The Nation Newspaper

Tag: banking

  • Consumer banking viable, says Citigroup

    Citigroup Inc. said Nigeria’s efforts to crack down on identity theft are making it more attractive to start a consumer banking business in Africa’s most-populous country.

    More banks are rolling out consumer banking in Nigeria because individuals dealing with banks in are increasing “who they say they are,” Akinsowon Dawodu, chief executive officer of Citibank Nigeria Ltd., said. A lack of security around identification has been an impediment to personal banking in the country in the past.

    The Central Bank of Nigeria (CBN) is requiring customers to provide fingerprint identification, a system it started introducing with commercial lenders in February 2014. A deadline for customers to get bank verification numbers has been extended to October 31 so that Nigerians living abroad can enroll. People who don’t comply will lose access to their accounts, the regulator says on its website.

    The system, combined with a growing network of credit bureaus that collect information on customers, “makes the consumer proposition fairly viable,” Dawodu said.

    An entry into consumer banking would enable lenders to market products like personal loans and mortgages in Nigeria which has 170 million people, where the New York-based bank provides corporate banking services. The economy in Nigeria, Africa’s biggest oil producer, is forecast by the government to grow 3.9 per cent this year.

    Citi itself doesn’t plan to enter consumer banking in the country, Jeffrey French, a London-based spokesman, told Reuters.

    The Central Bank said in June last year that the absence of a unique identifier had curbed growth in credit cards and credit-related products. The bank verification number system is intended to combat cybercrime and identity theft, among other offences, it said.

    The credit bureaus were conceived to strengthen risk management at banks after a debt crisis caused by loans to stock speculators and fuel importers threatened the industry with collapse in 2008 and 2009.

  • Banking and Mrs Warren’s Principle

    Banking and Mrs Warren’s Principle

    “Looking for work,” I wrote on this page some six years ago, “has become one of the most dangerous occupations in Nigeria – a risky venture that is likely to cause harm or injury, even death.”

    In that piece (August 19, 2008), I had employed the term “occupation” not in a flippant or cynical sense, but to reflect what had become the painful reality for millions of our young men and women for whom looking for a job had become a full-time occupation in itself

    As they pounded the streets and scoured the corporate offices and factories and farms and construction sites in search of work, I remarked, they were more likely to be swindled, mugged, kidnapped, sexually assaulted or exploited and abused in every conceivable manner by persons masquerading as prospective employers.

    I was reacting to reports in the July 14, 2008, editions of the national newspapers that dozens had died the preceding weekend at various centres across Nigeria in recruitment exercises conducted by the Immigration Service and the Prisons Department.

    For 43 of the 195, 000 applicants jostling for 3,000 vacancies, the race proved a fatal regimen, a journey of no return.  A good many of them were trampled underfoot in the frenzied rush to gain a vantage position at the start; others died from sheer exhaustion.  Hundreds sought hospital treatment for the injuries they suffered from the race.

    This grisly scenario, slightly modified, was reenacted in March 2014 at various locations across where the same agency was scheduled to administer written tests to some 520, 000 applicants chasing  4, 556 openings…

    The 2008 fitness test of a 2.5 km run was replaced with an obstacle race requiring thousands of applicants who had converged on various locations several hours ahead of schedule to bulldoze, squeeze, elbow, claw, fight or otherwise find their way to the event through a single entrance.

    At least 19 persons, four of them pregnant women, were killed in the resulting stampedes.  Hundreds suffered injuries.

    In a sane society, the responsible political official would have handed in his resignation even if the fiasco had not been compounded by so wanton a grim harvest. Elementary decency demands nothing less.

    But Abba Moro, the Minister of the Interior, who supervised this carnage, kept his job right up to the end of the Jonathan Administration, and would doubtless have continued to serve in the cabinet if Dr Jonathan had not lost his re-election bid.  And Dr Jonathan roused himself to sympathise with the relations of the victims long after the carnage, handing them token compensation only as part of his cynical election strategy.

    The dangers to which job seekers are exposed are not always physical, however.  Women job seekers in particular, are constantly exposed to moral danger, and sexual abuse, particularly in the banking industry.  But that is nothing new.

    It goes back to the time of former military president Ibrahim Babangida, who was barely three years into his misbegotten rule when his palace intellectuals declared that Nigeria’s history would have to be divided into two neat periods: the era before Babangida (BB), when all was darkness, and the era that began with him (AB) when everything magically turned into sweetness and light.

    The more desperate revisionists among them even insisted that Nigeria’s history actually began with Babangida’s coming.   Before then, according to them, Nigeria had nothing worth calling a history.

    As evidence, they pointed to the wonders that structural adjustment had wrought all over the land –cocoa farmers fling to their plantations in their personal helicopters, entrepreneurs, freed from the shackles of de-regulation, establishing flourishing businesses that created more jobs than there were people to fill, and banking institutions sprouting up in every neighbourhood like mushrooms after the first rains, glittering symbols of the boom.

    It was an ensnaring boom. You made a substantial deposit for a fixed period and collected     your interest upfront, sometimes to the tune of 20 per cent.  But this conservative approach was employed only by banks that operated from known addresses.  The “wonder” banks that operated from one-room shacks, with bundles of bank notes piled from floor to ceiling  and where records, if any, were kept in notebooks or even loose sheets, offered much higher returns.

    Many indeed were the patrons who rushed in, usually with other people’s money to cash in on what looked like a sure path to wealth and the good life it can buy.  I recall a paymaster for the army who deposited the funds for the salary of soldiers in one of the wonder banks in the hope of turning it around within the month with a quick kill under his belt

    He never got his deposit back.  Neither did most of those who had rushed to cash in on the scheme.

    That was when the banks that operated from licensed premises and apparently in compliance with industry regulations hit upon the idea of hiring attractive young women for the most part. Entry salaries were so attractive that a job in the banks became the dream of most of our young school leavers.

    Their remit: to canvass for deposits.  It was not explicitly stated, but the underlying assumption,  to put the matter delicately, that the women among them will not hesitate to use what they have to get the deposits they need just to keep their jobs.   This is the ideology of Mrs Warren’s profession in George Bernard Shaw’s play of the same title writ small.

    The targets were impossibly high.  Just how high is indicted in a letter I have before me at this writing:

    “Dear Ms X:

    “You will recall that upon assumption of duty, your commitment to drive a liability target of N180,000,000 (not a misprint) and a risk asset target of N63,000,000 (again not a misprint) within a period of six months.”

    Even if she had a private mint, she would have found it hard to meet these targets, due to the scarcity of processing material, not forgetting the epileptic power supply  After six months, she had achieved only 2 per cent of her risk asset target of N63 million.

    “Management is extremely displeased with this abysmal level of performance and absolute destruction of value,” the letter under reference states in severe reproach.   “Please note that you have up to 31st January, 2015 to achieve significant improvement (60%) growth; otherwise your employment with the bank will be reviewed.”

    The new target is no more attainable than the earlier one, but there you have it.

    I have heard of canvassers offering would-be depositors a higher return than the going rate at the bank and making up the difference from their own earnings – in other words, subsidising their employers just so that they keep their jobs.

    There has always been a seamy side to banking. Putting young women in the way of moral harm and sexual exploitation, placing them in a position where they feel obliged to follow Mrs Warren’s footsteps to keep their jobs, makes it seamier still.

  • Taking cash-less banking to greater heights

    Taking cash-less banking to greater heights

    Telecoms technology and banking services are creating a new growth in the financial services sector via mobile money. This payment module has grown beyond its initial concept and is expected to bridge the gap between the banked and unbanked, writes COLLINS NWEZE.

    The dream of getting financial services to the nooks and crannies of the country is being realised by banks, the Central Bank of Nigeria (CBN), telecoms operators and the Nigeria Communications Commission (NCC) via money.

    That vision, many analysts said, would be driven by mobile money. This refers to payment services operated under financial regulation and performed from or via a mobile device.

    Mobile money system refers to the various components required to deliver mobile money to the banking and non-banking community. The providers of these services and solutions are required to operate within the defined regulatory framework specified in this document and any other regulation/guideline issued by the CBN.

