The Nation Newspaper

Tag: Banks

  • Fitch: Banks’ problems’ll persist

    Fitch: Banks’ problems’ll persist

    Fitch Ratings yesterday said Nigerian banks will continue to face challenges this year, following an extremely difficult 2016.

    It explained that banks faced multiple threats from the operating environment in 2016, including Nigeria sliding into recession, the economy continuing to suffer from low oil prices and severe shortages of foreign currency.

    It said lenders have struggled with declining operating profitability (excluding translation gains), sluggish credit growth, fast asset quality deterioration, tight foreign currency liquidity and weakening capitalisation, putting increasing pressure on their credit profiles.

    “The outlook for the rest of 2017 is not much brighter. We believe that the banks will continue to face extremely tight foreign currency liquidity despite the authorities’ best efforts to normalise the foreign-exchange (FX) interbank market and improve the supply of dollars,” it said.

    It said deliveries under the Central Bank of Nigeria’s (CBN) Forex forward transactions since June last year have helped the banks access dollars and reduce a large backlog of overdue trade finance obligations to international correspondent banks.

    It said that severity of the foreign currency liquidity issues, refinancing risk remains at the top of our perceived risks for the sector, especially as some banks have large Eurobond maturities in 2017/2018.

    “Fast asset quality deterioration is in line with our expectations given the macro challenges and the continuing issues in the oil-sector. Oil-related impaired loans are high and this excludes large volumes of restructured loans. Other industry sectors contributing to bad loans include general commerce and trading, which have been affected by both the naira depreciation and foreign currency shortages,” it said.

    It said slower economic growth and a lower risk appetite from banks will continue to translate into subdued credit growth and weak core earnings generation in 2017.

    “Loan growth averaged 25 per cent in September last year, but this was due to the currency translation effect post devaluation as about half of sector loans are in foreign currency. Loan growth was negligible in constant currency terms. The banks’ 2016 profitability was underpinned by large translation gains booked on net long foreign currency positions following the naira devaluation,” it said.

  • UTME: Applicants decry delay at Banks in Bwari

    UTME: Applicants decry delay at Banks in Bwari

    Some applicants in Bwari seeking to register for the 2017 Unified Tertiary Matriculation Examination (UTME), have expressed concern over delay in the registration processes.

    They told the News Agency of Nigeria (NAN) on Wednesday that the delay was worrisome, considering the short period of March 20 to April 19 fixed for the exercise nationwide

    Mr Hope Okoro, an applicant who spoke to NAN at the JAMB Computer Based Centre in Kogo community, located in Bwari, said the registration process was easy, but for the delay in banks.

    “The registration is easy and fast; the problem is just the queue at the bank where you pay for the form,” he said.

    Miss Patience Nweke, an applicant, complained of challenges she faced in two banks within the area, adding that the exercise was stressful.

    “First, we were delayed at one of the banks that did not even care to attend to us. When we went to another bank, the queue was unbearably too long

    “I was here at 7 a.m. on Monday when the sales of the UTME form was said to have commenced but we were not attended to till 3 p.m. the next day after standing under the sun for long,” she lamented.

    Another applicant, Miss Ann Ajayi, said although such exercise involved some form of delay, the attitude exhibited by some bank staff lacked much to be desired.

    She said even after for a long time in one of the banks (name withheld), none of the staff attended to them.

    “We were told by someone said to be a bank staff, that the JAMB Registrar had not approved the selling of forms,” she said.

    Reacting to the complaints, Mr Abdusalam Mohammed, Supervisor of the JAMB CBT centre in Kogo, Bwari Area Council, insisted that no hitches had so far been experienced in the cause of the registration.

    “The delay complained about is not from us; the delay was from the banks, but that has been rectified and the registration is going on perfectly,” Mohammed insisted.

    A staff one of the banks in Bwari who pleaded anonymity, said most of the financial institutions were yet to commence registration processes because they were still making arrangements for hitch-free exercise

     

  • Banks, customers at war over 150% import cover

    Banks, customers at war over 150% import cover

    Commercial banks and their customers are at war. It is over 150 per cent coverage introduced by the banks for Letters of Credit (LC) applicants seeking dollars for raw materials import. The coverage is to insulate the banks against dollar scarcity and naira volatility. The banks want the coverage on all LC transactions, but customers see the move as arbitrary and painful, writes COLLINS NWEZE. 

    For importers and manufacturers, whose businesses depend on dollar availability to thrive, this is not the best of times. With the continued dollar scarcity and unending naira volatility against world currencies, banks are introducing new transaction terms for customers applying for open Letters of Credit (LCs) to import raw materials.

    Manufacturers and importers, who have been groaning under rising interest rate as high as 30 per cent per annum and high transactions fees, would have the 150 per cent being introduced on all LC transactions to contend.

