The Nation Newspaper

Category: Money

  • CITN, Tribunal to collaborate on tax administration

    The Chartered Institute of Taxation of Nigeria (CITN) and the Tax Appeal Tribunal (TAT) are to collaborate on areas of their operations that will benefit tax payers.

    In a statement issued after visiting the cordinating secretariate of TAT on the issue, CITN Council members said the areas of collaboration border on capacity building for tax professionals to ensure they understand proceedings at tax tribunal, technical input into operations of TAT as well as inter-organisational publicity.

    The Publicity Chairman of CITN, Chukwuemeka Eze, said partnership with TAT would add value to tax payers especially those that have cases to resolve at the tribunal.

    TAT is an administrative tribunal, he said, established pursuant to Section 59 of the Federal Inland Revenue Service (Establishment) Act, 2007 as the foremost alternative dispute resolution body in the tax system in Nigeria.

    He said TAT operates in eight zones – one in Abuja, one in Lagos, and one in each of the six geo-political zones. The commissioners, who dispense administrative justice at TAT, work on part-time basis while each zone has a secretary who is a permanent staff member of TAT.

    TAT Coordinating Secretary, Yahaya Manga Abubakar, agreed with the CITN that given the fundamental positions of both agencies in the tax system, it became imperative that they partner to create a tax system as contemplated by the National Tax Policy.

    He acknowledged that there was need for a closer relationship between two bodies since the activities of the two organisations are complementary, and not mutually exclusive.

    He said since the focus of CITN is to produce qualified and competent tax professionals and that of TAT is to resolve tax disputes between taxpayers and tax–collecting authorities in a fair, just and equitable manner, an interactive relationship between the bodies will serve the interest of taxpayers better. He said the tax payers will be the ultimate beneficiaries of a functional and efficient tax system.

  • Sterling Bank doubles profit, dividend

    Sterling Bank Plc recorded a well-rounded performance in 2012 as the bank rode on the back of increased market share and robust credit risk management to double its profit from core operations.

    The impressive bottom-line performance underpinned 100 per cent increase in cash payouts, giving the bank the highest current dividend yield among banks that have so far released their reports.

    With a net profit after tax of N6.95 billion in 2012, the board of directors has recommended a 100 per cent increase in cash dividends to shareholders from 10 kobo paid for the 2011 business year to 20 kobo in 2012. In spite of the doubling in cash payouts, the strong growth in net earnings will still see the bank ploughing about 55 per cent of net earnings into reserves for business growth. At current market price, the recommended dividend represents a dividend yield of 7.3 per cent, the highest by any bank so far.

    Audited report and accounts of the bank for the year ended December 31, 2012, prepared in line with the International Financial Reporting Standards (IFRS) and approved by all financial services regulatory agencies, was presented to the investing public at the Nigerian Stock Exchange (NSE) yesterday.

    The report showed that the bank consolidated its growth and seamlessly harnessed the synergies from its recent acquisition with both outward and underlying performance indicators indicating marked improvements.

    While gross earnings grew by 51 per cent, profit from core operations (excluding the effect of one-off disposal of subsidiaries in 2011) increased by 108 per cent; the proportion of non-performing loans to total loans portfolio improved considerably to 3.8 per cent as against 4.8 per cent in the previous year. Net interest margin improved from 5.0 per cent to 5.2 per cent underlying increasing profitability of the bank’s core banking operations in spite of the tough operating environment.

    Gross earnings stood at N68.9 billion in 2012 as against N45.7 billion in 2011. The top-line was driven substantially by improving core banking operations and larger market share as net interest income rose by 43 per cent from N16.7 billion to N23.9 billion. Non-interest income also increased to N15.3 billion as against N13.4 billion in the previous year. Net operating income after impairment loss rose by 51 per cent to N39.5 billion as against N26.1 billion. Adjusted for income from discontinued operations, profit before tax grew by 108 per cent to N7.5 billion in 2012 as against N3.6 billion in 2011.

    Besides, the bank’s balance sheet size and structure improved remarkably during the year. Total assets increased from N504 billion to N580.2 billion. Customer deposits increased by 18 per cent to N463.7 billion as against N392.0 billion while net loans and advances grew by 42 per cent from N162.1 billion to N229.4 billion. Shareholders’ funds increased by 14 per cent to N46.6 billion compared with N41.1 billion in the previous year.