    The CBN is responsible for defining and monitoring the mobile money systems in Nigeria.

    With mobile money, instead of paying with cash, cheque, or credit cards, a  consumer can use a mobile phone to pay for many goods and services.

    In 2008, the global market for various mobile payments was projected to reach more than $600 billion by 2013. In developing countries, including Nigeria, mobile payment solutions are deployed as a means of extending financial services to the unbanked or under-banked. These groups constitute about 50 per cent of the world’s population, according to Financial Access’ Report.

    Analysts insist that financial exclusion persists because of the inaccessibility of the unbanked mostly people in the lower strata of the economy, by the financial services providers.

    The unbanked are often far removed from the centre of commerce, which tends to lower their participation in economic transactions.

    Thus, a combination of low demand for financial services and prohibitive costs without commensurate returns dissuades financial services providers such as banks, insurance, and pension administrators from establishing its presence in these locations.

    However, mobile technology and innovations in the financial services industry, coupled with the phenomenal growth in telecoms’ subscriber numbers, have altered this situation.

    However, financial services providers continue to leverage the reach of telecoms networks to provide mobile money services to otherwise inaccessible locations.

    The spate of agreements on mobile money services among financial institutions and telecoms networks, MTN and Diamond Bank, UBA and Airtel, Stanbic IBTC Bank, FirstBank, Ecobank and Globacom, will, doubtless, ramp up the synergy that should lead to further growth in mobile money.

     

    NIBSS Network

    The CBN insists that Mobile Money Operators (MMO) are required to, henceforth, connect to the Nigeria Interbank Settlement System (NIBSS) otherwise called the National Central Switch (NCS) to ensure ease of communication for schemes in the system.

    In a guideline for the sector, the apex bank said a scheme operator can either be a bank or a licensed corporate organisation.

    It said the NIBSS is responsible for connecting the various players in the financial system using various players, such as banks, MMOs, non-banking financial institutions, payment terminal providers, card acquirers, government institutions and their customers to send, receive and process funds, documents and other instruments electronically through its platform.

    The apex bank said MMOs are the lead initiators for the mobile scheme and shall be responsible for ensuring that the various solutions and services within an approved mobile payment scheme meets the entire regulatory requirements as defined in this framework and as may be specified from time to time.

    The regulator said the MMOs shall be ccountable to the CBN and the end users. The CBN recognises that, with the evolution of the mobile money system, spin-off services would be identified by MMOs, which can be outsourced to entities with specialised skills and resources to support such services in a more efficient and effective manner. The service providers may employ the infrastructures of the MMOs to provide services to the end users.

    “The MMOs shall provide a detailed payments management process that covers the entire solution delivery, from user registration and management, Agent recruitment and management, Consumer protection/dispute resolution procedures, Risk management process to transaction settlement. These processes shall cover the scope of the value chain across all the participants in the mobile money ecosystem,” it said.

     

    The M-Pesa example

    The poster boy of the successful integration of the rural/informal populace into banking system via mobile money services is usually Kenya. M-PESA, Kenya’s mobile money system, has been hugely popular and successful in that country. It has over 40,000 agents and 17 million users (“equivalent to more than two-thirds of the country’s adult population, conducting more than two million transactions daily.

    In 2010, Kenya had just 840 bank branches and 1,510 ATMs to serve a population of 47 million. M-PESA, with its 40,000 agents, helped to plug the supply hole and provide access to financial services to ordinary Kenyans.

    Micro finance institutions piggybacked on M-PESA to penetrate remote areas quickly without increase in costs.

    In other countries, some financial institutions seemed to have found the right mix to ensure the successful deployment of mobile money. Standard Bank (parent bank of Nigeria’s Stanbic IBTC Bank), for instance, has been successful with mobile money in Uganda, Tanzania, and South Africa.

     

    Bank-led model

    The bank-led mobile money model adopted by Nigeria may be slightly different from Kenya’s telecoms-driven model but the underlying peculiarities are broadly similar.

    Access, costs, lower economic activities, and partnerships are common threads. The lessons of M-PESA are not lost though as mobile operators like MTN Nigeria is beginning to play more significant roles in mobile money.

     

    CBN Vs telco-led model

    The CBN said it avoided the implementation of the telco-led model in the mobile money operation to have control of monetary policy operations. The policy, it said will also enable it minimise risks and ensure that the offering of financial services are driven by organisations it licensed.

    In new guidelines, the CBN said the telco-led model, where the lead initiator is Mobile Network Operator (MNO), shall not be operational in the country. The apex bank said the overriding vision of achieving a nationally utilised and internationally recognised payments system necessitates strategies to bring informal payment transactions into the formal system.

    This framework has identified two models for the implementation of mobile money services namely; Bank Led – Financial Institution(s) and/or its Consortium as Lead Initiator and Non-Bank Led- A corporate organisation licensed by the CBN as Lead Initiator.

    “The CBN recognises the importance of Mobile Network Operator (MNOs) in the operations of mobile money and appreciates the criticality of the infrastructure they provide,” it said.

    The CBN said a robust payments system is vital for effective monetary policy implementation and the promotion of economic efficiency. “The introduction of mobile telephony in Nigeria, its rapid growth and adoption and the identification of person to person payments as a practical strategy for financial inclusion, has made it imperative to adopt the mobile channel as a means of driving financial inclusion of the unbanked,” it said.

    Chief Excutive Officer (CEO), MTN Nigeria, Michael Ikpoki, said the network would focus on meeting the significant market demand for financial services and mobile content with an expected positive impact on data revenue.

    “The success of Diamond Y’ello Account and other basic mobile money services is expected to lead to the adoption of more sophisticated mobile payment solutions such as bulk mobile payment designed for corporate organisations. This service makes it easier for organisations to send money in bulk to their suppliers, employees or other business partners without the beneficiaries necessarily having to own a bank account,” he said.

    Mobile money providers are also expected not be shy to adapt and replicate what works in other places but continue to innovate and develop bespoke products and services to excite consumers and boost conversion rate.

     

    Benefits to consumers

    Some of the benefits to the consumer include security, convenience, accessibility, speed and ease of transaction, competitive charges, access to quality advisory services, and integrity of transactions; the customer literally carries his bank in his pocket or bag wherever he goes.

    Other not-so-obvious benefits, which are nonetheless important, are better cash flow management, enhanced financial planning, and inculcation of sustainable savings habit, which boost financial security and comfort in retirement.

    “Mobile payments, which I perform on my phone, help to reduce my travelling costs,” a farmer in the rural area who uses mobile payment services said.

    Mobile money also has the potential to galvanise economic activities, leading to higher socio-economic development, lower cost of transactions and reduction of cash handling costs, among other benefits.

     

    Role of regulators

    CBN Director, Payment Systems Unit, ‘Dipo Fatokun, said apex bank believes that mobile money and agent framework is the frontier of cashless boom.

    “Mobile money is the next thing expected to transform CBN’s cash-less policy. The apex bank believes that such initiative will aid both telecommunications and banking industries to further serve Nigerians better,” he said.

    Nigeria’s telecoms subscriber base, put at 131 million as of September, last year by the Nigerian Communications Commission (NCC) should play a major role in bringing the unbanked into the formal banking system.

    With over 50 per cent of Nigeria’s unbanked adult population, mobile banking could be the catalyst that will help quicken the adoption of banking services by this critical segment of the population.

    Offshore portfolio managers appear to be similarly persuaded and they are already positioning to take advantage of the expected growth in mobile money.

    For instance, Carlyle Group, a United States-based global alternative asset manager with $203 billion of assets under management across 129 funds and 141 fund of funds vehicles, recently acquired a $147 million (about N27 billion) minority stake in Diamond Bank, partly on the strength that the bank’s new mobile banking service “will help rapidly boost the lender’s customers and profits.”

    Also strengthening mobile money is the Nigerian Deposit Insurance Commission (NDIC’s) extension of deposit insurance cover of up to N500,000 to mobile money account holders.

