The Nation Newspaper

Category: Money

  • AfDB eyes $1.5b bonds

    AfDB eyes $1.5b bonds

    The African Development Bank (AfDB) is planning to raise $1.5 billion in local-currency bonds in Nigeria and Zambia to finance infrastructure projects.

    This became exigent as emerging-market bond yields rise on speculation the Federal Reserve will reduce economic stimulus.

    The AfDB, which gives money to African governments for projects in areas, such as roads, ports and energy, is completing the planned size of the medium-term note programmes and is in talks with authorities in the two countries, Olivier Eweck, financial technical services manager in the bank’s treasury department, said in a statement.

    “Before the end of the month we would have made up our minds on the numbers,” he said.

    The Nigerian issues may be worth as much as $1 billion and the Zambian debt may reach the kwacha equivalent of $500 million,” he said.

     

  • ‘Public sector deposits hit N2.5t’

    ‘Public sector deposits hit N2.5t’

    Public sector deposits in banks stood at N2.5 trillion, about 20 per cent of total deposits between January and March, Currencies Analyst at Ecobank Nigeria Olakunle Ezun has said.

    Ministries, Departments and Agencies (MDAs) of states and the Federal Government as well as the local governments comprise the public sector.

    In an emailed report titled: “Nigeria: Indirect monetary policy tightening,” Edun said aside the Cash Reserve Ratio (CRR) which rose by N650 billion, after the Central Bank of Nigeria (CBN) increased the ratio to 50 per cent, an additional N955 billion will be removed from the economy.

    Last week, the CBN raised the CRR from 12 to 50 per cent during the Monetary Policy Committee (MPC) meeting.

    The hike, he said, suggested that the tightening effect would be immediate, which in turn could require CBN repost to rebalance liquidity demand and supply.

    The monetary policy, he said, may remain relatively unchanged in the months ahead. “Assuming no significant change to key indicators, we think the Monetary Policy Rate (MRR) will be held at 12 per cent in subsequent MPC meetings, although further indirect tightening may occur if liquidity remains above target,” he said.

    Ezun said oil production remains a key variable and the recent moderate contraction in production to 1.88 million barrel per day in June from 2.1 million barrel per day in December 2012 highlights on-going oil theft/bunkering. It also showed the impact of delayed investment that has been caused by Petroleum Industry Bill uncertainties.

    “If production continues to fall and in combination with a fall in global oil prices below $100 per day, there is a risk that Nigeria’s growth could slow owing to the high level of government spending throughout the economy,” he predicted.

    Ezun said liquidity tightening will push up the short end of the yield curve by around 40 to 50 basis points.

    “We also expect the longer end of the curve to move up, but by a smaller margin. The amount of the rise will be countered by the level of repost the CBN conducts in the days and weeks ahead to rebalance credit demand and supply. Assuming our positive inflation outlook and currency stabilise, we think foreign investors can continue to invest in one year and shorter maturity government securities with confidence that real returns will remain solid and currency risk minimized,” he said.

    He explained that pressure on forex reserves would also rise, leading to currency weakness even as the relatively expansionary fiscal stance is another concern, particularly if fiscal revenues come under strain. He noted that oil revenues account for around 75 per cent of total fiscal revenues.

    “The somewhat low balance of Excess Crude Account of $5.3 billion in May 2013 highlights the limited recourse to supplementary financing should revenue growth slow.

    “Inflation remains comfortable and the MPC estimated that the inflation outlook was good with single digit inflation likely by year-end. Inflation is likely to accelerate to low double digits driven by robust domestic demand and on-going government spending, and despite the recent choking-off of liquidity.”

     

  • Why Discount Houses can’t rival banks, by CBN

    DISCOUNT Houses are finding it difficult to compete with banks as authorised dealers in money market because of poor capital,” the Central Bank of Nigeria (CBN) has said.

    The CBN Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for 2012 to 2013 classified banks and discount houses as authorised dealers in money market instruments.

