The Nation Newspaper

Category: Money

  • Visa forecasts growth in Africa

    Fundamo, a Visa Incorporated company and the world’s largest specialist mobile financial service provider, has reported growth of mobile financial services in Africa.

    In a statement, the firm said it has launched three new services – FirstMonie with First Bank Nigeria and Celpay, with Celpay International in Uganda and Zimbabwe. “Earlier this year the industry celebrated a decade of banking the unbanked. The market has transformed since we launched the world’s first mobile financial service in a developing economy with Celpay in Zambia. Mobile money providers are rapidly diversifying and consumers are demanding access to more sophisticated services,” Chief Executive Officer, Fundamo, Hannes van Rensburg in a statement.

    “The launch of the services by Celpay International and First Bank Nigeria highlights the growing number of service providers competing to meet consumer demand in Africa. A great deal of credit must go to governments across Africa which are driving the principles of financial inclusion and creating regulatory environments in which services like these can flourish as part of grander ‘cashless society’ plans.

    “We expect to see a host of exciting government schemes gain ground in the next year,” said van Rensburg.

    In Nigeria, it said mobile financial services market is set for phenomenal growth as only 38 per cent of the country’s 160 million people have access to formal financial services.

    Meanwhile, there are over 93 million mobile phone subscriptions in the country, the most in Africa.

    “The majority of consumers surveyed in Nigeria intend to use mobile money to save money for their family (59 per cent) and pay utility bills (58 per cent), the firm said.

    To meet this demand, FirstMonie offers consumers a host of advanced services, including utility payments for airline tickets, electric, insurance, cash withdrawal from an Automated Teller Machine without a bank card, and payment for goods at merchant locations,” he said.

  • Nigeria’s revenue may fall over US oil

    The United States (US) increasing oil stock-piles, deepening global uncertainties and weak global demand are likely to suppress oil prices and slash Nigeria’s revenues, Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, has said.

    In an FDC Economic report, Rewane said since Nigeria obtains over 80 per cent of its fiscal receipts from oil, a reduction in fiscal revenue especially if production drops will deplete earnings for the country.

    “ Any oil price and or production disruption could easily deplete the government coffers to as low as $20 billion, a depreciation of the exchange rate, loss of market confidence and a possible rating downgrade,” he said.

    The FDC boss said pointers are in favour of an end to the CBN’s tight monetary policy stance and the need to boost growth and lending to the real sector.

    He said the contractionary policy stance has been in play since October 2011 when the Monetary Policy Rate (MPR) was raised by 275 basis points.

    He insisted that the sustainability of a contractionary stance and its stifling impact on growth and the economy justifies the need for a change in policy direction.

    “Our view is that the overdependence on interest rates as a tool for adjustment is precarious. In 2013, the CBN will have to moderate its stance to allow the interest rate decline and exchange rate depreciate,” he said.

    According to him, the Monetary Policy Committee (MPC), as anticipated, left its benchmark interest rate unchanged at 12 per cent per annum during its last meeting for this year.

    He said the decision was based on inflationary risks and uncertainties surrounding the weak global economy and that other policy instruments such as the Cash Reserve Ratio and Net Open Position were left unchanged at 12 per cent and one per cent.

    Likewise, Nigeria’s annual inflation rate increased by 0.4 per cent to 11.7 per cent in October, primarily as a result of exceptional factors such as the flooding which resulted in an increase in food inflation to 11.1 per cent.

    He said the impact of the flooding in 12 states of the country was immediate but was not as severe as expected. Core inflation declined for the fourth consecutive month to 12.4 per cent, which, according to the MPC has created some uncertainty as to the appropriate policy stance to apply.

    Rewane said for the leading economic indicators to have remained positive for two months and the Gross Domestic Product (GDP) growth figure for third quarter to come in lower than the previous year at 6.48 per cent, sends mixed signals on the direction of the Nigerian economy.

    He admitted that government is resolute in its pursuit for fiscal prudence as reiterated by the Federal Minister of Finance. He said that with rising debt service cost of N560 billion that is estimated to increase by 5.67 per cent to N591.76 billion in 2013, the Nigerian debt market may experience respite soon as federal government instruments become more attractive to investors.

