,507 dud cheques issued were processed by banks from January to December last year.

    The CBN said over-indulgence of cash in the economy increases the cost of banking services, raises the incidence of crime and facilitates money laundering, adding that it is collaborating with the financial institutions and law enforcement agencies to check the prevalence of dud cheques.