    CBN Director of Communication, Ugochukwu Okoroafor, told The Nation that Discount Houses, have not been able to compete with banks since 2005 after the capital base of banks increased from N2 billion to N25 billion. The capital base of Discount Houses has remained around N2 billion since then. Discount Houses are meant to facilitate the issuance and sale of short-term government securities and other eligible short-term commercial bills.

    Okoroafor said the consolidation of that era favoured banks against discount houses in their scramble for businesses. He said since many of the banking needs of people provided by discount houses were now done by banks, the operating environment has steadily risen against discount houses.

    But Emmanuel Ebuk, an Executive in Consolidated Discount Limited (CGL), said the problem of discount houses had nothing to do with capitalisation. He said CDL has a capital base of N27 billion, and that many other operators in the sector are well-capitalised.

    On last week’s withdrawal of licence of the Express Discount Limited (EDL), Okoroafor said the CBN does not bail out shareholders but depositors, adding that since the firm only serves about 0.3 per cent of the banking public, it was not wise to deploy public sector funds in its rescue.

    Information obtained from the EDL website showed that the firm was incorporated on November 25, 1992 as a private limited liability company and specialised financial institution.

    It was licensed by the CBN on July 22, 1993 to carry out the functions of a discount house and started operations on Friday, July 23, 1993.

    The EDL was owned by a group of financial institutions namely, Bank of Industry, Keystone Bank, Fin Bank, Omis Investment Limited, NICON Insurance, Niger Insurance, Skye Bank and Enterprise Bank.

    The last financial statement of the firm obtained in its website was published in December 2009 during which it made a loss after tax of N1.93 billion. The last dividend paid to shareholders was in 2008 when it paid N0.9 kobo against N0.34 kobo paid in 2007.

    The CBN had last Friday announced the revocation of the operating licence of EDL over alleged sharp practices and failure to recapitalise.

    CBN Director, Banking Supervision, Mrs. Tokunbo Martins, said in a statement that the discount house had maintained false and misleading books of account and had huge exposure to margin loans. She added that the firm had engaged in activities, which contravened Discount House guidelines. It had also indulged in distressed borrowing by sourcing funds at rates higher than it could earn by investing the funds, she added.

    Mrs Martins said the firm had negative shareholders’ funds and required a minimum capital injection of N21 billion if it were to remain in business.

     

  • Visa backs financial literacy mobile app

    Global payments technology company, Visa, has announced a mobile application development challenge, meant to stimulate the development of innovative web, mobile applications and games.

    It will also assist in teaching money management skills and supporting the advancement of financial literacy in Nigeria.

    “The challenge will bring key financial services players like the Central Bank of Nigeria (CBN), commercial banks, personal finance non-governmental organisations and other stakeholders together with software developers and designers, to create interesting applications and games. These applications and games will advise Nigerians on how best to manage their money and financial affairs, and also educate them on the tools available to meet their financial needs,” the statement said.

    Ade Ashaye, Country Manager for Visa in West Africa, said these applications and games will advise Nigerians on how best to manage their money and financial affairs, and also educate them on the tools available to meet their financial needs.

    “At Visa, we are dedicated to increasing financial literacy among the unbanked through strategic partnerships and educational programs. This is the motivation behind the Financial Literacy Challenge,” the statement added.

    The Chief Executive Officer, Co-Creation Hub Nigeria, Bosun Tijani, said: “Collaborating with Visa on the Financial Literacy Challenge creates room for Nigeria’s technology talent to turn their energy and skills to building apps that will boost the skills and confidence of Nigerians as they make financial decisions. We are pleased to be deploying our Open Living Labs approach to generate and develop truly innovative apps and games that are reflective of the Nigerian experience.”

     

  • ‘CRR hike’ll be positive for naira’

    ‘CRR hike’ll be positive for naira’

    The naira will be the biggest beneficiary of the 50 per cent rise in Cash Reserve Ratio (CRR) on public sector deposits, analysts have said. While there was no change to exchange rate policy, the CRR effect will be positive for the naira given the N650 billion immediate liquidity drop in the financial system.