  • NIBBS daily operation worth N70.02b

    The Nigerian Inter-bank Settlement System (NIBSS) handles about 140, 344 transactions, worth N70.02 billion daily, the Central Bank of Nigeria (CBN) has said.

    The transactions, which were recorded across various electronic payment channels, indicated gradual acceptability of the cashless initiative in the country.

    The statistics also showed that NIBSS processes 6,749 instant payments, 99,602 electronic fund transfers and 33,993 cheque transactions daily.

    “With an aggregate of N70.2 billion daily, the transactions across the three e-channels are worth N5.66 billion, N40 billion and N24.7 billion ,” the statement said.

    CBN Head, Shared Services, Mr Chidi Umeano, said the cash-less initiative hass gained since the beginning of the year. NIBSS has continued to process 4.2 million monthly inter-bank, instant payment and cheque transactions, he stated.

    Industry observers said the N70.02 billion daily transactions amount to N2.2 trillion in a month, adding that the figure would be higher if the trend continues.

    The Chief Executive Officer, Mobile Money Africa, Mr Emmanuel Okowgale, said the cash-less initiative has brighter prospects, if things go according to plans.

    He said the cash-less project would yield more financial values to the industry as time went on, advising Nigerians to continue to appreciate the beauty of using e-payment channels for transactions.

    He said mobile payment system has worked in Kenya, among other countries, arguing that it is taking shape in Nigeria.

    In a related development, the Managing Director and Chief Executive Officer, NIBSS, Mr Adebisi Shonubi, said continued encouragement of the use of PoS terminals is critical to the success of the cash-less initiative.

    “We strongly believe that the enhancement of PoS adoption relies on high PoS availability and connectivity and consequently the expansion of telco facilities beyond the conventional GPRS to CDMAs.”

    Shonubi argued that the Nigerians possessed the acumen required for the success of the cash-less project.

    On his part, the CBN Deputy Governor, Mr Tunde Lemo, said the number of deployed and active PoS terminals had grown from 5,557 as at January 2012 to 104,858 by October 14, 2012.

    Lemo, who was represented at a forum in Lagos by an official of Shared Services Department, CBN, Mr Chimene Eleonu, said another 176,604 PoS terminals were already registered.

    He lamented the huge gap between registered and deployed PoS, arguing that the gap was due to lack of capacity on the part of the payments terminal service providers to meet PoS demand.

  • Debt recovery: NDIC dumps court for alternative dispute resolution

    Debt recovery: NDIC dumps court for alternative dispute resolution

    Weary of what it calls a cumbersome court process, the Nigeria Deposit Insurance Corporation (NDIC) is to explore alternative dispute resolution (ADR) for debt recovery, its Managing Director, Umaru Ibrahim, has said.

    The corporation, he said, discussed with judges at debt recovery conferences in Abuja, Lagos and Port Harcourt on the need to resolve bad loan cases outside the court, adding that debt recovery is a difficult task that has to be tackled with extra efforts and mutual understanding.

    “Debt recovery is a herculean task, but we are making progress. There is need to adopt alternative dispute resolution in solving pending debt issues in the banking industry. We had a conference with Judges on the need to resolve debt issues with bank customers outside the court,” he said.

    Contending that going to court was expensive and in many cases nothing came out of it.

    Ibrahim said the cumulative debt recovery for the closed commercial banks from 1994 to date, stood at N23.33 million as against N22.26 million in December 31, 2011. This is an increase of N1.074 million, representing 4.83 per cent.

    Also, cumulative debt recoveries from closed microfinance banks (MfBs) as at September 2012 stood at N41.97 million, as against N13.57 million recovered as at December 2011. That showed an increase of N28.40 million, representing 209.29 per cent as at September 30, 2012.

    He said N19.6 million had been realised from the sale of physical assets as at September 2012 from closed commercial banks. Also, N154.54 million had been realised from the sale of physical assets of closed MfBs from January to September 2012.