    Managing director, Sterling Bank Plc, Mr. Yemi Adeola said the 2012 report reflects the enhanced capacity of the bank following the business combination with Equitorial Trust Bank (ETB).

    He described the report as a delight, noting that the growth was driven by a marked improvement in core banking operations whilst the bank maintained a tight grip on asset quality, with non-performing loans dropping to its lowest rate of 3.8 per cent despite a 42 per cent growth in loans to N229.4 billion.

    According to him, the bank has been implementing several key initiatives to broaden its customer base and enhance customer satisfaction.

    “Going into 2013, our goal is to reduce our cost of funds, enhance our brand presence in our target markets and improve operating efficiency. We have also revamped our retail strategy through a number of initiatives. Our physical infrastructure is being upgraded to capture a high-street retail look and feel; and restructured along the lines of hub and spoke delivery platforms,” Adeola said.

    He reassured that ongoing initiatives would make the bank more efficient and profitable, reiterating the commitments of the board and management to continuously deliver better and competitive returns to shareholders.

    The earnings report triggered massive bullish rally on Sterling Bank’s shares at the NSE yesterday. Sterling Bank’s market consideration rose by 9.45 per cent, adding 26 kobo to close at N3.01 per share. Sterling Bank was the second most active stock with a turnover of 54.93 million shares worth N159.44 million in 243 deals.

    Equities generally sustained positive market sentiments with 38 advancers against 26 decliners. Okomu Oil Palm led the advancers with a gain of N7.97 to close at N87.72. Nigerian Breweries followed with addition of N3 to close at N169. Seven-Up Bottling Company rose by N1 to close at N50. Guinness Nigeria added 98 kobo to close at N266 while Beta Glass gathered 94 kobo to close at N10.43 per share.

    However, Presco topped the losers’ list with a drop of N2.50 to close at N22.50. MRS Oil and Gas trailed with a drop of N2.48 to close at N22.40. Guaranty Trust Bank lost N1.77 to close at N25.68 while PZ Cussons Nigeria fell by 71 kobo to N36 per share.

    Investors staked N6.45 billion on 516.34 million shares through 7,897 deals. Banking stocks accounted for 365.70 million shares worth N3.68 billion in 3,893 deals.

  • ‘Fed Govt not doing enough to woo Diaspora investors’

    ‘Fed Govt not doing enough to woo Diaspora investors’

    • Forum flays staging of roadshows abroad

    The Federal Government is not doing enough in its effort to woo investors from the Diaspora, Director, Nigeria Development and Finance Forum (NDFF) Jide Akintunde has said.

    Speaking ahead of the its conference holding in Washington DC, United States from June 4 to 5, he said there is no functional policy to encourage Nigerians living abroad to invest in the country except ‘wooing’ them through road shows.

    He noted that there are barriers to investing in the country, which especially affect the participation of Nigerians living abroad, compared to global or emerging market investors looking to invest in Nigeria.

    He said Diaspora Nigerians have more psychological closeness to the country, and so they have more awareness of the high level corruption dynamic in getting a deal done where government officials are involved in the process.

    He said the conference is aimed at drawing these investors into investing in the country. “However, a global investor with experience in the emerging markets knows how to deal with the rough terrain of business in Nigeria. Indeed, his behaviour is constrained by legislations in his home country which prohibit payment of bribes while doing business abroad. But this is not necessarily the case for a Nigerian abroad who has no emerging market exposure or experience,” he said.

    He said the programme of privatisation of the State Owned Enterprises (SOEs) could have been used to stimulate Diaspora investment.

    Akintunde, however, insisted that to do that requires more transparency in the programme than we have. We also need innovative policies to make it happen. “When we look at the financial outlay for the purchase of government assets, they are very high; perhaps too high beyond what a unit of business controlled by an individual could muster. That might explain why the multinationals and investment vehicles promoted by foreign governments are the more visible foreign businesses in the country. However, the planned floatation of Diaspora bonds by Nigeria and a few other African governments can help address this barrier,” he said.