     

  • Cost of banking regulation

    Cost of banking regulation

    Banks, which hitherto made huge profits, are now struggling to survive, no thanks to the impact of tougher regulatory demands on their profits. Experts insist that banks must play by the rules to stave off regulatory clampdown, writes COLLINS NWEZE.

    hen the profit of Stanbic IBTC Bank tumbled 46 per cent to N4.81 billion in the first quarter ended March 31, this year, many people wondered what hit the bank that raised profit by 63 per cent to N40.1 billion in its 2014 financial year. What they probably did not know is that Stanbic IBTC is not the only bank that had its earnings slashed by tougher regulation and sanctions. Five other banks lost N312 million as fines paid to the Central Bank of Nigeria (CBN) for violating the Banks and Other Financial Institutions Act (BOFIA).

    GTBank, Zenith Bank, First City Monument Bank (FCMB), Access Bank, and Sterling Bank all came under the regulator’s hammer. They were fined varying amounts of money for various misdemeanours in 2014 financial year, including foreign exchange breaches, failure to obtain CBN’s approval for additions to investment in property, non-compliance with the recommendations of a financial services provider PriceWaterhouseCoopers, weaknesses noted in internal control, and Know Your Customer (KYC) procedures, among others. For the affected banks, it was a wake-up call of a sort that it is no longer business  as usual and that there are no sacred cows anymore.

    However, the penalties are likely to be the smallest the lenders will pay going forward. According to the Managing Director, Financial Reporting Council (FRC), Mr. Jim Obazee, the Council is already compiling cases against many banks that breached its reporting rules in their 2014 financial statements. The Council, he said, is investigating the banks to confirm whether their financial statements are in accordance with provisions of the International Financial Reporting Standards (IFRS), the Companies and Allied Matters Act (CAMA), the BOFIA and the FRC Nigeria Act. The FRC, he said, will look at the accuracy and reliability of the reports in their statements based on these Acts.

    Already, Zenith Bank, United Bank for Africa (UBA), GTBank and Union Bank have submitted their accounts to the Council for review. The penalty for each violation ranges from N5 million to N100 million. A bank will be sanctioned based on the number of infractions committed, including a jail term for offenders. “We are looking at how reliable, and how accurate the financial accounts are because they must be exact. Offenders will have their FRC registration numbers withdrawn, based on Section 41 of the FRC Act. That means they will not be able to work in Nigeria again,” Obazee said.

    The FRC chief said banks that fail to classify expenses, such as staff costs, auditors’ remuneration, interest on loans, and directors’ remuneration will be sanctioned. For him, a more significant message behind the financial pains banks have to bear is that the era of impunity is over.

    The same message came from CBN Governor Godwin Emefiele, who on assumption of office, said he will focus on managing factors that create liquidity shocks, promising zero tolerance for practices that undermine the health of financial institutions.

    He equally promised a gradual reduction of interest rates to a comparable level with other emerging markets; maintain exchange rate stability, strengthen financial system stability and improve banking supervision because policy adjustments have revealed loopholes and high level of governance indiscipline in the sector.

    However, violation of regulatory guidelines is not limited to Nigerian banks. Globally, these illicit activities include the 2008 Societe Generale’s $68.5 billion rogue trading, UBS’s $2.2 billion fraud trading in 2013, JP Morgan’s $6.2 billion London Whale scandal in 2013, and the Barclays’ London Interbank Offered Rate (LIBOR) fixing scandal. More recently, there is the Citigroup $7 billion settlement with U.S. authorities in July last year over mortgage scandal as well as the $9 billion BNP Paribas fine (July 2014) for illicit transactions from 2004 and 2012.

    Beyond the fines and promises to reduce interest rates, Nigerian banking regulators, like their global counterparts, are also paying more attention to how healthy the lenders are. The result of the last CBN liquidity stress test on the banking sector released last month jolted many people. The test conducted on 23 banks, showed that ‘six small banks’ Capital Adequacy Ratios (CARs) fell below regulatory threshold.  CAR is a ratio of a bank’s assets to its risks. CBN Deputy Governor, Financial System Stability, Dr. Joseph Nnanna said the unnamed ‘small banks’ CARs fell to 8.85 per cent, against stipulated 10 per cent for lenders operating only in Nigeria and 15 per cent for those with foreign subsidiaries.

    The test conducted using both the bottom-up and top-down approaches specified in the modified International Monetary Fund (IMF’s) stress test framework, captured the diverse nature of individual bank’s balance sheet and observed weaknesses.

    Although, the deputy governor defended the stability of the banking sector, the result of the test gave insight to the grave situation faced by lenders. For instance, majority of the banks, The Nation learnt, are grappling with low capital bases, long term bonds’ repayment, and depressed income margins. The poor cash flow from investments in power sector assets is also a major concern negatively impacting on banks’ capability to stay in business.

    CBN’s and other regulatory policies, including reduction on Commission on Turnover (CoT) fees, increase in contribution to the Asset Management Corporation of Nigeria (AMCON) and Nigeria Deposit Insurance Corporation (NDIC) levies and high Cash Reserve Ratios (CRRs) are also depleting banks’ profits.

    For instance, the CRR, which  is the minimum cash, as a percentage of customer deposits and notes that each commercial bank must keep with the CBN as reserve was harmonised at the CBN-led Monetary Policy Committee (MPC) meeting held on May 18th and 19th.

    The CRR was until the MPC meeting at 20 per cent for private sector deposits and 75 per cent for public sector deposits. But the committee decided to harmonise it at 31 per cent for private and public sector deposits.

    The CRR is meant to protect depositors and ensure banks have sufficient cash at all times to meet the day-to-day demands and cash withdrawals of their depositors. But in reality, it is a powerful monetary tool often used by central banks to control money supply in the economy.

    The MPC considered that the current discriminatory CRR on public and private sector deposits has not only constrained the policy space but could inspire moral hazard by private market participants. Consequently, it was recognised that while additional tightening measures may not be appropriate now to avoid overheating the economy, a harmonisation of the CRR was imperative to curb abuses and improve the efficacy of the monetary policy.

    The CRR adjustment removed over N2.7 trillion from CBN’s vaults and placed it in banks’ custody for on-lending to customers. But while the impact is expected not to be felt immediately, damages done to banks’ bottom line before the policy shift still abound. The funds were kept with the CBN at zero interest rate before this reversal.

    Equally affecting banks’ profits is the implementation of revised guide to bank charges. The CBN’s gradual phasing out of CoT by 2016 and the simultaneous introduction of interest on savings account have impacted banks’ gross earnings significantly.

    For instance, bank customers will from 2016 begin to enjoy free CoT on all their transactions. The policy, which  took effect on April 1, 2012 has seen the CoT gradually drop to N3 per mille in 2013. It was N2 per mille last year; N1 per mille this year and will be zero per mille next year.

    In 2013, the AMCON levy was also increased from 0.3 per cent of banks’ total assets to 0.5 per cent. Analyzing AMCON’s 2013 financial year audited results, an investment banking and financial services firm, Afrinvest (West Africa) Limited, said the “bad bank’s” levy on Deposit Money Banks (DMBs) increased by approximately 76 per cent from N54.6 billion in 2012 to N96 billion in 2013.

    Afrinvest estimates that AMCON’s levy on banks are expected to hit N143 billion by the end of 2014, further strengthening the Corporations’ cash flows in the years ahead but has invariably put pressure on the net earnings of banks. The firm advocates for a strategically cautious approach in rolling out these policies given the enormity of the tasks ahead. Besides, Emefiele’s proposed gradual reduction in interest rates may lead to the unintended consequence of exerting additional pressure on banks’ income derived on yielding assets. These hitches have moderated the industry’s gross earnings from 40.9 per cent in 2012 to 14.8 per cent last year.

    Analysis of banks’ performance showed that the impacts are mixed. While some showed resilience in the face of regulatory headwinds and tough economic environments, others felled like pack of cards. For instance, Stanbic IBTC Holding Company said its first quarter 2015 pre-tax profit fell 46 per cent to N4.81 billion against the same period last year.