    About 698 MfBs and Primary Mortgage Institutions (PMIs), he said, paid N980.79 million as premium to the corporation as at September 30, 2012 as against N1,06 million collected from 765 of them same period of 2011, a decline of 8.02 per cent.

    As at September 30, 2012, 130 MfBs and 20 PMIs could not be assessed for premium collection as they failed to submit their certified deposit statements as well as call reports since December 31, 2011. He said the corporation is still prevailing on the banks to ensure that it obtains their certified deposit liabilities statements or call reports.

    He said the regulators were to issue new licences to microfinance banks that wanted to enter the market.

    According to Ibrahim, NDIC paid N6.68 billion insured deposit to 527,950 depositors of liquidated commercial banks as at September 30, 2012 as against N6.63 billion paid to 527,942 depositors as at December 31, 2011, an increase of 0.70 per cent.

    The NDIC boss said the corporation conducted a joint risk assessment examination of commercial banks with the Central Bank of Nigeria (CBN) during which the later led 11 banks while it led seven banks.

    The exercise, he said, was meant to find out the asset quality of the banks to determine provisions required, a precondition for approving their accounts for publication.

    The CBN also conducted an examination of the three banks acquired by the Asset Management Corporation of Nigeria (AMCON) namely: Mainstreet Bank Ltd, Enterprise Bank Ltd. The Keystone Bank examination was led by NDIC.

    Ibrahim said the assessment was meant to determine the regulatory compliance and financial condition of the banks in the first five months of their existence. Also, out of the 291 MfBs and PMIs assigned for examination by the NDIC, a total of 207 had been examined. The examination of the remaining 84 banks slated for this quarter is still ongoing even as the report of the 186 out of the 291 MfBs scheduled for examination in the year had been concluded and forwarded to the boards of the respective banks and NDIC management for appropriate supervisory action.

    On statutory returns, he said N61.303 billion was collected as premium for commercial banks as assessment for 2011, the Deposit Insurance Fund (DIF) stood at N415.393 billion as at September 30, 2012. This, he said, is an improvement from N354.09 billion recorded as at December 2011, an increase of N61.303 billion or 17.31 per cent.

    The NDIC boss also said a total of N2.64 billion out of the N4.67 billion insured deposits belonging to 73,000 depositors of microfinance banks in liquidation had been settled.

    He said to date, the corporation had, in addition to payout, deployed purchase and assumption and bridge bank option in resolving failures of banks in the country.

  • BoI, FMBN, NEXIM, others assets hit N380b

    THE assets of Bank of Industry (BOI), Federal Mortgage Bank of Nigeria (FMBN), Nigerian Export Import Bank (NEXIM), Bank of Agriculture (BoA), and Infrastructure Bank (IB) rose by 5.8 per cent to N380.3 billion at the end of the second quarter of this year, the Central Bank of Nigeria (CBN) has said.

    The apex bank said paid-up share capital, deposits and loans/advances increased by 3.1, 28.7 and 25.0 per cent to N70.5 billion, N94.2 billion and N162.2 billion.

    Total shareholders’funds, however, declined by 8.1 per cent to N23.7 billion, while a profile of the asset base of the institutions indicated that BoI, FMBN, NEXIM, BoA and IB accounted for 56.6, 18.2, 12.4, 10.0, and 2.8 per cent of the total.

    With the exception of the BoI, the other DFIs were faced with dire operational challenges as evidenced in the increase in their aggregate losses from N42.6 billion at end of December 2011 to N47.1 billion at end of June 2012.

    The Federal Government has also called for the recapitalisation of the DFIs. The government had directed the CBN Governor Lamido Sanusi, and Minister of Finance Ngozi Okonjo-Iweala, to meet with Minister of Trade and Investment Olusegun Aganga, to come up with modalities, which would enable it to increase the capital base of the DFIs.

    It said the move to recapitalise the bank was not to only to improve its capacity to fund the country’s industrial sector, but to also align its operational practices with international best practices.

  • CBN’s fresh guidelines on bank fraud coming

    The Central Bank of Nigeria (CBN) is contemplating introducing Public Key Infrastructure (PKI) framework to guide against frandulent transactions in banks.

