The Nation Newspaper

Category: Business

  • Why MfBs’ can’t recapitalise

    • Expert blames govt, DFIs

    Why did many microfinance banks (MfBs) fail to meet the December 31, last year deadline, for their recapitalisation? It is because the Federal Government and Development Finance Institutions (DFIs) did not come to their aid, says Managing Director, Support Microfinance Bank Sunny Akahmiorkhor.

    The MfBs were required to recapitalise with N20 million; N100 million and N2 billion, according to their category.

    Akahmiorkhor regretted that the MfBs framework, which requires state and local governments to contribute one per cent and five per cent of their annual budget to MfBs operations was not being implemented.

    He said the government’s non-commitment to MfBs’operations made it difficult for leading DFIs, such as the International Finance Corporation, International Development Bank (IDF) and Department for International Development (DFID), to assist MfBs.

    The Central Bank of Nigeria (CBN) has accused MfBs of being deficient in their understanding of micro financing. It said poor corporate governance and a high level of non-performing loans, among others, are also key challenges facing the subsector. According to CBN’s operational guidelines for the establishment of microfinance banks, they are not expected to engage in excessive spending.

    Last month, it warned that the deadline for recapitalisation would not be extended. In a circular, Director, Other Financial Institutions of CBN, O.A. Fabanwo, said it was exigent to remind directors and shareholders of the deadline.

    Fabanwo advised the MfBs to conduct due diligence and seek professional legal and financial advice.

    Many of the MfBs liquidated by the Nigeria Deposit Insurance Corporation (NDIC) ran into trouble when their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of the MfBs were taking excessive risks, and branching out too quickly without considering resources at their disposal and whether loaned funds were for short or long term obligations.

    A unit MfB bank is authorised to operate in one location without branches/cash centres and is required to have a minimum paid up capital of N20 million; its state counterpart is expected to have a minimum paid up capital of N100 million. It is allowed to open branches within the same state or the Federal Capital Territory (FCT).

    But the national MfB is authorised to operate in more than one state, including the FCT. It is required to have a minimum paid up capital of N2 billion and is allowed to open branches in all states of the federation and the FCT, though subject to the approval of the CBN.

  • Insurers urged to seek more training

    TO remain relevant in the industry, the Director-General, Chartered Insurance Institute of Nigeria (CIIN) Mr. Adegboyega Adepegba has urged insurance practitioners to get adequate training.

    Adepegba told The Nation that the body has been given statutory powers to train and retrain insurance professionals, noting that it is doing its best to ensure that professionals are well-trained before they are certified.

    He said for anybody to become a professional, he must have passed the institute’s exams. He explained that they are in three parts: certificate, diploma and advanced diploma.

    He added that the institute provides many services, which enable the students to be prepared for the exams.

    Explaining the mode of operation, Adepegba said: “We also have a college trains those who would take the examinations and those that will come in for refresher courses.

    “The institute also has some exam programmes that it conducts regularly, annually and others at intervals, such as conferences, seminars, in-house programmes and the Mandatory Continuous Professional Development (MCPD).

    He said under him, insurance education has improved, noting that members of the institute are getting the best training.

    He added that education is not something one gets from one source, advising students and members of the profession to develop and re-develop themselves.

    He said the MCDP programme ensures that students write, carry out research and attend programmes that can broaden their knowledge about the practice of insurance.

  • Mobile money agents seek clear pricing for services

    Consumers, merchants and other agents of mobile money are demanding a clear pricing structure for the effective implementation.

    According to a survey conducted by Visa Incorporated, respondents said individuals are price sensitive and also evaluate alternative options carefully. The survey analysed the financial services needs and expectations of mobile money among about 2,500 consumers, mobile money agents, and merchants in Bangladesh, Ghana, India, Indonesia, Nigeria and Pakistan.

    Ninety per cent of consumers expressed interest in making use of these services in the future, but cited costs of calls as the primary reason for choosing a mobile network operator.

    Also, lack of prevalent accessibility to mobile money agents was ranked as a key barrier to the adoption of mobile money. It said to drive adoption, cash and customer service will need to be accessible to meet expectations even as 54 per cent of consumers cited quick and easy access to cash as a key benefit of mobile money.

    The study also found that security concerns associated with carrying cash and the need to quickly send money to family members living far away are among the key drivers of mobile money adoption.