    The naira had a day after the CRR hike firmed to a four-week high against the dollar. The local currency closed at N159.9 to the dollar, its strongest since June 19. The CRR accounts for 10 per cent of banking sector deposits.

    In an emailed report, Consolidated Discount House Limited raised strong fears on the naira’s stability, stressing that Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi, will ensure the defence of the local currency till his departure from the bank. Beyond these, it said the depletion of the naira will have strong domino effects on the system. It would also lead to negative carry trade and higher import costs for local businesses. The report said the single digit inflationary outlook for the second half of the year is largely anchored on stable exchange rates.

    Currencies analyst at Ecobank Nigeria, Olakunle Ezun said that by raising the public sector deposit CRR, the apex bank aims to slow growth in money supply and reduce inflationary pressures to sustain a comfortable level of inflation.

    He said monetary policy may remain relatively unchanged in the months ahead, assuming no significant change to key indicators. “Liquidity tightening will push up the short end of the yield curve by around 40 to 50 basis points. We also expect the longer end of the curve to move up, but by a smaller margin,” he said.

    The Monetary Policy Committee (MPC) of the CBN had last week left the Monetary Policy Rate (MPR) unchanged at 12 per cent. The Standard Deposit Facility and Standard Lending Facility were also held steady, at 10 per cent and 14 per cent respectively.

    However, the CRR for public sector deposits was raised to 50 per cent from 12 per cent in an attempt to reduce bank lending of these funds. By raising the CRR on public sector deposits, the CBN aims to slow growth in money supply and thereby reduce inflationary pressures to sustain a comfortable level of inflation.

     

    Interbank rates

     

    Rates at the interbank defied expectations and maintained a southward trend during the week. Afrinvest West Africa report said market expectation was that the new CRR should put an upward pressure on money market yields as profit taking was expected to ensue within that space. The 12 months Nigeria Interbank Offered Rate (NIBOR) closed the week at 12.8 per cent, having attained a 20-day 15.9 per cent peak on 17th July 2013.

    “With the increased CRR on public sector funds and the consequent liquidity squeeze, we expect the CBN Open Market Operation (OMO) rates to ease in the coming months to avoid excessive liquidity tightening,” it said.

     

    Public sector funds

     

    The CBN last week mandated banks to separately report public sector funds in their monthly and daily bank returns. In a circular to banks, CBN Director, Banking Supervision, Mrs Agnes Martins said the lenders will effective August 7, categorise their deposits under the Federal, State and Local Government deposits, with the reports included as additional memorandum items.

    He said the policy was a fallout of a review of recent development in the economy during the last Monetary Policy Committee (MPC) meeting. He said the reporting format requires that banks group their deposits under a specified code. He said that all Federal Government Ministries, Departments and Agencies (MDAs) and companies’ naira deposits will be reported under Federal Government Demand Deposits.

    All Federal Government MDAs and companies’ domiciliary accounts deposits will come under Federal Government Time Deposits while all state government MDAs and companies’ naira deposits fall within State Government Demand Deposits. Also, all state government MDAs and companies’ domiciliary accounts deposits in naira will fall under State Government time deposits while all local government MDAs and companies’ naira deposits will be reported under Local Government demand deposits category.

     

    Revenue deficit

     

    The Federal Government recorded a deficit year to date of N419 billion, FBN Capital said, quoting the CBN’s latest monthly report. The 2013 budget projects a full-year deficit of N887 billion. The report also said that Nigeria had posted only three monthly surpluses since May 2012.

    May recurrent items, including debt service and statutory transfers to bodies such as the National Assembly accounted for 76.2 per cent of total Federal Government spending and capital items the balance of 23.8 per cent. The budget projects shares of 67.5 per cent and 32.5 per cent respectively.

    The report said that on the surface, the position may not appear sufficiently critical to warrant the aggressive move taken by the MPC. It said that such a conclusion ignores the shortfall in oil revenues and the electoral calendar.

     

    Bilateral trade

     

    The Nigeria, Canada trade volume was projected to double to $6 billion from $3 billion by 2015, the Canadian Minister of International Trade, Ed Fast had said.