    PKI is a set of hardware used in creating, managing, distributing, storing and revoking digital certificates used for transactions. The hardware helps in validating the identities of customers during transactions.

    The concept is expected to help improve transactions and prevent the theft of depositors’ funds through scams and forgeries.

    CBN’s Director of Communication Mr Ugochukwu Okoroafor, said: “We are working on Public Key Infrastructure mechanism to track down transactions. This will enable us to know when, where and who conducts transactions in the industry.”

    He said the concept would help in ascertaining the veracity of claims made by customers after transactions.

    “Through the Public Key Infrastructure, the banks would be able to know those who are conducting transactions, authenticate them, as well as proving that they were the ones carrying out the transactions. CBN is working on the framework for the growth of the industry,” he added.

    He said the industry is set for greater heights in view of the measures put in place to protect customers.

    An investment analyst, Mr Tayo Bello, said corruption is the major problem in the industry globally, noting that fraudulent practices was the major cause of the distress in the banking industryin the 80s.

    Bello said CBN was restoring confidence in the industry. He advised that the reforms must continue to improve growth. He said the reforms had helped in engendering confidence, and made customers believe in the system.

    He said once customers are sure of the safety of their funds, they would not hesitate to patronise the products offered by banks.

  • Oil sector leads forex utilisation

    Oil sector leads forex utilisation

    The oil sector was the highest user of foreign exchange (Forex) in the first half of the year, despite the fact that the Federal Government reduced subsidy claims on petroleum imports.

    According to a report released last week by FBN Capital, the oil sector used $5 billion, which fell sharply from $6.4 billion recorded in the first half of 2011. This, it said, was due to fuel subsidy cut in January and the ensuing audits.

    The substantial imports of food products, most of which could be grown locally, accounted for 13.5 per cent of the total. Nigeria’s insatiable appetite for imports, which is a function of the limited productive capacity of its economy has assisted in raising the ceiling for forex use.

    The report showed that $22.2 billion forex inflows were recorded from the Central Bank of Nigeria (CBN) while autonomous sources consistently provided the greater forex supply worth $33.5 billion, adding that imports of goods and services hit $28 billion and $10.9 billion respectively.

    Nigeria’s Eurobond yields fell for the seventh day to a record after CBN Governor, Sanusi Lamido Sanusi, said the nation’s financial system was not under threat from the withdrawal of speculative investments.

    Borrowing costs on the $500 million debt due January 2021 slid four basis points, or 0.04 percentage point, to 4.162 per cent in Lagos, the lowest since it was issued in January 2011. The yields have dropped 213 basis points from a high of 6.29 per cent on December 21, 2011.

     

    Inter-bank

    The inter-bank rate fell 104 basis points to 11.1 per cent on December 6, due to liquidity injection through matured treasury bills. Although, the CBN auctioned N177.61 billion on December 5, the net withdrawal on December 6 was N49.6 billion.

    Olukunle Ezun, a Fixed Income and Currencies Analyst at Ecobank Nigeria Plc, said CBN’s liquidity management remains active and supported by the circular issued on August 1, tightening currency and the Monetary Policy Committee’s decision to leave the Monetary Policy Rate unchanged at 12 per cent.

    The naira weakened 0.2 per cent against the dollar in the Inter-bank on 6 December, despite CBN’s liquidity management efforts. It closed the week at N157.35 to a dollar.

    According to Ezun, although the CBN has supplied sufficient dollar at the twice-weekly Wholesale Dutch Auction System (WDAS) auctions, the auction process is devoid of the required competition needed to generate significant secondary market activity.

     

    Oil export/ corruption

    Oil exporting countries are more corrupt than they ‘should be’ than non-exporters, Renaissance Capital (RenCap), an investment and finance firm, said.

    A report from the firm said oil exporters constitute 18 of the 25 countries that are measurably more corrupt in the Transparency International (TI) survey than per capita Gross Domestic Product (GDP) measures suggest they should be.

    The worst performers, it said, include Equatorial Guinea and Kuwait, with scores at least 30 points lower on the 100-point scale than their peers.The next worst include Turkmenistan and Venezuela, while Greece, Italy and Afghanistan, were each 20 to 29 points lower than their peers.