    The Visa study suggested that the success of mobile financial services is determined by how deeply a mobile money provider understands its customers and tailors the service to the needs of consumers and mobile money agents – from service menus, to marketing and education.

    It also found there is high awareness of mobile money services and capabilities among consumers in developing economies. “Eighty- one per cent of consumers surveyed intend to use mobile money to send money to family members, 56 per cent to pay utility bills and 52 per cent to save money for their family.The primary driver to adopt mobile financial services is the need to protect funds from theft and the ability to more easily send funds and pay bills,” it said.

    “Not having prevalent accessibility to mobile money agents is ranked as a key barrier to the adoption of mobile money. In order to drive adoption, cash and customer service will need to be readily accessible to meet expectations. Fifty- four per cent of consumers cited quick and easy access to cash as a key benefit of mobile money,” it said.

    The study included in-depth qualitative and quantitative research on money management needs, habits and practices as well as factors that need to be addressed for the adoption of mobile money services.

  • Freight forwarders accuse minister of interference

    The National Council of Government Approved Freight Forwarders (NAGAFF) has accused the Minister of Transport Senator Idris Umar of interferring in the affairs of the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN).

    It said the minister “sees Council as a parastatal under his ministry.”

    In the letter dated January 4, 2013, sighted by The Nation, the NAGAFF founder, Boniface Aniebonam, also stated that the chairman of CRFFN is not an appointee of Mr President as it is in the case of other parastatals, such as the Nigerian Ports Authority (NPA), Nigeria Maritime Administration and Security Agency (NIMASA), the Nigeria Shippers’ Council (NSC) and the Nigeria Inland Waterways Authority (NIWA).

    NAGAFF said: “We believe the CRFFN was domiciled in the Transport Ministry in order to give it impetus and necessary protection to meet the desired interest of its establishment. However, recent happenings in the Council suggest that you seem to see the Council as a parasatal of the Transport Ministry, whereas the CRFFN Act has told us that membership of the Council does confer status of public servant on the elected members of the Council.

    “This is why the chairman of the Council must be an elected member whose name is in the register of CRFFN.”

    The power of the Minister to give direction and character to the Council, NAGAFF said, is not absolute. Section 5 of the Act that established the council stipulates the power of the minister in that regard.

    He said the categories of registered members that form the register of freight forwarders are three – individual, corporate and registered associations.These three groups of private membership, he added, are the owners of the CRFFN.

    Consequently, he said any attempt to administer the Council without their mandate or input is a breach of the Act.

    “With the dissolution of the first Council, it is our considered opinion and advice that we now need to run and manage an inclusive Council with a view to achieving set objectives. We, therefore, suggest that while constituting the new interim governing body of the Council, you may draw representatives from the three categories of registered members and a few from government representatives, such as NIMASA, Maritime Academy, Oron and NIWA to form the steering Council with a mandate to organise sustainable election,” he said.

  • Mutual Benefits Assurance, others win awards

    The Management of Inspenonline has named the President, Nigerian Council of Registered Insurance Brokers (NCRIB) Mrs Laide Osijo, the Insurance Man of the Year 2012.

    She emerged top out of many insurance operators considered for the award. Within the short period she has been in the saddle of leadership of the largest insurance brokers’ fraternity in African, she has distinguished herself and has used her wealth of experience to reposition insurance practice.

    Commissioner for Insurance Fola Daniel was awarded the Good Leadership Award for his steps in repositioning the industry and providing adequate security for policyholders.

    Mutual Benefits was named the Insurance Company of the year. It was picked as a result of its stride in retail insurance through well- developed micro-insurance channel.

  • IEI settles N990m claims

    International Energy Insurance Plc has said it made N990 million claims settlement between January and October of the last financial period.

    In a statement the firm said this was part of the company’s promise to settle claims to its insured clients promptly.

    According to the statement, this shows the company’s core values of proficiency, integrity, innovation, dependability and friendliness, which had been earning IEI trust and loyalty from its customers.

    Managing Director/Chief Executive, Mrs. Roseline Ekeng, said transparency and reliability were the most enduring values to earn customer trust.

    She stressed that the business environment requires more open hands and doing what you say.

    “The customers are wiser and more exposed today to global best practices, and no well-meaning underwriter will hide under any guise,” she added.

    According to the statement, different categories of the claims settled covered motor, fire, general accidents, marine cargo, marine hall, bond, oil and gas, industrial risks, public liability and aviation.

    It stated that IEI is one company that got right its core strategic business direction which is energy insurance.