    He disclosed this in the Oxford Business Group (OBG) report, which indicated that Canada was working closely with the Federal government to address issues relating to security.

    The report titled: ‘Nigeria -2013 Report on Economic Reforms’, the firm said is prompting investors to take a “fresh look” at the country.

    Also, Fast said Nigerian government’s privatisation and anti-corruption reforms will create better opportunities for investors.

    “These ongoing changes will create better opportunities for all Nigerians and for investors from around the world. Canadian businesses are taking a fresh look at Nigeria and the opportunities it presents. They see that the environment is good for business, including a fair and strong regulatory framework to support and protect them,” he said.

     

    Agent banking

     

    Commercial banks and microfinance banks (MfBs) will get automatic licences to run agent banking when the guideline is reviewed in the coming months, CBN Governor, Sanusi Lamido Sanusi has said.

    He spoke in Lagos at the launch of the Geospatial mapping of Financial Institutions in Nigeria in conjunction with the Bill and Melinda Gates Foundation (BMGF).

    He said it was important to review the guideline and make it clearer because of initial challenges facing the banking practice. Sanusi said the agent banking is part of the CBN determination to enhance financial inclusion in the country. He said the broader aim of the financial inclusion target is that of the proposed 80 per cent adult Nigerians to be included, at least 70 per cent would be in the formal sector, with specific targets for services such as; payments, savings, credit, insurance and pensions outlined as well.

    “Achieving these targets will require the collaborative efforts of all the stakeholders in the financial industry, and with this in mind the CBN has approved a number initiatives centered around improving inclusion some of which include; The development of Agent Banking Guidelines, and tiered Know-Your-Customer (KYC) requirements to encourage Financial Institutions to reach out to underserved segments, the development of a Consumer Protection Framework under a newly set up Consumer Protection Department and a National campaign to promote Financial Literacy,” he said.

     

    Banks’ stocks

     

    Nigeria’s banking index fell the most in a month after the CBN tightened monetary policy by increasing reserve requirements, damping the outlook for lenders’ margins.

    Bloomberg said the Nigerian banking index, which tracks the West African nation’s 10 largest lenders by market value, declined 3.9 per cent to 404.84, the steepest drop since June 28.

    The CBN’s MPC led by Governor Lamido Sanusi introduced a 50 per cent cash reserve requirement on public sector funds last excess liquidity in the system.

     

    Bank to bank report

     

    Stanbic IBTC Plc has said its major focus in Nigeria will be strengthening retail lending and supporting Small and Medium Scale Enterprises (SMEs). Speaking during a new branch opening in Gbagada, the bank’s Regional Head, Nigeria, Lincoln Mali said he wouls adopt the Standard Bank in South Africa approach to retail lending in Nigeria.

    He said that the bank is not yet strong in retail business in Nigeria but that is going to change going forward. “In Nigeria, we are not all that known for the retail part of the business and that is what my team and I are bringing into the country. In South Africa, we are strong in retail lending. We will be strong in Nigeria as well. We have started to lend in the retail part of the business,” he said.

    Ecobank Transnational Incorporated announced the opening of its South Sudan banking affiliate. In a statement, the bank said the new banking affiliate, the 34th on the African continent, offers the opportunity to support the youngest African state in addressing the challenges in regards to its development. It said Ecobank South Sudan offers products and services of the Group to individuals, Small and Medium Scale Enterprises (SMEs), multinationals and institutions.

    Thierry Tanoh, the Group Chief Executive, said the bank is excited to have obtained the authorisation of South Sudanese authorities to operate in this country, which holds a huge potential for financial intermediation. “Our presence in four of its six bordering countries, namely Kenya, Uganda, the Democratic Republic of Congo and the Central African Republic, is a unique advantage to contribute to the development and integration of South Sudan young republic,” he said.

    Diamond Bank Plc partnered with the Rivers State Government on Wealth Creation and Poverty Reduction (WCPR) summit with the theme “Developing an Effective Comprehensive Framework for Wealth Creation and Poverty Reduction in Rivers State.”