    Stanbic did not give any reason for the decline in profit. It recorded a threefold increase in loan loss provisions to N3.9 billion against N1.2 billion last year, the major driver in the year-on-year reduction in earnings. Stanbic’s revenue performance was subdued as profit before provisions came in flat at N24.6 billion.

    Although non-interest income grew by six per cent year-on-year to N13.9 billion, this was more than offset by a nine per cent year-on-year decline in funding income to N10.7 billion due to margin compression, with all key headline items visibly below expectations.

    ikewise, Skye Bank’s fourth quarter 2014 results showed a pre-tax loss of N1.9 billion. Despite the pre-tax loss, Profit After Tax (PAT) came in positive at N4 billion but declined by 53 per cent year-on-year. A gain of N4.2 billion on the other comprehensive income line together with a tax credit of N1.7 billion were the drivers behind the positive PAT.

    Profit before provisions grew by 14 per cent year-on-year to N25.4 billion. The growth on this line was driven by a 33 per cent year-on-year growth in funding income. In contrast, non-interest income declined by four per cent year-on-year. However, the year-on-year growth in pre-provision profits was not enough to offset a 56 per cent year-on-year and 59 per cent year-on-year rise in loan loss provisions and operating expenses respectively. On a full year 2014 basis, Skye’s PBT and PAT declined by 47 per cent year-on-year and 32 per cent year-on-year respectively.

    However, Unity Bank Plc posted a 35.2 per cent rise in first quarter PBT to N4.26 billion against the same period last year. The middle tier bank did not give reasons for the higher earnings, but said revenue rose to N16.5 billion against N14.97 billion in the period ended March, 31.

    Also, Access Bank’s first quarter pre-tax profit rose 23 per cent to N16.5 billion from year ago, the top tier lender said. Access Bank also did not give a reason for the rise in pre-tax profit. Gross earnings rose by 18.5 per cent to N245.2 billion during the period ended March 31, it said.

    GTB’s unaudited financial results for the first quarter ended March 31 showed a 17 per cent growth in gross earnings to N79.02 billion, from N67.58 billion recorded in the comparative period of 2014, underpinned by strong growth in interest income and effective management of operating expenses and cost of risk.

    Its PBT was N32.65 billion, an increase of 17 per cent from N28.01 billion reported in first quarter of last year. The bank reported a first quarter 2015 PAT of N26.56 billion an increase of 15 per cent over the N23.11 billion reported in 2014.

    Likewise, Fidelity Bank’s first quarter 2015 PAT of N5 billion grew 27 per cent year-on-year, mainly due to a positive N956 million result on the other comprehensive income line. Excluding the latter, PAT was up by just six per cent year-on-year. PBT grew by the same rate. In terms of the contributions of the different revenue lines, non-interest income was the standout performer, with a strong 65 per cent year-on-year growth to N7.7 billion. Foreign exchange trading gains drove the strong non-interest income result.

    Zenith’s first quarter 2015 PAT grew strongly, by 27 per cent year-on-year to N28.7 billion, faster than 15 per cent PBT because of a significant positive result of N1.1 billion in other comprehensive income. The 15 per cent year-on-year PBT growth was driven by non-interest income which grew by a staggering 40 per cent to N31.9 billion. In contrast, funding income fell six per cent to N42.6 billion because interest expense of N38.8 billion grew much faster by 50 per cent year-on-year than interest income 14 per cent year-on-year. This is in spite of the fact that loan growth has visibly outpaced deposit growth in the last five quarters. This apparently anomaly can be explained by the fact Zenith saw its net interest margin fall to 6.2 per cent from over eight per cent.

    FBN Holdings (FBN) first quarter 2015 results showed that PAT came in flattish at N19.4 billion. PBT grew nine per cent year-on-year to N26.9 billion. The flattish performance on the PAT line was due to a 35 per cent year-on-year growth in income tax to N4.3 billion and a 47 per cent year-on-year growth in the loss reported on the comprehensive income line.

    Profit before provisions grew by 14 per cent year-on-year to N88.3 billion. The growth on this line was driven by a 51 per cent year-on-year growth in non-interest income. A 126 per cent year-on-year growth in foreign exchange gains to N9.7 billion was the primary driver behind the performance in non-interest income. In contrast, funding income grew marginally, by 1.3 per cent year-on-year.

    The marked growth on the non-interest income line completely offset a 138 per cent year-on-year increase in loan loss provisions and an 11 per cent year-on-year increase in operating expenses, and led to PBT growing by nine per cent year-on-year.

    peaking on the results, Skye Bank’s Group Managing Director/Chief Executive Officer, Timothy Oguntayo, said in spite of the challenging operating environment, the bank carefully grew its risk assets portfolio, attained a 15.7 per cent growth in deposits, supported customers in critical and productive sectors of the economy, and declared a fairly decent profit.

    Oguntayo said the recent acquisition of Mainstreet Bank Limited, which has resulted into a much larger franchise of over 450 branches, provides the bank with enhanced capacity to provide easier access to its teeming customers, and explore various opportunities in diverse segments of the economy.

    Likewise, Chief Executive Officer, Stanbic IBTC Holdings Plc, Mrs. Sola David-Borha, stated that the performance, despite the effect of declining crude oil prices on the operating environment, is evidence of the positive outcome of the group’s strategy of growing the client base across target and key market segments while maintaining a principled credit process.

    She said the future holds great promise for all stakeholders as the Stanbic IBTC Group continues to seek opportunities in high growth sectors of the economy to grow its business, while sticking with its business model anchored on the prudent management of resources. “We remain positive in 2015, despite the envisaged volatility in economic conditions, to deliver best-in-class services to our customers and provide value for our shareholders,” she stated.

    Managing Director of Fidelity Bank Plc, Nnamdi Okonkwo commenting on the results, said the lender built on the successes of the last financial year as it remains committed to delivering sustainable earnings and improved asset quality notwithstanding the headwinds witnessed in the industry, occasioned by the drop in the global oil prices. “As you have noticed, developments in the international markets presented some challenges to both the real sector and the financial sector of our economy,” he said.

    Head, Equities Market at Renaissance Capital (RenCap), Adesoji Solanke said lenders must be disciplined on the cost line and properly manage their impairment charges before they could deliver earnings growth. He said most banks’ managements acknowledged the current challenges and their initial focus will be on reducing the funding costs by continuous downward re-pricing of costly term deposits.

    Vetiva Capital Management analysts predicted that on an aggregate level, the banking industry 2014 gross earnings would take a potential $690 million annual hit, because of the CBN’s CRR policy alone. They said the impact will vary from bank to bank depending on how much public sector deposits on their books.

    Sterling Bank’s Executive Director, Strategy, Abubakar Suleiman said the cost of resolution for the 2009 banking crisis is something that will be with banks for a while but that should not stop them from aspiring to deliver good returns. “These are difficult times. A time when government and regulatory authorities are trying to stabilise prices, including exchange rates and interest rates, and the choices available to them are limited. And again, these are not policies that will be there forever. They will be applied in the best interest of the country, and when things stabilise, we expect some of these policies to be reversed and profitability will improve for the banks,” he said.

    According to him, the CBN cannot allow a certain level of liquidity in the system when there is pressure from the exchange rate. “And even the banks themselves are not better-off if liquidity is allowed in the system because what they gain in terms of interest income they may end up losing if there is significant devaluation or devaluation that is not managed properly. In my view, the CRR policy is something that must happen, and is not going to prevent any serious minded bank from returning decent Return on Equity,” he said.

    For Chairman, Progressive Shareholders Association, Boniface Okezie, contributions to AMCON and NDIC have become outrageous and are eating deeply into banks’ profits. He advised the banks to always make public by including in their annual reports, whatever payments they make to regulators. “Investors money can’t be used to fund regulators. This is not acceptable to us, and should be discouraged,” he said. Okezie said that funding of such regulatory bodies should be done by the Federal Government, and not quoted companies, to ensure objectivity and transparency.