    The 150 per cent cover was introduced last year when the naira outlook became uncertain and the banks decided to build the transaction risks around their customers. The Banks are

    The introduction is taking its toll on manufacturers. A Lagos-based newspaper printing company narrated its experience with its lenders when it opened LCs to enable it secure dollars to import raw materials.

    “I must confess to you that our experience has not been palatable at all over the past two years. Last year, after so many struggles, we were able to establish some LCs to bring in some of our raw materials. Subsequently, it has not been the same thing, because our attempt to get forex through more LCs after the March episode had not been possible,” an official of the newspaper’s told The Nation on condition of anonymity.

    The official explained that the company had approved Form ‘M’ with GT Bank for $70,000 to import printing ink from Europe. But the bank kept the naira equivalent for nine months without providing the dollar needed for the transaction.

     

    Failed transaction

    It said: “Our naira was with the bank, and was not yielding any interest for us. We could not touch the naira. By last December, we decided to withdraw the money after the transaction failed. The one we did in 2016 was through Sterling Bank, which was successful. It took us time to source the dollar, but it was eventually done at the rate of less than N200 to dollar in March last year.”

    Explaining the difficulties manufacturers had in sourcing dollar for imports, the introduction of flexible foreign exchange policy by the Central Bank of Nigeria (CBN) compounded the situation.

    With that policy in place, importers and manufacturers were sourcing dollars at the parallel market rates.

    The source went on: “But for a newspaper house, we cannot buy dollars at the parallel market rate because even when we buy at the official rate, the cost of producing a copy of any newspaper is higher than the cover price even when you get the dollar at the official rate, let alone when the dollar came from the parallel market. So, we deliberately refused to source for dollars from the parallel market. We relied on the banks,” he said.

    The firm’s worst experience came when it opened a $1.8 million (about N600 million) worth of LC with Zenith Bank.

    It said: “The raw materials we needed were newsprint, ink, and Chemistry, among others and were meant to last us for six months. But, we had only N420 million instead of N600 million and we advised the bank to do an LC worth N400 million and subsequently reduced our order for raw materials.

     

    At the mercy of banks

    “But when they converted the N400 million to dollars, it was of about $1.2 million at the rate of N320 even when the official rate was between N305 and N310 because we wanted the interbank bidding to be successful. Everything came to about N420 million, but the bank said we can only deal if we deposit 150 per cent of the $1.2 million in naira value.

    “The bank had already overstated even the rate, to avoid any fluctuation. That means that we were depositing N480 to every dollar, which was even far higher than the rate in the parallel market.

    At the end of the negotiations, the bank urged the company to deposit N680 million to cover the entire transactions, and it turned out a big frustration for the firm.

    “We refused to deal, because we did not have the fund. We explained to the bank that already gave room for rate fluctuations and there was no need to provide 150 per cent cover as being requested.

    The bankers went back and forth, consulting with their head office and directors. The transaction was finally approved and the bank accepted 100 per cent cover for the transaction after negotiations that lasted between four and six months.”

    It was learnt that the 150 per cent import cover has become an accepted practice in the industry. The Indians, it was learnt, are willing and ready to establish LCs at any condition set by the lenders, and this has affected genuine importers and manufacturers.

    The industry source said: “Besides, the interest rates we are paying in such facilities were very high. We were charged 28 per cent by Sterling Bank; GT Bank charged us 21 per cent.

    “We understand that First City Monument Bank (FCMB) is charging customers 30 per cent per annum and 150 per cent import cover. These are the predicament that manufacturers and importers are facing, which I want the CBN to look into. The banks also take several fees, such as LC establishment charge, management fees, and all sort of other charges.”

    The source said that establishing an LC should not take more than two weeks, but is extending to several months because of the stringent rules being set by commercial banks.

    It said: “The CBN is aware of the development. It should look at what is going on in the foreign operations unit of banks. If the dollar is there, one should be able to establish an LC within two weeks, if you submit your Proforma invoice, approved Form ‘M’ and other requirements. The approved Form ‘M’ is processed online, which is then followed with making the naira cover available.”

    According to the source, the ongoing delay in LC establishment, rising fees and extra naira cover are affecting the prices of goods and services.

    “All these push up cost of running businesses and products. There is price in-elasticity in the newspaper industry, because we cannot unilaterally raise the prices and so, the company is forced to absorb the extra costs”, the sourecsaid.

    Another manufacturer and Managing Director, Rockview Integrated Services Limited, Obinna Chizom, shared his own experience.

    Chizom said: “Our business started experiencing a slowdown after mid last year after we failed to secure the needed forex to import raw materials. We initially funded our account with the bank at 100 per cent but our account officer called after three months demanding that the bank’s new rules require we fund the account by 150 per cent. The worst was that the bank refused to lend us the 50 per cent extra cash. We ended up withdrawing the cash and our business is going down at present.”

    He said there was no possibility that the bank will refund any excess cash from the transaction if he succeeded in securing the extra 50 per cent.