    He said with the Diaspora bond, Nigerians abroad could invest in the Nigerian infrastructure sector with their pooled financial resource. This, he said, mitigates the risk of an individual or few individuals taking on both management responsibilities and operating risks of investing in Nigeria.

    “Some years ago, the Federal Government had mooted the idea of creating a technology parks with the involvement of Nigerians abroad, to incubate IT businesses in the country. But the commitment to push the policy to fruition has been lacking. Thus one of the proposed locations for the project, the former Federal Secretariat complex in Ikoyi, Lagos, has remained unoccupied for years,” he said.

  • MfBs reject N20m proposed capital for unit operators

    MfBs reject N20m proposed capital for unit operators

    Microfinance Banks (MfBs) have rejected the N20 million capital proposed by the Central Bank of Nigeria (CBN) for unit operators.

    The National Association of Microfinance Banks (NAMBs) said many unit operators would die if the proposed capital is implemented.

    The proposed capital “is too high”, NAMBs Lagos Chapter Chairman Valentine Whensu said.

    In a statement, Whensu appealed to the banking watchdog to allow the operators to open more branches to enable them raise the N20 million capital base. He said when the banks are allowed to open more branches, it would be easier for them to generate enough profit.

    He said it would be more convenient for operators at the state level to raise the N100 million capital base required of them.

    Citing Lagos, Whensu said the state has 20 local government areas and 37 local council development areas, adding that these would make it easier for those that want to play at the state level to get enough funds for recapitalisation.

    He advised CBN to consider the association requests, adding that the Microfinance Banks are committed to serve the poor in the country.

    Whensu commended the apex bank for extending the recapitalisation deadline to December 2013 from December last year, stressing that this will enable the banks to shop for more funds.

    The Managing Director, Gold Microfinance Bank Limited, Mr Lanre Abiola, said there is need to have a critical look at the recapitalisation fees of the banks, adding the fees must be moderate to foster growth of the operators.

    Abiola said the bad economy is taking its toll on the banks, arguing that it is becoming increasingly difficult for some operators to raise the minimum capital base of N20 million.

    He said: “The cost of operations of microfinance banks is high in Nigeria. When you consider the cost of procuring diesel to provide alternative alternative power supply, payment of salaries of staff, among others, one would discover it is not easy to operate MfBs in a country with poor infrastructure.

    “Besides, it is difficult to satisfy all the customers that are coming for loans. The reason is because savings is very low in the banks. The money that the banks are giving as loans comes from the savings. In a situation where a customer lodge in let say, N60,000 for a year or two, and is expecting a loan of N300,000 or N500,000. That is impossible. There are many problems facing the banks, of which illiquidity is the major one.”

    NAMB Chairman, Mr Olufemi Babajide, said liquidity is the major problem among the banks, in spite of the flexible recapitalisation fees imposed on the banks by the CBN.

    Babajide advised banks to choose from the N20 million, N100 million and N2 billion capital base to serve their customers better.

    He said the association few years ago divided the banks in Lagos into six zones to enable them to serve their customers well in their zones and get enough money for recapitalisation.

  • Why banks’ audited reports are delayed

    Why are banks’ audited reports not released in time by the Central Bank of Nigeria (CBN)?

    The delay is caused by impairment test on assets, full disclosure of ac-counts, related party transactions, estimated future cash flows, among others, contained in the International Financial Reporting Standards (IFRS), says an accountant, Uwadiae Oduware.

    Oduware, a partner in Delloite and consultant to the Financial Reporting Council (FRC) on IFRS, said these issues weigh in CBN’s considerations for the release of the reports.

    Oduware said the apex bank is delaying banks’ financials because its wants to be sure that banks conducted impairment test on their assets. He said the test must be carried out before a company is deemed to have complied with IFRS guidelines.

    He said: “As a bank, you need to test your assets to know whether their values have been impaired. For instance, if a bank bought some vehicles, which are supposed to last five years. It is important for the bank to conduct impairment test on the vehicles after two years. This will help in knowing whether the vehicles can last five years or not. Through the test, it would be clear whether the current test values of the assets are beyond their carrying values. CBN is taking its time because it wants to avoid a situation where there would be problems on the assets of banks later.”