    He said banks’ earnings have been badly depleted by the AMCON levy hike. He said he had earlier warned that the CBN is over regulating the sector. “The shareholders are being denied their take home pay.

    The policy changes are targeted at shareholders,”he said, adding that many banks now lack the needed fund to lend, which could have helped improve their earnings.

    An economist and shareholder based in Lagos, Gabriel Nnanna, said bank’s current performance is making many shareholders to have a rethink on investing in the sector. He said banks now have to drive low cost funds from Small and Medium Enterprises (SMEs) for them to remain profitable giving the declining margins in government deposits.

    “It is no longer profitable and wise to keep expensive funds mainly from government. I think forward thinking banks should go for cheaper funds to reduce their cost of funds and create better returns for shareholders,” he advised.

    For Solanke, the last two years have seen discussions around banks centred on monetary policy and the regulatory environment. He thinks the CBN could be creating an increasingly difficult operating environment, under which some banks cannot hope to deliver returns in excess of their cost of capital. His words: “I think that Nigerian banks are indeed, facing an uphill struggle to deliver 20 per cent plus returns, especially compared with their other African peers.

    “With the tough regulation, banks will be left with little choice but to pursue revenue growth by raising lending rates on their loan books.

    This is likely to come at the expense of either loan growth or asset quality. The larger, more liquid banks may prefer to accept lower loan growth, and instead increase their exposure to treasury assets, since the yields have risen slightly, and hence remain in attractive territory.

    “All in all, high earnings growth is likely to be challenging to achieve. It will become harder for some of the banks to deliver returns in excess of their cost of equity, especially some of the smaller banks.”

    On decline in banks’ profits, Obazee said while the CBN is ensuring regulatory compliance, the FRC is looking at general purpose financial statements, from where it determines whether a bank is in distress or not. He said the adoption of International Financial Reporting Standards (IFRS) in Nigeria has made reporting robust as banks must make full disclosures of their financial positions. Lenders, he insisted, must show how they arrive at their judgments and estimates.

    “The IFRS ensures we trace all the banks’ policies to the financial statements. A lot of malpractices have been cut down, because of full disclosures. If you are disclosing fully, there will be no room for financial manoeuvres. If your results are IFRS-based, there will be a lot of disclosures. Whatever judgment and estimates you make, must tally with estimates. With these disclosures, banks can no longer book profits that do not exist. Banks’ definition of assets has changed as everything has to be put on the table. The banks can no longer lie about their cash,” he explained.

    But other analysts insist that the CBN should be more interested in the overall impact of its policies on the economy than banks’ returns.

    This is because banks’ earnings could decline, but the overall impact of the regulation on the economy is equally important as the regulator needs to continually ensure that the financial system is safe and stable at all times.

     

  • From banking to herbal cosmetologist

    From banking to herbal cosmetologist

    Despite challenges faced by entrepreneurs, producers of herbal products are developing strong businesses that are benefitting the economy, Daniel Essiet reports.

    •Jimoh
    •Jimoh

    Mikail Jimoh, Managing Director and Chief Executive Officer, Jim Products, as an entrepreneur, started very small. And through sheer hard work and perseverance he has made it to the top. He runs one of the most successful herbal cosmetics and household products in Lagos.

    But he did not start  as a health  entrepreneur. He  began as a banker after graduating in banking and finance from the University of Lagos (UNILAG) in 1991. After his National Youth Service Corp (NYSC) service, he had a stint with Nichebel Merchant Bank where he earned over N25,000 per month. Being a banker with all the perks that go with the job, Jimoh could be said to be comfortably engaged. That notwithstanding, he resigned in 2004 to manufacture a range of herbal products that earned him Products of the Year 2014 Award by the Association of Micro Entrepreneurs of Nigeria (AMEN). His  flagship  product, after he started, he told The Nation, was  Jim Aloe Vera Dental Powder. He called it his cash cow. He has 30 other products, all registered with the National Agency for Food and Drug Administration and Control (NAFDAC), including Jim Herbal Toothpaste, Jim Herbal Skincare Soap, and cream.

    His idea for natural cosmetics with healing properties came from his  father,  who  is a herbalist, had  shown  him how  to use herbs to  treat ailments. Jimoh said he has herbal practice in his lineage, which he integrated into cosmetics production. He acknowledged that he is not a chemist or scientist; he only acquired the technical know-how and infused his in-house knowledge to get the formula for the production. While on the banking job, Jimoh manufactured the products on skeletal basis at weekends, manufacturing them in his apartment. He then noticed the high demand for the products.

    As at that time, there was no mobile telephone and it was difficult to know when customers paid into his account. He went on leave from his job and never returned, having been enthralled by the huge demand for his products.His start up capital was his salary of N25,000. His wife and their first son, now a university undergraduate, were his only employees, offering services he could not afford to pay for. Driven by a common passion, Jim, his wife, and son worked late into the night to get the products ready for supply to customers the next day.

    As  the business grew, he  started engaging workers. But due to incessant harassment by the police and customers’ debt burden, everything went down the drain. He was left with huge debt from customers. However, his wife rose to the challenge and gave him a life-line of N1,500,  which  he  took to Ojota to pick his materials to resume production.

    Along the line, he got  a credit facility of N76million without collateral, from GROFIN, a South African non governmental organisation with an  office in Lagos.

    He  said the organisation  assisted him without  going through  any hassles Nigerian banks would subject any entrepreneur  to.  Securing machines and  equipment, courtesy the  GROFIN,  he was able to engage 75 employees in his factory at Sango Otta, Ogun State.

    Today, the company  has become a successful business model, with tremendous goodwill and demand for its products. From a  small operation   to a business worth millions  of  Naira, it has been a phenomenal journey.  Having adopted a totally new concept of herbal care and cures, Jimoh   took time to increase his  knowledge  of  the  healing powers of herbs and the dangers of chemical and synthetic ingredients. He did this be reading   articles in leading newspapers and magazines.   As  obstacles and hurdles come up in life, he  tried to see them as challenges. With  his  desire to excel, his  relentless determination to succeed, a strong will and sheer hard work, Jimoh   believes nothing is impossible.

    According  to him,  awareness of herbal   products and treatments, are at an all-time high. This is attributed to exposure of global trends and lifestyle changes, higher disposable incomes and the trend towards fitness and youth.  Right  now, product innovation has helped the organisation to remain dynamic.

    Walking into his  factory  is   a delight  with  processed   herbs  and  other materials lining shelves and ingredients for producing  soap, creams, lbalms and bathing goodies. And everything is made using natural products, herbs, flowers, natural colourings and  other body nutrients.

    As the company got bigger, so was the range of products – a variety of soaps and fragrances, creams and lip balms, shampoos and bath bombs. The soaps are made using a mix of oils, which are mixed with essential oils, natural colourings or clays. He  has   master recipes  and is set to customise them with various scents, patterns and ingredients. Locally produced ingredients, including honey are all sourced and used.

    He never imagined he would be doing this. He changed the rules of the business by trusting his instincts; introducing business norms that were ahead of their time and by investing in strategic relationships. He built a series of bonds and networks with hundreds of family members, vendors, dealers and employees. These networks are now the glue that holds the group together. He  has been personally responsible for rekindling a spirit of entrepreneurship amongst his employees.

    Recognising the potentials of the agricultural sector for economic development,  Jimoh  is making  efforts  to  establish an  agro processing  unit  in Kwara State.

  • CBN, NDIC adopt fresh banking supervision model

    CBN, NDIC adopt fresh banking supervision model

    The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have adopted a new banking supervision model.

    Banking supervision will, henceforth, be risk-based, according to NDIC Managing Director Alhaji Umaru Ibrahim.

    In a report obtained from the corporation’s website, Ibrahim said risk-based supervision would enable CBN and NDIC to evaluate banks’ areas of risks, focusing on critical areas while evaluating the risk management models deployed to achieve business plans.

    He said the corporation has developed frameworks for Early Warning Signals (EWS), identified and measured Systemically Important Banks (SIBs), whose failure could trigger crisis in the economy.