    The remaining countries include Iraq, Kazakhstan, Russia, Kazakhstan and Ukraine. “These are countries in which debt investors may feel more comfortable, as they can bypass corruption problems by dealing in international courts when things go wrong. But there has been improvements. Russia, which was on the verge of being in Italy and Venezuela’s group, but in the past year, has clearly moved into the middle of the “slightly more corrupt” group,” the report said.

     

    IMF

    The International Monetary Fund (IMF) has developed a balanced view on the management of global capital flows to help give countries clear and consistent policy advice.

    In a statement, IMF said global capital flows have increased dramatically in the last decade, from an average of less than five per cent of global Gross Domestic Product (GDP) during 1980 to 1999 to a peak of about 20 per cent by 2007. In the past, countries’ capital accounts have ranged from almost completely closed to completely open and, while most countries have moved in the direction of greater openness, wide differences remain.

    It said the financial account in a country’s balance of payments covers a variety of financial flows, mainly foreign direct investment (FDI), portfolio flows including investment in bonds and equities, and bank borrowing which have in common the acquisition of assets in one country by residents of another.

     

    Financial inclusion

    The number of adults excluded from the financial system would drop to 20 per cent by 2020, Chief Executive Officer, Enhancing Financial Innovation & Access (EFInA), Ms. Modupe Ladipo, said. At the moment, no fewer than 34.9million Nigerians, representing 39.7 per cent are excluded from financial services.

    Unveiling the results of the EFInA Access to Financial Services in Nigeria’s survey, she said between 2008 and 2012, the number of adults that are financially excluded decreased by 10.5 million. She explained that the report was meant to measure trends in access and use of financial services in the country and establish credible benchmarks and indicators of financial penetration in the country.

     

    Recurrent expenditure for states

    The recurrent expenditure of the 36 states was 58 per cent of last year’s budget, FBN Capital, an investment and research firm, said.

    In a report obtained by The Nation, the firm said on the surface, states have a better mix of expenditure but recurrent items accounted for 58 per cent of their aggregate spending in 2011, capital items 38.9 per cent and extra-budgetary costs 3.1 per cent.

    It said personnel consumed 19.2 per cent of the total and overheads, a further 13.7 per cent, even as Federal Government’s minimum wage legislation pushed up the cost of salaries this year.

    At the Federal Government level, the firm said the rise in recurrent expenditure was affecting real sector funding and growth. It said personnel costs amounted to 36.5 per cent of total spending in 2011, and related overheads, an additional 14.3 per cent. Statutory payments to bodies, such as the National Judicial Council and the National Assembly, have accounted for 5.9 per cent of government expenditure year to date.

     

    Offshore Banking

    Banks with foreign subsidiaries have been advised to use resources in their host-countries to boost their operations rather than ship funds from home.

    In a statement, the Central Bank of Nigeria (CBN) urged them to raise funds from the offshore capital market through private placements or public offerings.

    CBN’s advice followed its earlier directive stopping banks from using local resources to fund their offshore subsidiaries. It also stopped quarantee of deposits for foreign subsidiaries.

    CBN Director, Banking Supervisions, Agnes Martins, advised that the banks could also pursue a merger or acquisition; or if external capital raisings fail, submit a strategy for exiting the relevant foreign jurisdictions to the regulator.

    The directive also barred Nigerian banks from guaranteeing the deposits of their foreign subsidiaries and mandates banks with foreign subsidiaries to submit plans showing that their subsidiaries are fully capitalised in line with Basel II and III accords.

     

    Cheque transactions

    The value of cheque transaction declined by 13.5 per cent to N10 trillion during the first half of the year over increasing use of electronic payment. In a Central Bank of Nigeria (CBN) report on the first half of the year released last week, it said the value of electronic card (e-card) transactions rose by 32.8 per cent to N1 trilion from N764.14 billion in the first half of 2011.