    He said another problem is full disclosure of accounts, adding that CBN wants to ensure that banks disclose transactions made in their accounts.

    “IFRS allows full disclosure of accounts, and banks must comply with this. Disclosures in the IFRS are more than the previous accounting standard. Under IFRS, a lot of judgments are expected on the part of the Board of a company. The board must in vivid terms say how they came about the estimates in their accounts. Those estimates are subjective to management’s judgment. Therefore, they must disclose everything in their bid to comply with IFRS. For example, when a loan is given to a customer before, he/she must not fail to pay back within 91 days. However, IFRS will not tell a customer to pay back within a stipulated period. Rather, it will tell the bank to test the collateral the customer is bringing to ascertain its genuineness. So, the CBN would not be happy to see loopholes in the accounts of banks. They have to be very careful,” he added.

    Oduware also a consultant to Securities and Exchange Commission (SEC), said IFRS requires a more extensive disclosure on related party transactions.

    He said CBN wants to be sure that disclosures on such transactions have been made beyond what banks have disclosed in their accounts.

    According to him, financial reports must contain estimated future cash flows in line with IFRS provisions. He said assets, such as buildings or properties, must be able to generate economic benefits, adding that the development would help banks in making cash projections in their accounts.

    He said the values of a property must go beyond physical existence, adding that these must be stated in the accounts.

    He said the apex bank is trying to ensure that banks comply with the relevant provisions of IFRS before releasing the audited reports of banks to the public.

    He said Financial Reporting Council has control over the issue of compliance to accounting standards, stressing that the CBN would still present its works to the council for approval.

  • Import bill declines to $35.4b

    Nigeria’s import bill declined by 43 per cent to $35.4 billion in the last one year, Renaissance Capital (RenCap), an investment and finance firm has said. In a report obtained by The Nation, the firm said the import bill is equivalent to 13 per cent of the Gross Domestic Product (GDP) last year.

    It said the decrease in imports was across all categories as machinery and transport equipment, Nigeria’s biggest import segment, declined 63 per cent, following modest growth of two per cent in 2011. This, it said, showed a slowdown in fixed investment and growth.

    Nigeria’s trade surplus, it said, surged 75 per cent to $105.9 billion, which is 39 per cent of GDP, based on data released by the National Bureau of Statistics (NBS) trade data. This, it said, largely explains the increase in the current account surplus to 7.5 per cent of GDP in September 2012 as against 3.6 per cent in 2011.

    “We expect revisions to the import numbers. We find it odd that while imports declined across all categories, unspecified imports swelled 600 times to $12 billion in 2012. Unspecified imports surged from less than one per cent of total imports in preceding years to 31 per cent in 2012.

    “We are likely to see a significant revision of imports by categories as seen in the downward revision of the errors and omissions’ negative balance in the 2010 balance of payments. While the eventual revised total import bill will still show a decline, in our view, the extent of the year on year decreases are likely to narrow as a larger share of the unspecified items are identified post-revisions.

    “A slowdown in oil earnings growth largely explains the decline in total exports earnings growth to 14 per cent in 2012 as against 44 per cent in 2011. We think the oil earnings’ growth slowdown to nine per cent in 2012 as against 48 per cent in 2011 was largely due to a flat Bonny Light crude oil price of.”

  • Equities post mouth-watering returns

    Equities post mouth-watering returns

    Nigerian equities started and ended the first quarter on a high note. In spite of declining inflation rate and stable foreign exchange, average equity return for the three-month period still leaves investors with something to cheer, writes Taofik Salako.

    Equities glided through the first quarter with mouth-watering returns that dwarfed the celebrated performance of the stock market in the previous year. With three-month returns as high as 231 per cent, the first quarter of 2013 was the most resurgent in recent years. Average return at the Nigerian equity market closed the three-month period ended March 31, 2013 at 19.4 per cent, implying capital gains of about N1.8 trillion within the period.

    The All Share Index (ASI), the common value-based index that tracks all equities quoted on the Nigerian Stock Exchange (NSE), closed the first quarter at 33,536.25 points as against its index-on-board of 28,078.81 points for the year. This represented a three-month return of 19.44 per cent. Besides its primary importance as the benchmark index for the NSE, the ASI doubles as the country index for Nigeria and rightly indicates the competitiveness of Nigerian equity returns.