    The company said it has sound technical and experienced energy underwriting unit in Nigeria.

    “With the best crop of hands and sound management, IEI has demonstrated a consistent growth-led business model that has withstood the test of time,” the statement added.

  • ‘Airspace redesigning ‘ll save costs for airlines’

    The redesigning of the airspace to make it compliant with the World Geodetic Survey 84 – the latest technology in air routes – will save millions of naira for carriers, the Managing Director of the Nigeria Airspace Management Agency (NAMA) Nnamdi Udoh has said.

    WGS 84 compliance is one of the steps taken by Nigeria to meet the International Civil Aviation Organisation standard and transit to performance-based navigation.

    Mr Udoh said the redesigning of the airspace would help to reduce transit time by 30 per cent and reduce the cost of air transport.

    It would also minimise the impact of weather and other disruptions as well as achieve 99 per cent on time departure and arrivals.

    The NAMA boss explained that the new airspace design would also limit passenger processing time in the airport to less than 10 minutes.

    He, however, listed some of the challenges in the aviation industry as poor policy environment, inadequate infrastructure, poor financing, poor regional leadership, operational inadequacies and insecurity.

    He said if air transport must attain the expected seven per cent annual growth rate, impediments to an open market should be cleared and a process put in place for the full commercialisation and liberalisation of the industry.

     

  • Violators of ‘no premium, no cover’ policy to pay N500,000 fine

    Violators of ‘no premium, no cover’ policy to pay N500,000 fine

    Firms and brokers that flout ‘no premium no cover’ policy of the National Insurance Commissionin (NAICOM) are liable to N500,000 fine, it has been learnt.

    A document from the Commission states: “As a result of the growing challenges arising from huge levels of outstanding premium reported in the financial statements of insurance companies, and to protect the interest of policy holders and other stakeholders from negative consequences of the gaps in existing practice, insurance brokers and underwriters are required to comply with the requirements.

    “Any insurer who grants cover without having received premium or premium notification from the relevant insurance broker, shall be liable to a fine of N500,000 in respect of each cover so granted.

    “All insurance brokers shall within 48 hours of receiving insurance premium on behalf of any insurer, notify the insurer in writing in each case, of receiving such insurance premium. An insurance broker who fails to notify the insurer of any premium received on his behalf shall be liable to a fine of N250,000 in each case of failure to notify.”

    In the case of a lead insurer and co-insurers, it indicated that a lead insurer, who fails to pay other co-insurers premiums received on their behalf within 30 days, shall be liable to a penalty of 10 times the amount of premium not remitted.

    The document said that insurers shall quarterly, and not later than 30 days after the end of each quarter, notify the commission of premium acknowledged as having been received by the brokers, but not remitted to them.

    It said any insurer that failed to render this return shall be liable to a fine of N5,000 daily for which the non-rendition continued.

    On the insurance brokers, the NAICOM new rule indicated that insurance brokers shall quarterly and not later than 30 days after each quarter, render to the Commission returns of premium received and unremitted to the insurers.

    The Commission said any broker that failed to render this return shall be liable to a fine in the sum of N5,000 for each day for which the non-rendition continues.

    Penalties imposed on an insurance operator before the new circular shall be disclosed in its annual financial statements and report to shareholders, the Commission stated.

    However, the Managing Director, Royal Exchange Prudential Life, Wale Banmore, praise NAICOM for the policy.

    He told The Nation that about one week into the implementation of the policy, so many clients who otherwise would just have written, expressing their intention to stay on cover, had really backed it up with payments.

    He said: “I don’t want to mention names, but it is vey encouraging, it has not been like that in the past years. There may not be a 100 per cent compliance from day one, but it is an ongoing exercise.”

    Banmore said the position of NAICOM became necessary because of the Commission’s desire to help both the public and the underwriting firm, stating that the law is not new as it has been in existence, even before the insurance Act of 2003. “What the law is simply saying is that there will be no cover unless the premium is fully paid, that is what is done worldwide, he added.

    He explained that there are two ways insurance premiums can be paid, either directly to the insurance firms, or through the intermediaries, such as registered agents or brokers who will make the full payment to the underwriters before a cover can be granted.

    Banmore said it has always been like that, but due to exigencies and other factors, people will insure their properties. However, the premium will not be paid on time, adding that some only come to pay when there is a claim. This is what NAICOM is out to fight because it has put a lot of strains on the underwriters, he said.