    Data on various e-payment channels for the period under review indicated that Automated Teller Machine (ATM) remained the most patronised, accounting for 96.4 per cent, followed by mobile payments with 1.3 per cent and Point of Sale (PoS) terminals, 1.2 per cent. The web (internet) was the least patronised, accounting for only 1.1 per cent of total e-payment transactions.

     

    Financial Inclusion

    The number of adults excluded from the financially system would drop to 20 per cent by 2020, Chief Executive Officer, Enhancing Financial Innovation & Access (EFInA), Ms. Modupe Ladipo, has said.

    At the moment, no fewer than 34.9million Nigerians, representing 39.7 per cent are excluded from financial services.

    Unveiling the results from the EFInA Access to Financial Services in Nigeria’s survey, he said between 2008 and 2012, the number of adults that are financially excluded decreased by 10.5 million.

     

    NDIC

    Microfinance banks (MfBs) that fail to live up to the legal requirement will be closed next year, the Managing Director, Nigeria Deposit Insurance Corporation (NDIC), Umaru Ibrahim, has said.

    Speaking at a briefing in Lagos, he said that some MfBs have not lived up to expectations and have refused to pay their premiums to the corporation.

    He said as at September 30, 2012, 698 MfBs and Primary Mortgage Institutions (PMIs) paid N980.79 million as premium to the corporation as against N1,06 million collected from 765 MfBs in the same period in 2011, representing a decline of 8.02 per cent.

    As at September 30, 2012, 130 MfBs and 20 PMIs could not be assessed for premium collection as they failed to submit their certified deposit statements as well as call reports since December 31, 2011.

    He said the corporation is still prevailing on the banks to ensure that it obtains their certified deposit liabilities statements or call reports. Ibrahim also said the Central Bank of Nigeria (CBN) is also considering issuing new licences to MfBs that want to enter the market.

     

    Bank to bank report

    Ecobank Capital, the investment banking division of the leading pan-African bank, Ecobank, has announced that it has successfully raised a $202 million syndicated credit facility on behalf of IHS Holding Limited, Africa’s largest independent mobile infrastructure provider.

    In a statement, the firm said the proceeds will be used as part of IHS’s acquisition of MTN Group Limited’s 1,757 mobile network towers in Cameroon and Côte d’Ivoire with the continuation of IHS’s solar energy and build-to-suit programmes for other wireless operators.

    IHS Holding’s Chief Executive Officer, Issam Darwish, said he is happy with Ecobank, the co-arrangers and participating banks. “The facility was oversubscribed and securing this credit facility reaffirms our excellent reputation on the local and international credit markets. We are delighted the consortium shares our long-term vision of creating an indigenous force in mobile network infrastructure and collectively has the financial capacity to support our pan-African expansion,” he said.

    The Fidelity Helping Hand Programme (FHHP) instituted by staff of Fidelity Bank Plc to assist to support communities has donated some educational materials to Ikoyi Primary School. The group has also renovated the nursery section of the school to enable the pupils to have a more conducive environment for learning.

    The bank’s Assistant General Manager, Public Sector Richard Madiebo said the THE Programme is the staff’s way of supporting the society.

    He said the initiative has helped many people, schools and community to live better lives and achieve success in their different endeavours.

     

  • ‘Financially excluded adults to drop to 20% by 2020

    THE number of adults excluded from the finanacially system would drop to 20 per cent by 2020, Chief Executive Officer, Enhancing Financial Innovation & Access (EFInA), Ms. Modupe Ladipo, has said.

    At the moment, no fewer than 34.9million Nigerians, representing 39.7 per cent are excluded from financial services.

    Unveiling the results from the EFInA Access to Financial Services in Nigeria’s survey, he said between 2008 and 2012, the number of adults that are financially excluded decreased by 10.5 million.

    She explained that the report was meant to measure trends in access and use of financial services in the country and to establish credible benchmarks and indicators of financial penetration in the country.

    According to her, financial inclusion is the provision of high quality financial products, such as savings, credit, insurance, payments and pensions, which are relevant, appropriate and affordable for the entire adult population, especially the low income segment.

    “An inclusive financial sector is characterised by the diversity of financial services products and providers, the level of competition between them, and the legal and regulatory environment that ensures the integrity of the financial sector and access to financial services for all,” she said.