    NDIC, he noted, has been complementing CBN in many areas, particularly in banking supervision and distress resolution in the last 26 years. Ibrahim said the banking supervision and failure resolution functions, which have been part of NDIC’s core functions, cannot be in doubt many years after.

    The corporation, he said, is seeking amendment of its law to enhance its operational performance and ensuring that it has powers to pay depositors after a reasonable time between 30 and 90 days after the bank closes its premises, following revocation of its licence or because of the court case.

    “A situation where depositors have their money trapped in failed banks without access to such funds should not be encouraged. That is the global best practice which must be allowed in Nigeria. That is the power being sought by NDIC,” he said.

    The NDIC boss said cases of failed institutions without succour for depositors abound in commercial banks, microfinance banks and primary mortgage institutions. He said the amendment will enable the corporation to discharge its core mandate in line with best practices.

    The corporation, he added, continues to seek consultation, collaboration, partnership and cooperation with the CBN as well as other members of financial stability groups.

    He said the core mandate of the NDIC as explicit deposit insurance  firm are deposit guarantee, banking supervision, failure resolution and bank liquidation.

    “The NDIC serves as a lifeline to Depositors through the Deposit Guarantee scheme. The NDIC deposit guarantee payment to depositors up to the maximum insured limit in accordance with its statutory mandate in the event of failure of an insured financial institution. This distinct role allows the NDIC to continue to discharge its mandate and bolster the confidence of depositors in the banking system,” he said.

    From its initial guarantee of N50,000 per depositor of Deposit Money Banks (DMBs) at inception, the maximum deposit insurance coverage was increased to N200,000 in 2006 and N500,000 in 2010.

    “As for the MFBs and PMBs from N100,000 in 2006, the coverage level was increased to N200,000 in 2010. At the moment, the Corporation provides deposit insurance cover to the all eligible CBN licensed 24 deposit money banks (DMBs), 880 microfinance banks (MFBs), 77 primary mortgage banks (PMBs) and one non-interest bank (NIB) operating in the country,” he said.

    Ibrahim said the NDIC, as the third pillar of the financial safety-net, collaborates with the CBN to conduct risk based banking supervision in line with global best practice.

    “It also protect depositors and assist to promote an effective and efficient payment system by encouraging healthy competition and innovation among the insured deposit taking financial institutions through off-site and on-site supervision,” he said.

     

  • Fixing skills gap in banking

    Fixing skills gap in banking

    Worried by the skills gap in banking, the Central Bank of Nigeria (CBN) has instituted a competency framework for the sector. The Access Bank Academy has been accredited by the Chartered Institute of Bankers of Nigeria (CIBN) to address the anomaly by training bankers to become better managers, writes COLLINS NWEZE.

    As a service-driven industry, banking needs competent manpower to meet customers’ needs. Over the years, the perennial poor quality of service has exposed a lot of things about the industry- it suffers from dearth of skills. To reverse the trend, stakeholders and regulators have taken up the challenge to ensure that staff deliver the goods.

    This prompted the Central Bank of Nigeria (CBN) and the Bankers’ Committee to appoint the Chartered Institute of Bankers of Nigeria (CIBN) to serve as the accreditation agency under the Competency Framework for the Banking Industry.

    Last week, CIBN accredited the Access Bank Academy to train bank staff and prepare them to attain the Associate of the Chartered Institute of Bankers (ACIB) status. To many stakeholders, this is as a positive step in addressing the skills gap in the industry.

    • Mrs. Osibogun
    • Mrs. Osibogun

    CIBN President Otunba (Mrs.) ‘Debola Osibogun, who presented a certification certificate to the Access Bank Plc, said with the accreditation, Access Bank Academy has the stamp of authority to train its workforce and by extension, build capacity for the banking and finance industry in the country as required under the competency framework.

    The CIBN boss said the academy has met the requirements as stipulated by the Institute’s Linkage Committee and the CBN in compliance with the competency framework instituted by the apex bank.

    She added that the exercise remains the first set of accreditation certificate to be presented to a training service provider in the country.

    Osibogun said the accreditation will open more routes for intending CIBN members to come on board and write the institute’s professional examinations.

    It is also a platform for producing banking professionals that are highly knowledgeable and competent while benchmarking with international standards.

    She added that the new graduates of the academy will also be expected to register as student members of CIBN and subsequently, commence the Associate of the Chartered Institute of Bankers (ACIB) examinations.

    She said the linkage programme will open more opportunity for bankers to get the ACIB recognition, and become better staff of their institutions.

    Access Bank Managing Director Mr. Herbert Wigwe said the lender has excellent and longstanding relationship with CIBN, adding that the accreditation will deepen the relationship between both parties.

    Wigwe, who was represented by the bank’s Executive Director, Commercial Banking, Mr. Roosevelt Ogbonna, said the CBN competency framework has already spelt out what is needed to be taught at the academy adding that the bank is determined to invest in its people because as a service provider, its manpower remains its strength.

    The bank chief said participants in the programme will get exemptions from CIBN and must therefore, take advantage of the opportunity provided by the academy to enhance their capacity and skills in the profession. He said the bank is excited at the opportunity provided by the academy and that the quality and integrity of exams conducted by the academy remain high.

    Programme Director, Access Bank Academy, Nneka Udezue said the participants in the training will be given exemption for four subjects, all in finance.

    She said the academy also allows students with Second Class Upper Degree, to go through test, interview, and later will be allowed to be trained in the academy for five months.

    This, she said, would give them opportunity for employement in the bank. She added that the academy has made it easier for the bank to employ the right persons.

    Chairman, CIBN Capacity Building and Certification Committee, Pius Olanrewaju, said he has signed the Memorandum of Understanding (MoU) with the Rhema University on ACIB/Degree Linkage Programme, adding that the university shares some principles with the institute.

    Olanrenwaju said the Access Bank Academy has quality scholars that would ensure that the people that pass through the academy get the best quality training. “When we visited the Access Bank Academy, we saw quality facilitators. We are satisfied with what we met on ground. We need new crop of bankers that will take the industry to a new height. We will keep training and encouraging staff of banks to get the right skills that will enable them achieve the best in this industry,” he said.

    He said that it is not only junior staff that need quality training, the middle management and top management of banks also need to be effectively trained for them to grow the industry.

    Past President, CIBN, Prof. Wole Adewunmi, was excited that Access Bank has taken steps to advance education in the banking sector. He also reiterated that just as the junior staff get training, it is also imperative that top management of banks is also trained.

    “We are happy they are planning to advance education in the banking sector. As banks training their staff, there is need for top management to monitor to ensure that what is learnt trickle down to the branches. Banks should observe quality customer relationship management because we noticed that in most banks, the services at the branch level do not reflect the training acquired by staff,” he said.

    The former CIBN boss said that customers remain king and must be treated as king. “Management should go to the branches to know what is going on and find way to ensure that the training goes down to the grassroots,” he added.

    Adewunmi advised banks not to focus on deposit mobilisation and targets, which make staff to lose focus. He said that when quality services are offered, deposits will naturally flow into the coffers of the banks. He advised the mangers of the Access Bank Academy to ensure that the integrity and quality of their examinations remain high, as that will make stakeholders to take them more seriously.

     

    Other steps by CIBN

    Otunba Osibogun said that the competency framework of the CBN under the leadership of Godwin Emefiele is geared towards further improving banking practice and financial system stability.

    She said the initiatives of the apex bank were comparable with what obtained in the developed economies adding that the Nigeria banking industry was better positioned to support business and the economy.

    Otunba Osibogun observed that the new Code of Conduct in the Banking industry approved by the Bankers Committee was an important strategic initiative that would promote good banking practice and ethics while restoring public confidence in the system.

    She expressed satisfaction with the level of cooperation from the Bank Chief Executives as some of them have personally signed the Conduct Form and mandated their staff to do the same.

    The CIBN boss stated that the objectives of the Code of Conduct include guiding every member of the Institute, both individual and corporate in meeting obligations to customers and other stakeholders by maintaining and improving standard of service, performance and quality of banking products; ensuring that all bank employees conduct their duties fairly and honestly; maintaining best banking practice and strong commitment to sound ethical and professional standards in the banking industry, among others.