    Reflecting the value inherent in the ASI movement, aggregate market capitalisation of all equities rose by 19.6 per cent from 2013’s opening value of N8.974 trillion to close the first quarter at N10.733 trillion, indicating increase of N1.76 trillion. The marginal difference between the increase in ASI and market capitalisation was obviously due to last-day supplementary listings, which market dynamics might not have fully adjusted before the close of trading session.

    The performance of the market last quarter stands in sharp contrast to the downtrend that characterised the first quarter of 2012. Equities had posted negative year-to-date return of 0.38 per cent in the first quarter 2012 as declines in share prices of highly capitalised stocks overwhelmed the market. ASI closed first quarter 2012 at 20,652.47 points compared with its opening index of 20,730.63 points. Aggregate market capitalisation of all equities however, closed the first three months of 2012 at N6.550 trillion as against its opening value of N6.533 trillion, indicating the temporary extenuating influence of supplementary listing.

    Building on the momentum that closed 2012, the performance of equities in the past three months sets equities early on the global top returns’ table and reinforces several highly optimistic views that see the market surpassing its heart-warming full-year return in 2012. The Nigerian stock market recorded average full-year return of 35.4 per cent for 2012. This implied accretion of some N2.44 trillion in capital gains to investors in 2012. The ASI closed 2012 at 28,078.81 points as against its opening index of 20,730.63 points for the year. Aggregate market capitalisation of all quoted equities also rose from its opening value of N6.533 trillion to close 2012 at N8.974 trillion, indicating capital gains of N2.441 trillion.

    Both the 2012 full-year return and 2013 first quarter performance further compensated for the pre-2012 streak of losses, especially in 2011. Market value of quoted companies had dwindled by N1.38 trillion in 2011, with the ASI indicating a negative return of 16.31 per cent.

    Besides, equities were obviously the most attractive and best-return asset class in the first quarter. With inflation rate at 9.5 per cent, average return of 19.44 per cent indicates inflation-adjusted return of 9.94 per cent. This places equities above other securities, especially the government bonds and other fixed-income securities. Official data by the Central Bank of Nigeria (CBN) showed that 91-day Nigerian Treasury Bills currently closed the period with a yield of 11 per cent while three-month tenor deposit rate of banks stand at 8.3 per cent. Average inter-bank call rate stood at 10.16 per cent.

    Beyond the average market performance, several sectoral indices showed above average returns. The NSE Insurance Index indicated average return of 30.42 per cent for the insurance sector, although the return was driven mainly by certain highly capitalised and active stocks in the sector. Most insurance stocks were stagnant at nominal value during the first quarter. The NSE Banking Index underlined modest gains by highly capitalised stocks and impressive returns by stocks such as United Bank for Africa (UBA) and Wema Bank with a sectoral return of 21.41 per cent. The NSE Oil and Gas Index closed the first quarter with average return of 29.61 per cent while the NSE 30 Index, which tracks the 30 most capitalised stocks, was slightly above average with a return of 19.97 per cent. Only the NSE Consumer Good Index fell below average with a return of 17.25 per cent.

    While most stocks in the insurance, information and communication technology, packaging, and engineering technology sectors among others remained largely dormant, equities across several sectors made significant above-average returns. The top-20 return table ranged from 230.8 per cent to 41.7 per cent, underlining the impressive capital gains that accrued to investors during the period. Wema Bank topped the return table with a gain of 230.8 per cent as the bank seeks to leverage from regional banking to national banking licence. Wapic Insurance followed with a three-month return of 139.7 per cent while Evans Medical placed third with 101.1 per cent.

    Other stocks on the top-20 return table included Cement Company of Northern Nigeria (CCNN), 97 per cent; Livestock Feeds, 85.4 per cent; Forte Oil, 76.6 per cent; UBA, 75.4 per cent; Okomu Oil Palm, 70.6 per cent; Unity Bank, 68 per cent; Eterna, 65.8 per cent; Sterling Bank, 60.1 per cent; Fidson Healthcare, 59.4 per cent; Julius Berger Nigeria, 53 per cent; NEM Insurance, 52.7 per cent; Custodian and Allied Insurance, 50 per cent; Aiico Insurance, 46.8 per cent; Presco Plc and Sterling Bank, 44.9 per cent each; Mansard Insurance, 42.2 per cent; Transnational Corporation of Nigeria (Transcorp), 41.9 per cent while Diamond Bank ranked 20th with a three-month return of 41.7 per cent.