    The absence of relevant and reliable data and analysis on how individuals and households manage their finances was one of the biggest hurdles to improving access to financial services in Nigeria.

    CBN Governor, Sanusi Lamido Sanusi in his address entitled: Overview of the national financial inclusion strategy and the role of banks in promoting financial inclusion in Nigeria, said, there has been some improvement in the move to drive financial inclusion in the country.

  • States’recurrent expenditure hits 58%

    The recurrent expenditure of the 36 states was 58 per cent of last year’s budget, FBN Capital, an investment and research firm, has said.

    In a report obtained by The Nation, the firm said on the surface, states have a better mix of expenditure but recurrent items accounted for 58 per cent of their aggregate spending in 2011, capital items 38.9 per cent and extra-budgetary costs 3.1 per cent.

    It said personnel consumed 19.2 per cent of the total and overheads a further 13.7 per cent even as Federal Government’s minimum wage legislation, pushed up the cost of salaries this year.

    At the Federal Government level, the firm said the rise in recurrent expenditure was affecting real sector funding and growth. It said personnel costs amounted to 36.5 per cent of total spending in 2011, and related overheads an additional 14.3 per cent. Statutory payments to bodies, such as the National Judicial Council and the National Assembly, have accounted for 5.9 per cent of government expenditure year to date.

    “We can grumble at inefficient capital spending by the Federal Government, and cite the thousands of unfinished projects it has sanctioned. That said, we should stress the swollen recurrent budgets, which constrained the development of productive sectors of the economy,” FBN Capital said.

    It noted that the recurrent/capital mix in Federal Government spending has been around 65/35 per cent, with the recurrent share increasing to 71 per cent year to date without transfers.The medium term framework assumes a cut in recurrent spending in real terms. Nominal remuneration can be maintained but the core assumption is that the government’s fiscal stance is not undermined by the 2015 elections,” the report said.

    FBN Capital said on the surface, state governments have a better mix of expenditure but recurrent items accounted for 58 per cent of their aggregate spending in 2011, capital items 38.9 per cent and extra-budgetary costs 3.1 per cent.

    Personnel consumed 19.2 per cent of the total and overheads a further 13.7 per cent even as Federal Government’s minimum wage legislation, will push up the cost of salaries this year.

  • ‘Audit committee key to corporate governance’

    The audit committee remains a key pillar of corporate governance in firms, Chairman, Audit Committee Institute of Nigeria, Christian Ekeigwe, has said.

    He spoke at the Annual Audit Committee Roundtable in Lagos.

    He explained that in advanced economies, recommendations of audit committees are implemented as that is the only way of ensuring that management complies with regulatory guidelines.

    He said the Financial Reporting Council Act 2011 recognises the importance of Audit Committees in cooperate governance and there is need to explore the dimensions of audit committee responsibilities to ensure they fulfil their duties diligently.

    He advised investors to be careful in choosing firms to invest in, saying they should choose the ones that have developed the right environment. “Good governance is a control against fraudulent financial reporting. Firms with good governance would have enterprise risk management framework that helps deter and detect fraudulent financial reporting,”he said.

    He said the Audit Committee Institute is spearheading initiatives to improve the committee effectiveness with the establishment of its Centre for Audit Quality, which would focus on helping organisations and their internal and external auditors to improve the quality of audit judgments as a means of improving the quality of financial reporting process.

    He added that shareholders have a right to expect that Audit Committees are working for their interests because when that happens, shareholder value is protected.

    He said when shareholders’ interests are protected; it becomes easier to attract investments that create jobs and wealth for the economy. He called for reforms in many aspects of corporate governance and audit committees’ regime, financial reporting value chain as well as audit firm governance.

    He said Audit Committee Institute is spearheading initiatives to improve audit quality with the establishment of its Centre for Audit Quality (CAQ), which will focus on helping organisations and their internal and external auditors to improve the quality of audits as a means of ensuring shareholder value assurance.

    In future, professional bodies and audit firms would be invited to affiliate with the centre, in the quest for reassuring audit quality and preventing audit failure.