    She praised the CBN and the Bankers Committee for giving the institute the opportunity to partner with them on the implementation of the Banking Industry Competency Framework, assuring Emefiele of the institute’s continued support to the bank and the industry.

     

    CBN’s position

    The CBN regretted that the skill gap in the industry manifested in, among others, the lack of in-depth knowledge of core banking functions and poor understanding of basic banking operations; poor understanding of banking regulations; unethical conduct and unprofessional practices; and knowledge gaps in financial markets and treasury management.

    It said that reasons advanced for these inadequacies include the lack of a coordinated industry-recognised training accreditation and certification system as well as competency standards for practitioners in the industry.

    “The development of staff competencies became imperative in addressing the inadequacies, thus, underscoring the need to review the training of new generation of banking professionals to develop and deliver satisfactory banking products and services to the consumers,” it said.

    The framework, it explained, seeks to ensure that workers possess the qualifications, skills and experience relevant to the jobs that they are engaged to perform. It prescribes minimum requirements officers engaged in control function should possess. The primary goal of the framework is to provide reasonable assurance that a job holder is fit, proper and carries on satisfactorily the responsibilities of the office he occupies.

    The CBN explained that in drawing the framework, considerations were given to the various kinds of jobs performed in the industry as well as the bodies of knowledge, skills, and experience needed to perform the jobs.

    “The identification of gaps (where they exist) and how such gaps may be closed – possibly through education, training or acquisition of experience were also covered,” it said.

    “Based on the multiplicity of sources from which education and training may be acquired with the attendant quality differentials, there was need for accreditation of all the service providers to ensure that they meet minimum requirements and standards on a continuing basis,” it added.

    However, the success of the framework implementation, it said, depends on the effectiveness of the accreditation function, prompting the appointment of CIBN to perform the role.

    “The framework identifies some roles that are of operational and/or regulatory significance and designates such roles as control functions,” it said.

    The CBN said it will continue to provide overarching supervision in the implementation of the competency framework in the Nigerian banking industry. In this regard, the implementation of the framework will form part of the routine examination of banks in the country going forward.

     

  • Cash-less banking must grow to global standard, says Emefiele

    Cash-less banking must grow to global standard, says Emefiele

    How has  cash-less banking fared three years after its introduction? It has not done well says Central Bank of Nigeria (CBN) Governor, Godwin Emefiele who has tasked stakeholders to ensure the payment system meets global standard.

    Emefiele, who inaugurated members of the Payment System Strategy (PSS) Board, Payment Scheme Boards and Initiatives Working Groups of the Nigerian Payment System, meant to drive the restructured Payments System Vision 2020 (PSV2020), said despite growing the mobile payment channel by 8,400 per  cent to N296.9 billion in 2014 from N3.5 billion in 2012, there are still gaps to be filled.

    He said Point of Sale (PoS) transactions also rose to N312 billion last year from N48 billion in 2012, representing about 550 per cent increase; the Nigeria Interbank Settlement System (NIBSS) Instant Payment (NIP), increased by 423 per cent to 19.9 trillion last year from N3.8 trillion in 2012.

    The web channel grew by 108 per cent from N31.5 billion in 2012 to N65.6 billion last year, while Nigerian Electronic Fund Transfer (NEFT), rose by 7.5 per cent  to N14.6 trillion from N13.6 trillion.

    “There is no doubt that we have indeed, recorded many successes along the way; however, we do not intend to rest on our oars. In that sense, looking in retrospect, and interpreting the future of our payments system in the light of the present, we see our accomplishments as a stepping stone, bearing in mind that there’s  still a great deal of work to be done,” Emefiele said.

    He listed agriculture, smart cities, government flows, hotels and entertainment, transport, education, health, bill payment and direct debits, as areas that need strengthening in the payment system to improve results in the years ahead.

    He described the PSV2020 as part of the CBN’s efforts to transform the nation’s payment system, adding that a  functional national payment system is essential for an efficient financial sector.

    Emefiele listed some of the achievements made in the electronic payment to include implementation of the Nigeria Uniform Bank Account Number (NUBAN), deployment of a new Real Time  Gross Settlement system (RTGS) built on the Society for Worldwide Interbank Financial Telecommunication (SWIFT), messaging standards and Introduction of the cash-less policy, among others.

    He said the PSV2020, was created to make the Payments System ‘Nationally Utilised and Internationally Recognised’. “It is gratifying to note that our country is acknowledged as a major economic force within Africa, but also increasingly becoming an active player in the global economy. To participate actively, our payments system must be successfully benchmarked against the global best practices, as in most developed nations of the world. We have made some significant achievements so far  in this journey, but a lot still remains to be done,” he said.

    The Board, he said, shall be   chaired by the CBN Governor. It has the Honourable Minister of Communications & Technology; the Accountant-General of the Federation; the four Deputy  Governors of the CBN; the Chairmen of the four Payment Scheme Boards, among others as members.

    “The PSV2020 initiative is intended to benchmark the existing core payments infrastructure in Nigeria against international best practices.  The primary reference point was the Core Principles produced by the then Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS),” he said.

    He, however, said through the implementation of the original PSV2020 initiatives by the CBN, in association with the banking community, the country has witnessed an impressive growth of electronic payments and a shift from the overwhelming dominance of cash as a means of payment.

     

  • AfDB, MasterCard to broaden banking access

    African Development Bank (AfDB) and MasterCard are collaborating to expand financial inclusion on the continent. The collaboration seeks to develop solutions that drive inclusive growth in Africa by broadening access and use of digital financial services.

    MasterCard said it is bringing to the table its proven expertise to design and scale inclusive financial services solutions and infrastructure.

    The AfDB promotes sustainable economic growth and poverty reduction in Africa.AfDB and MasterCard will work with African governments and local companies to develop and deliver affordable services that meet the needs of consumers, especially the traditionally unbanked.

    The collaboration will seek to build cohesive financial systems that drive inclusion at a country level and enable service delivery to traditionally excluded populations. It will also allow the stakeholders to invest in a set of innovative financial services companies and solutions targeted at addressing barriers that hinder financial inclusion; and share knowledge across academic, policy and commercial sectors to create thought leadership on financial inclusion and economic development.

    President, AfDB, Donald Kaberuka, said: “Despite the phenomenal economic growth in Africa, this has not translated into shared prosperity and better livelihoods for the majority. Growth has to be inclusive to be socially and politically sustainable. One key component of inclusive development is financial inclusion, an area in which Africa has been lagging behind other continents. Broadening access to financial services will mobilise greater household savings, marshal capital for investment, expand the class of entrepreneurs, and enable more people to invest in themselves and their families.”

    President/Chief Executive Officer (CEO), MasterCard, Ajay Banga, said: “Less than one adult out of four in Africa has access to an account at a financial institution. While many of our industry partners have been active in this space, we believe that through our payments expertise, and the AfDB’s 50 years of experience in financing Africa’s economic transformation, we can achieve scaled impact and lasting transformation. This can only be accomplished when the public and private sectors combine resources and act together.”

     

  • Cash-less banking: Still a long way to go

    Cash-less banking: Still a long way to go

    Cash-less banking was introduced with fanfare three years ago, but it has yet to make an impact. It is being undone by erratic Automated Teller Machines (ATMs), Point of Sale (PoS) and internet banking downtime hitches. Many customers have lost confidence in the scheme, writes COLLINS NWEZE.

    The introduction of the cash-less banking was one of the biggest news that hit the sector in January 2012. The objective, the Central Bank of Nigeria (CBN) says, is to change the cash-driven economy and reduce the rising cost of banking operations.

    The policy is also designed to promote financial intermediation, financial inclusion, minimise revenue leakages, eliminate robbery and encourage e-payment.

    But three years after, feedback from customers shows that these objectives are far from being met.

    Some bank customers said the policy is yet to gain their confidence because of rising cases of fraud through the channels and additional costs that come with the implementation.