    In a statement, the bank said the event which held in Port Harcourt is an initiative of the state government, through the Rivers State Office of the New Partnership for Africa’s Development (NEPAD) and the Rivers State Sustainable Development Agency (RSSDA).

    Diamond Bank said it is committed to supporting Micro, Small and Medium Enterprises (MSME) to grow businesses through capacity building, under its BusinessExpress Enterprise Series.

    The bank said it is supporting the growth of SMEs because it recognises that the future of a nation lies in the hands of entrepreneurs, so any energy expended in building up that sector cannot be wasted. It is something that is going to benefit the economy in years to come,”it explained.

    Heritage Bank unveiled plans to provide funding for the micro, small and medium enterprise (MSME) sub- sector of the economy.

    Speaking at the bank’s MSME Clinic held in Lagos, the bank’s Managing Director, Ifie Sekibo, expressed the lender’s commitment to assisting MSMEs to become large corporate organisations that can be quoted on the Nigeria Stock Exchange in the next three years.

    The bank’s chief said the lender likes starting small and growing over time. He said the bank wants to create, preserve and transfer wealth from one generation to the other. He said that big opportunities exist in the electronic banking business, while MSMEs have untapped potentials.

     

  • Bond tab for biggest economies may decline by $220b

    The world’s leading economies will have $220 billion less sovereign debt to refinance in the year, cutting supply after every major government bond market rallied for the first time since the 2008 financial crisis.

    According to Bloomberg report, the amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China will drop to $7.38 trillion from $7.60 trillion last year. It said Japan, the United Kingdom, Germany, France, Italy and Brazil will see a decline, while the United States, Canada, Russia, India and China will face an increase.

    “While high debt loads are blamed for curbing global economic growth, bond investors are encouraged by signs that some nations are starting to rein in spending as they extend the average maturity of their obligations. Instead of rising, borrowing costs are falling as supply decreases, inflation remains in check and central banks from the United States to Europe cut interest rates to record lows,” it said.

    Deutsche Bank expects German bonds to outperform French debt even as it forecasts German 10-year yields will probably reach 2.25 percent at the end of 2013, from 1.32 per cent at the end of December and compared with the average over the past five years of about 2.85 per cent.

     

  • Heritage Bank to assist MSMEs

    Heritage Bank to assist MSMEs

    Heritage Bank plans to provide funds for the micro,small and medium enterprise (MSME) sub-sector of the economy.

    Speaking at the bank’s MSME Clinic in Lagos, its Managing Director, Ifie Sekibo, pledged the lender’s commitment to assist MSMEs to become large organisations that can be quoted on the Nigeria Stock Exchange (NSE) in the next three years.

    He said the lender likes growing small firms and that it wants to create, preserve and transfer wealth from one generation to the other. He said big opportunities exist in the electronic banking for MSMEs to tap from.

    He explained that the bank was looking beyond deposit mobilisation to assisting the sub-sector to realise the participants’goals, by identifying and solving problems that affect their businesses to provide the solution to make them function better.

    The Executive Director of the bank, Mrs Mary Akpobome, said those in the MSME sub-sector need to properly structure their businesses to make to banks’ funds attractive to them.

    “Over the last six months, we identified 60 MSMEs and studied their operations to see where we can help them. But we discovered that many of them had no business plans and are owned by one person who does all the work and usually has no business plan,” she said.

    She said the bank has stepped up its support by advising such firms on the need to properly structure their businesses to ensure that banks fully understand what they are doing.

    Mrs Akpobome noted that the bank would ensure proper training on basic cash flow, forecasting and analysis skills for customers to overcome some of the challenges that come with faulty reports.

    She added that an adequate structure was in place to make them trans-generation organisations. “We are work in progress. We are here to hear from you to know where we can come in. We are committed to this project,” she said.

    She explained that under the arrangement, MSME operators could open current accounts, sole proprietorship, joint/partnership, corporate, fixed deposit, savings or domiciliary, in any of the bank’s branches.

    She listed the special features on the accounts to include zero Commission on Turnover; free e-business transactions and concessionary interest rate on loans and overdrafts.