    However, the positive and significant gains by several stocks belied the stagnation and dwindling fortunes of several other stocks. While price depreciation was relatively low compared with capital appreciation several stocks failed to respond to market dynamics. From the most populous insurance sector to engineering, telecommunications, alternative securities market, construction to agriculture sector, several equities remained stagnated at either their nominal values or opening values for the period. The stock market has been driven to a large extent by less than 50 per cent of quoted equities. This same pattern, though expanding gradually, could also quicken market decline in the event of concentrated losses among top stocks.

    There is also the danger that the first quarter may pose an anti-climax as investors readjust valuations in line with earnings reports, most of which are expected to be released in the second quarter.

    But most analysts agreed that the overall outlook for the year still suggests a robust performance, although market pundits are divided on the extent of returns in the new business year. Across a broad spectrum of the investment management industry, market pundits and advisors appear to agree that the market would post positive return again this year. From FBN Capital to Sterling Capital Markets, GTI Securities, FSDH Securities and Investment One Financial Services (formerly GTB Asset Management Limited) among other leading investment services companies, previews show strong potential for continuation of the upswing. But how far will the market go? The second quarter could be decisive in shaping equities returns.

  • The coming of e-Form M

    The coming of e-Form M

    The era of manual Form M is now history. Banks within the first quarter of the year fully embraced e-Form M, which the Central Bank of Nigeria (CBN) sees as critical in the management of trade in the country.

    The CBN Director of Trade & Exchange, Batari Musa, said before the feat was achieved, manual operations made it difficult for lenders to process forex transactions for their customers. “Prior to the automation, there were delays in handling forex transactions. There were lots of challenges in tracking transactions done by banks, audit trail is almost impossible,” he said.

    He said banks’ full compliance with the automation of e-Form M as mandated by the CBN was achieved in the first quarter of the year.

    Speaking at the a customers’ forum organised by Access Bank, Musa said the e-Form M as it is commonly known is completed by importers while bidding for foreign exchange for importation of goods.

    “Prior to e-Form M, there were delays in handling forex transactions. There were lots of challenges in tracking transactions done by banks, audit trail was difficult too,” he said.

    He said full automation gives banks the opportunity to adapt fully to the process and master the challenges that come with the e- version of the process. “The automation of the e-forms reduces cost transaction; eliminate delays; provide reliable data for monitoring and planning purpose; and achievement of overall efficiencies of trade processes,” he said.

    However, All Authorised Dealer Banks (ADBs) will, henceforth, pay N1,500 per declaration of e-Form M, the CBN has said. In circular to all authorised dealers, CBN Director, Trade and Exchange, W. D. Gotring, said this became exigent following the successful deployment of the e-Form M on the Nigerian Single Window Trade portal and the commencement of on-line submission of the of the Form M by the banking watchdog.

    He said a charge of N1, 500 as fee per declaration for e-Forms M took effect last December. He said there should be a direct debit of the processing bank’s current account for each declaration which should be recovered from the customer of the bank. However, the charge on the customer for the e-Form M should be separated from other bank charges.

     

    Budget

    The delay in passage of the 2013 budget slowed activities in the banking sector in the first quarter. Fiscal releases by the Federal Government create huge economic activities that translate to increased businesses for banks, since the former is the biggest spender in the economy.

    President Goodluck Jonathan signed the budget on February 26 some months after its passage by the National Assembly. The National Assembly passed the budget before the end of last year. It jacked up the proposal from N4.92 trillion to N4.98 trillion.

     

    Economy

    Also within the quarter, Standard & Poor (S&P) said economic growth and a sustained period of lower political risk, including the successful reform of the natural resource, power, and agricultural sectors could improve Nigeria’s economic diversification. This, it said, would support stronger long-term economic growth, reduce the risks arising from an oil price or production shock, and help Nigerian banks diversify their loans books.