    A cashier at SMAT Electronics, Computer Village, Lagos, Maureen Onyekachi, told The Nation that poor network in the use of e-payment channels and the 1.25 per cent charge on merchants’ accounts when Point of Sale (PoS) is used have depleted some of the benefits that come with the system.

    She said the merchant fee wouldn’t have mattered if the network were to be seamless and trusted by customers. She said on several occasions, customers got debit alerts after paying through PoS, but at the merchant’s end, the transactions were declined.

    Onyekachi said though such hitches were resolved between the customers and their banks, they create doubts on the feasibility of achieving a viable e-payment system in the country.

    “Remember we pay 1.25 per cent fee for every successful transaction done via PoS, which translates to N125 for every N10,000 transaction or N1,250 for every N100,000 transaction. Still, that wouldn’t have mattered if the networks are working well,” she said.

    Mrs. Olatunji Alima, an egg distributor based in Lagos, also recounted her experience. She has been using ATM since 2012, but does not feel safe with it anymore.

    “I own a boutique and I am also a sole distributor of eggs. It has been two years. I don’t feel secure using the device anymore because robbers are attacking ATM subscribers daily at the point of withdrawal. I am always scared of using my ATM cards,” she said. Mrs Alima recounted  when her ATM card refused to work.

    “There was a time I came to withdraw money to pay off a debt. When I slotted in my card, it refused to neither slip out nor pay me. It was a bad experience. I am always very careful and time conscious every time I am about to make withdrawals from ATM. That is why I do not withdraw in the night. Anytime past 6:00 pm, I don’t get close to the ATM,” she said.

    She called for more security by the banks. “I know they are trying their best but they need to do more in terms of security provided for withdrawers and less technical difficulties should be expected,” she advised.

    Like Mrs Alima, Damilare Oshibajo, a technician, and Jeremiah Amaukwu, an information technology specialist, are also not comfortable using ATM. Oshibajo conceded that though ATM has made banking easier for Nigerians, he regretted that dispensing error is a major challenge. “The other day, I wanted to withdraw N20, 000 from the ATM. The machine debited my account but did not dispense the cash. I was told it will reverse the transaction within 24 hours. It never did until after 21 days,” he said.

    Amaukwu said there were several times when his account was debited and the money was not dispensed, a situation he described as worrisome. “It was N10, 000 they took from my account. I did not get it back until two months after,” he said.

    Chief Executive Officer, Forenovate Technologies Ltd, Don Okereke, said cybercriminals were using skimming and trapping devices to steal credit/debit card details of individuals without such persons knowing. He said there have also been several cases of online account takeover, where an unauthorised party gains access to an account by stealing the access codes and conducting illegal funds transfer to a designated account.

    “In today’s increasingly connected world, convenience, speed, technology adoption, and payment options allow people and businesses to conduct online financial activities with ease. Fraudsters are taking advantage of this trend, fleecing customers of their funds. “A leading bank has been bragging of its capacity to open instant bank accounts via Facebook. I advise banks not to sacrifice security and safety of their customers for speed,” he said.

    Okereke said many bank customers are illiterates who are yet to be accustomed to the dictates of cashless banking and all the issues associated with it. He said many of these customers lost confidence in their banks after many reported cases of e-frauds. “There is also another category of discerning, security conscious Nigerians who are abreast with the weaknesses inherent in cashless banking. For instance, I am yet to download any of my banks mobile banking Apps because of security concerns,” he said.

     

    Cash-less banking policy

    The Central Bank of Nigeria (CBN) launched the Cash-less Nigeria Project in Lagos State, in January 2012 and extended the policy to the Federal Capital Territory (FCT), Abia, Anambra, Ogun, Kano and Rivers States in June 2013. The policy was initiated against the backdrop of cash dominance in the payments system, a development which encouraged the circulation of huge sums of money outside the banking system and imposed huge currency management cost on the economy.

    The policy was meant to ensure price stability through effective monetary policy; sound financial system and efficient payments system. It was a critical part of the payment system modernisation, designed to promote the use of ATMs, PoS terminals, web payment, online transfers and even mobile money in banking transactions instead of relying on cash.

    CBN Governor Godwin Emefiele, on June 5, last year removed the three per cent charge on cash deposits above N500,000 for individuals and N3 million for corporate customers — the sanctions for defaulters —but said the nationwide rollout would hold.

     

    CBN’s position

    Aware of these dangers, the CBN has decided to set up a five-year Information Technology (IT) Standards for banks. CBN’s Director, Information Technology, John Ayoh, said the exercise would help banks identify and adopt global IT standards that address industry problems. He said banks were expected to implement the plan on continuous basis and in accordance with set timelines.

    CBN’s Director, Banking Payment and Systems Dipo Fatokun said the introduction of chip-and-pin payment cards have led to drastic drop in ATM card fraud. He said the CBN and other relevant institutions have been able to reduce card frauds considerably by instituting ATM Fraud Prevention Group and the Nigeria Electronic Fraud Forum (NeFF). The groups are to enable banks to collaboratively share data on fraud attempts and proactively tackle them to reduce losses.

    According to Fatokun, the CBN, instructed banks to set and implement mandatory daily limits for ATM cash withdrawal, while other related transactions, including PoS and web purchases should be subjected to stringent limit as agreed and documented between the banks and customers. He said it was the responsibility of the banks to ensure that a trigger was automatically initiated when limits were exceeded.

     

    Banks, others react

    In an emailed statement to its customers, GTBank said the policy would drive the development and modernisation of Nigeria’s payments system. It said individuals and corporate outfits would be encouraged to adopt electronic payment and other banking options.

    The policy, it added, is aimed at promoting the use of electronic-based transactions instead of cash for payments for goods, services, transfers, among other services.

    Skye Bank Plc has underscored the importance of deploying innovative technology in providing a secured and more convenient direct banking solution to its customers. In a statement, the bank said such action is to promote the cash-less policy. The lender has also unveiled its ‘SkyePLus’ to support the initiative.

    Visa’s Group Executive, Central and Eastern Europe, Middle East and Africa, Kamran Siddiqi, said the cash-less banking initiative is modernising the payment system and creating economic development for the country. He was in Nigeria last year to support Visa’s financial literacy and cashless payments drive.

    “Nigeria is a very important market for us. It is exciting for me to be here to support the progress Visa has made in driving financial inclusion and making electronic payments more accessible to everyone everywhere,” he said.

    He said Visa is dedicated to increasing financial literacy among the unbanked through strategic partnerships and educational programmes. “This was the motivation behind the recent highly successful Financial Literacy Challenge with the Co-Creation Hub. It was geared at stimulating the development of innovative web and mobile applications to teach money management skills and support the advancement of financial literacy in Nigeria,” he said.

     

    Incentives

    The Nigeria Interbank Settlement System (NIBSS), collaborating with banks, is working out modalities that will ensure that customers that use their e-payment cards to pay for goods and services on PoS terminals and web platforms get cash refund of 50 kobo for every N100 spent.

    Already, lenders are serious about the offer, as they look at more ways of rewarding users of e-channels, such as PoS, ATMs or even web payments.

    However, in most banks, withdrawing less than N100,000 across the counter attracts a surcharge. Customers are expected to use ATMs or make direct online transfer into beneficiaries’ accounts. Despite these approaches, a majority of bank customers still prefer cash transactions, mainly because of fear of losing their money in what they see as unsecured platforms.

    Vice President, IBM Tivoli Storage, Software Group, Steve Wojtowecz, advised banks to adopt efficient and quality banking software despite their high cost to effectively fight fraudsters.

    He said banks should ensure that people responsible for data security are highly efficient to achieve maximum protection. He said the cost for acquiring software would be upset in a matter of months from efficiency and security benefits. He advised banks to acquire several layers of data security and authentication so that should one layer fail, the other can sustain their operations.

    “There are many mechanisms a bank can implement to limit fraud, including having several layers of data security and authentication, because preventing fraud is very difficult. Limiting fraud is the best case option at the moment,” Wojtowecz said.