    The bank also offers credit facilities for working capital, secured overdraft, temporary overdrafts; finance leases; invoice discounting and local purchase order financing.

    To strengthen the partnership, the bank is collaborating with Enterprise Development Centre, Fate Foundation, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and Lagos Chamber of Commerce and Industry (LCCI) on training MSME operators.

     

  • Diamond Bank, Rivers hold summit

    Diamond Bank, Rivers hold summit

    Diamond Bank Plc has partnered with the Rivers State Government to host the Wealth Creation and Poverty Reduction (WCPR) summit.

    It had as theme: Developing an effective comprehensive framework for wealth creation and poverty reduction in Rivers State.

    In a statement, the bank said the event, which held in Port Harcourt, was an initiative of the state government, through the Rivers State Office of the New Partnership for Africa’s Development (NEPAD) and the Rivers State Sustainable Development Agency (RSSDA).

    Diamond Bank said it is committed to supporting Micro, Small and Medium Enterprises (MSME) to grow businesses through capacity building, under its BusinessExpress Enterprise Series.

    The bank said it is supporting the growth of SMEs because it recognise that the future of a nation lies in the hands of entrepreneurs, so any energy expended in building up that sector cannot be wasted. It is something that is going to benefit the economy in years to come.

    ‘’The seminar is a complete package of everything a bank could provide to a small business to enable it grow. The BusinessExpress Enterprise Series is an initiative of the Diamond BusinessXpress Account (DBXA). It is a current account designed to meet the needs of MSME such as hotels, supermarkets, businessmen, professionals, travel agencies, trading outfits, schools, churches, fast food outlets, restaurants, clubs and entertainment outfits,” the statement added.

     

  • Ecobank expands to South Sudan

    Ecobank expands to South Sudan

    Ecobank Transnational Incorporated has announced the opening of its South Sudan banking affiliate. In a statement, the bank said the new banking affiliate, the 34th on the African continent, offers the opportunity to support the youngest African state in addressing the challenges in regards to its development.

    It said Ecobank South Sudan offers products and services of the Group to individuals, Small and Medium Scale Enterprises (SMEs), multinationals and institutions.

    The Group Chief Executive Thierry Tanoh said the bank is very excited to have obtained the authorisation of South Sudanese authorities to operate in this country which holds a huge potential for financial intermediation.

    “Our presence in four of its six bordering countries, namely Kenya, Uganda, the Democratic Republic of Congo and the Central African Republic, is a unique advantage to contribute to the development and integration of South Sudan young republic,” he said.

     

  • UBA inaugurates World MasterCard

    United Bank for Africa (UBA) Plc has introduced the World MasterCard, which is the most exclusive card in the MasterCard staple.

    In a statement, the bank said this is consistent with the bank’s focus of providing appropriate product to every customer segment, including high net-worth customers who cherish rare and exclusive privileges.

    Head, Cards, UBA Plc., Adédèjì Olówè, said the card programme, which is available by invitation only, can be tied to any of Naira, US Dollar, Pounds Sterling and Euro domiciliary account.

    He emphasised that the product offers benefits such as travel accident and inconvenience insurance; extended warranty; purchase protection; concierge services; and emergency cardholder services. The card, Adedeji stated, is exclusively made from a rare alloy of Silver Nickel, only a few materials of which exist.

    “The heft of the material is its signature. The recognition of the programme has afforded it the highly coveted MasterCard premium hologram. In addition, there is a great security service protecting our esteemed customers everywhere they shop with Fraud Protection and MasterCard Zero Liability,” he added.

    According to Adedeji, UBA also offers a dedicated lounge for its premium cardholders at the Head Office supported by 24/7 private banking customer support.

     

    The introduction of World MasterCard is coming after UBA Plc added MasterCard for Domiciliary Accounts to its robust bouquet of electronic products. This variant of Debit MasterCard products is tied to domiciliary accounts instead of Naira Current or Savings account and offers the same flexibility of usage anywhere in the world, including Nigeria.