    S&P said loan growth could then proceed at manageable levels to the real economy, mitigating the inherent risks of foreign currency lending, large concentrations, and real estate bubbles. It said Nigeria’s narrow economic structure also exposes the economy, and the banking sector, to a fall in oil prices or production. This risk is exacerbated by foreign currency lending and loan concentrations in the oil and gas sector.

     

    Interbank rates

    Also, inter-bank rate was steady in the last week of the quarter, due to repaid N354.93 billion inflow from treasury bills and Open Market Operations (OMO) bills. Call and seven-day money market rates were steady at 10.25 per cent and 10.5 per cent on March 27. The three-month Nigeria Interbank Offered Rate (NIBOR) was also steady at 11.5 per cent though less activities are done on the tenor.

    The interbank secured lending (Open Buy Back) rose slightly to 10.16 per cent for commercial banks and 10.2 per cent for discount houses. The inter-bank money market remained liquid and might continue this week due to expected treasury bills and OMO bills maturities.

    Olakunle Ezun of Ecobank Nigeria said the CBN liquidity management remained active and supported by the circular issued on reviewing its guidelines for how banks access its Standing Lending Facility window and forex auction. “Given the market liquidity of about N408.9 billion on March 28, the CBN might continue its liquidity management through the sale of OMO bills to ensure price stability,” he said.

    The apex bank also said banks’ customers will from 2016 enjoy free Commission on Turnover (COT) on their transactions. This was contained in a ‘Revised Guide to Bank Charges’ released by the banking watchdog last week. It took effect from April 1, 2013.

     

    Bank charges

    The report, first issued in 2004, was meant to provide a standard for the application of charges in the banking industry, and to minimise conflicts between banks and their customers. The revised policy will serve as a regulation on applicable charges for banking services and products offered to customers.

    CBN Acting Director, Financial Policy and Regulation, I. T. Nwaoha, said in a circular to banks and discount houses that COT applies to customer-induced debit transactions on current accounts. He said the banking watchdog has begun a gradual phase-out of COT from N3 per mille in 2013; N2 per mille in 2014; N1 per mille in 2015 and zero per cent per mille in 2016.

    He said loan repayment from current or savings account will attract zero COT, while there is no charge attached to debits representing transfer to other accounts in the same name.

     

    PMI’s capitalisation

    The CBN extended the recapitalisation deadline for Primary Mortgage Institutions (PMIs) to December 31, 2013. The decision to extend the recapitalisation deadline for PMI, the apex bank said, “is to allow the companies more time to recapitalise.”

    The apex bank said it gave the subsector an additional eight months to shore up their capital base from the earlier deadline of April 30, 2013. These were contained in a circular to directors and shareholders of primary mortgage banks from the CBN entitled: “Extension of the deadline for compliance with the revised guidelines for primary mortgage banks.” The apex bank said the extension was to allow PMBs directors and shareholders sufficient time to exercise any of the options for capital raising, business combination and downscaling highlighted in the earlier circular dated December 14, 2012.”

     

    Interest rate

    The CBN Governor Sanusi Lamido Sanusi has said he supports keeping the benchmark interest rate on hold to contain inflation, as policy makers increasingly opt for a cut. He said: “My own inclination is to just hold and just continue doing what we’re doing, because it has worked very well. But I’m only one vote in the Monetary Policy Committee. The votes to ease are beginning to increase.”

    The 12-member MPC, led by Sanusi, left the key rate at a record high of 12 per cent for a ninth meeting to help bolster the naira and keep inflation below 10 per cent. Three members voted for a reduction, up from two in January, to support the economy. Policy makers have so far rejected calls from businesses and the government to lower borrowing costs.

  • Mobile money firms mull mergers and acquisitions

    Mobile money firms mull mergers and acquisitions

    The 20  Mobile Money Operators (MMOs) licensed by theCentral Bank of Nigeria (CBN) two years ago are contemplating merging, The Nation has learnt.

    Some of the companies include  Stanbic/IBTC Plc, Ecobank Nigeria Plc, Fortis Moble Money, UBA/Afripay, Guaranty Trust Bank/MTN and First Bank Plc. Others are Pagatech, Paycom, M-Kudi, Chams, Eartholeum, E-Tranzact, Parkway, Monitise, FST, and Corporate.