    He said NAICOM is out to protect the public by insisting that insurance firms must be ready to pay their claims when it is due, and at the same time protect the firms so that they can ensure their funds come to them as at when due, stating that every cover must be accompanied by premium payment.

    The Royal Exchange Prudential boss said the government is not exempted from the rule. “Although the government contributes about 60 per cent of insurance premium to most insurance companies, the rule does not exempt them,” he said.

    He said the industry is watching to see how the government would respond, but he assured that if there is no payment from the government and a claim occurs, no insurance company in Nigeria would respond.

    He said NAICOM is watching underwriters and has thretened to sanction any firm that may flout the order.

  • Companies predict early leads on 2013 earnings

    Several companies expect to pull through the initial lull in the early months of this year with substantial earnings to set the 2013 business year on a robust outlook, according to forecasts released by quoted companies.

    Emerging forecasts from several quoted companies for the first quarter ending March 31, 2013 showed that most companies expected positive bottom-line and many were quite optimistic they could build on expected improvements in sales and profitability in the year just ended December 31, 2012.

    Initial earnings estimates from agricultural,manufacturing, downstream oil, banking, construction and insurance sectors among others indicate that companies would be able to sustain their average dividend payouts while many annualised earnings imply strong potential for increase in payouts.

    The Board of Presco Plc has estimated that the agricultural company could pool total sales of N2.37 billion within the first three months of 2013. They estimated that profit after tax for the period could be N686.0 million, implying probable net profit of more than N2.7 billion for the whole year.

    Banks are quite bullish on earnings outlook for the year with Skye Bank estimating net profit of N4.46 billion in the first quarter. According to forecasts released by the bank, gross earnings could be N32.85 billion while profit before tax would be about N5.58 billion.

    Access Bank indicated it expected profit after tax of about N12.42 billion in the first three months, implying a conservative annualized net profit of about N50 billion. Gross earnings is estimated at N51.44 billion while the bank expects pre-tax profit to be about N15.15 billion.

    First City Monument Bank said it expected profit before tax to be N4.3 billion within the period. Profit after tax is estimated at N3.21 billion while gross income is projected at N31.48 billion.

    Directors of Eterna Plc projected that pre and post tax profits could be N361.5 million and N260 million. Total turnover is expected at N6.56 billion. Continuing positive bottom-line would further consolidate the recovery of the downstream oil company, which recently returned to positive net earnings.

    Julius Berger Nigeria Plc has estimated a net profit of N1.31 billion on total income of N41.8 billion during the first quarter.

    In the insurance sector, industry leading stocks remained optimistic on earnings outlooks. Mansard Insurance, formerly Guaranty Trust Assurance, said it could record a gross insurance premium of N6 billion while a net profit could be N481.04 million.

    Custodian & Allied Insurance projected gross premium of N4.06 billion and higher net profit of N967.76 million.

    Many analysts said the relative stability and early passage of the national budget would impact on the performance of companies.

    Private sector operators under the aegis of the Lagos Chamber of Commerce and Industry (LCCI) said early passage of the 2013 budget has heightened the prospect of improved budget implementation in 2013.

    It outlined that the early passage of the appropriation bill holds several benefits for the economy and Nigerians including good prospects of better budget implementation in 2013 and better planning space and time horizon for stakeholders in the economy because of the signalling effect of the budget both from appropriation and policy perspectives.

  • Central banks revise liquidity ratio for banks

    The Basel Committee has released revised Liquidity Coverage Ratio (LCR) for banks following endorsement the endorsement of the new rule on January 6, 2013 by the Group of Central Bank Governors and Heads of Supervision (GHOS).

    The LCR is an essential component of the Basel III reforms, which are global regulatory standards on bank capital adequacy and liquidity endorsed by the G20 Leaders.

    In a statement made available to The Nation, the Basel Committee noted that the LCR is one of the key reforms to strengthen global capital and liquidity regulations with the goal of promoting a more resilient banking sector.

    “The LCR promotes the short-term resilience of a bank’s liquidity risk profile. It does this by ensuring that a bank has an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash easily and immediately in private markets to meet its liquidity needs for a 30 calendar day liquidity stress scenario. It will improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy,” it stated.

    The LCR was first published in December 2010. At that time, the Basel Committee put in place a rigorous process to review the standard and its implications for financial markets, credit extension and economic growth. It then committed to address unintended consequences as necessary.