    It was gathered that some of the firms may merge because they could not muscle financial resources to overcome infrastructural, financial and agents’ network challenges among others.

    The Business Development Manager, Fortis Mobile Money, Mr Kunle Ogunmola said the firms were considering mergers and acquisitions because of their lean financial status.

    He said: “I’m sure there are moves being made by the operators to consolidate their businesses. The moves, for obvious reasons, might not be known to the public now. The mobile money scheme is still in its early stage, and operators would like to take their time before making their positions known to the public on some vital issues,”

    Ogunmola said mobile money operation was capital intensive, stressing that the operators need to pull their resources together.

    “The big players in the ecosystem are having financial problems. How much more the small players in that are carrying out mobile payment transactions. From all indications, the merger will be between the banks and the smaller firms,” he said.

    Ogunmola said mobile money initiatives requires a lot of money to ensure wider penetration, adding that it is only when they coalesce to strengthen their operations that they can get such funds.

    The Chief Executive Officer, Mobile Money Africa, Mr Emmanuel Okwogale, said mergers and acquisitions was inevitable if the sub-sector is to achieve its goals.

    Noting that the awareness level about mobile money is low, he said operators must also contend with infrastructural gaps.

    He said the sub-sector has the potential to provide transactions worth billions of naira within a month, adding that it will be difficult to achieve this if there is no business combination among operators.

    Besides, he said the shortage of agents is posing a threat to the success of mobile payment transactions, stressing that the firms will grow when they are using aggregated agents network for their operations.

    Similarly, the Managing Partner of One Network, Mr Sola Bikersteth, said mergers and collaboration initiatives are necessary in the face of poor agent network operators have to contend with.

    He said it is difficult for an individual mobile operator to build a large agent network, adding that it would be a lot easier if they coalesce to build the network for their operations.

    In a related development, the Mobility Head, Accenture Nigeria, Mrs Henrietta Bankole-Olusina, said mergers would be necessary for effective performance of the operators. She said a consolidation of existing licensed players as a result of the competition is expected in the near future.

    The mobile market, she explained, will be driven by competition from external players, adding that this can only be made possible when the operators come under a single and vibrant umbrella.

     

  • Single digit Inflation will foster growth, say experts

    Single digit Inflation will foster growth, say experts

    The ability to keep inflation at a single digit of nine percent for three months will help in fostering macro-economic growth, experts have said.

    The yearly inflationary rate, which was 9.7 per cent on January, dropped to nine per cent in March, indicating that the Central Bank of Nigeria’s (CBN’s) aggressive mopping  up of funds via issuance of Treasury Bills among other instruments has paid off.

    CBN’s former Director of Research, Mr Titus Okunronmu, said the economy would benefit in the long run if the trend is sustained. He said various sectors of the economy would benefit on account of the drop in inflation to nine per cent.

    Okunronmu said: “Though it is expected that the rate would further reduce to seven per cent in line with CBN’s stance on the issue, the nine per cent will help in stimulating growth of some sectors of the economy. Manufacturers are hard hit in an environment with high inflation and interest rates.This implies that they are not only go battle with huge cost of production, but would find it difficult to get enough sales.  But with inflation coming down, it is a good development for real sector operators.”

    He urged CBN to reduce the benchmark interest rate of 12 per cent, arguing that maintaining it for the six consecutive periods is not good enough for Nigerian economy where there is an impeded access to funds.

    “I think a remarkable drop in major macroeconomic rates would be better. The MPR, inflationary rate, among others must be reduced to grow the economy,” he added.

    An economist with the Lagos Business School, Dr Austin Nweze hailed CBN’s decision to focus on the maintenance of a favourable macroeconomic outlook.

    “It is obvious that the economy is not moving now. Activities are very low due to hindered access to funds. While the apex bank is curtailing the rate of inflation, it must not lose sight of the fact that the economy needs credit to grow. This can be made possible by a reduction in the monetary policy rate,” he said.

    FBN Capital Limited, had in a report entitled: Inflation still single digit, projected that the headline inflation rate will fall to 7.5 per cent by the end of 2013, while that the core –inflation rate will drop to 6.6 per cent.