     

    Push for real sector

    His words: “I want the CBN to look into the matter and call the banks to order. The CBN should remember that only the real sector that will bring in the desired changes we are all expecting to happen in the economy. When the banks work against the interest of manufacturers and importers, it is going to affect the economy.”

    A former Keystone Bank Executive Director, Richard Obire faulted the 150 per cent import cover by banks, describing it as illogical and capable of putting the companies at the receiving end of the transactions.

    He said: “That practice is wrong. The banks should charge the customer for the risk through a mutually beneficial rate and then move on to carry the risk of the transaction instead of shifting it to the customer.

    “In forwards forex contracts, the prices of the naira against dollar should be agreed with the customer and the dollar delivered to the customer at a future date without default.”

    The banks no longer show interest in taking any risks, yet they want to make huge profits, Obire said.

    He said: “The banks want to get both the funding and liquidity from the customer beyond what the customers can afford. I suspect that since the dollar liquidity is still low, many banks want to ration the available dollar by setting tough conditions that only a few manufacturers can meet. The extra 50 per cent cover is going to give the bank float, and enhance their profitability within the period of the transaction.”

    Obire urged the banks to go for pricing-based negotiation instead of asking for 150 per cent cover.

    “The banks should chose the rates that cover their risks instead of demanding for 150 per cent cover, because not all companies have the level of liquidity that can absorb such conditions,” he advised.

    The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, also kicked against the policy, describing it as unfair.

    “It is an unfair practice which should be discouraged. The extra 50 per cent cover is too high. Besides, many of the manufacturers might have borrowed the fund, and have to contend with high interest rate,” he said.

     

    Demand for low interest rate

    Some manufacturers have urged the CBN to initiate policies that would encourage lower interest rates and stimulate economic activities. The Monetary Policy Rate – the benchmark interest rate remains at 14 per cent since July 2016 and is unlikely to be reduced as the Monetary Policy Committee (MPC) meets today and tomorrow.

    The meeting is the committee’s second in the year and it is meant to review major global and domestic economic developments since its last meeting. The projection is that the MPC will retain the benchmark interest rate- Monetary Policy Rate (MPR) at 14 per cent, Cash Reserve Ratio (CRR) at 22.5 per cent and liquidity ratio at 30 per cent.

    The meeting will be coming on the back of a continuous decline in the nation’s domestic output, inflationary pressures, weak earning scorecards and forex market challenges, though some improvements seem to have been recorded in fiscal policy administration.

    Not a few local and multinational companies have said that a dollar shortage, driven by the oil price crash is forcing local suppliers to patronise black market for the dollar, thereby pushing up their operational cost of.

    The naira has been under pressure since the start of the oil price rout mid-2014 when crude oil prices dropped significantly.

    The South African retailer Truworths and many other multinational firms quit the country, citing import restrictions and the inability to access forex among the reasons for its decision. Unilever Nigeria and Guinness Nigeria have all complained about challenges of sourcing forex.

    But Head, Currencies Market at Ecobank Nigeria, Olakunle Ezun, said the practice was in order and that the banks were acting in good faith.

    He said that the 150 per cent import cover was adopted by banks to enable them hedge against rising currency risks.

    Ezun said: “There is this fear of devaluation, or the fear that the value of the naira might depreciate, so, a lot of banks want to hedge themselves against these risks. If a bank is opening an LC of about $30 million and asks the customer to fund the account by providing a more liquid naira.

    The bank might demand that the customer provide naira cover for $45 million. There is a buffer of $15 million above the rate. The major issue is just about the uncertainty or un-quantified risk that surrounds the naira value at present,” he said.

    Ezun explained that at the point of opening the LC, the naira may be N300 to dollar but by the time the LC was maturing, the naira could have depreciated to N350 to the dollar.

    He said: “At that point, it would be difficult to call the customer to come and top up their account to cover the gap in the LC. The bank may not even be able to see the customer again.

    “That is why the bank will from the start, ask the customer to provide a buffer, in case there is naira depreciation, the buffer would be able to cover for that depreciation.”

    Explaining further, he said that over time, banks have created unwanted loans for themselves. Bad loans in the local banking system soared to more than double the limit set by the CBN as the industry struggles with an economic downturn.

    The ratio of non-performing loans rose to 11.7 per cent at the end of June from 5.3 per cent at the end of 2015, the CBN, which requires banks to keep the measure below five per cent said.

    He said: “In most cases, when those depreciations happen, bad loans are created for the banks. In most cases, those customers may not come back to service the loans, and that will lead to rising bad loans.

    “The counterparty like the JP Morgan, HSBC, Citibank, among others are not seeing the customers, they are seeing the local bank. These local banks have learnt their lessons over time.

    “For me, I do not see issues in the banks asking for the 150 per cent buffer. What is important is the interbank funded forex forwards is secured. You are buying a 90-day forex from the CBN, and you are providing naira cover for it.

    “Nobody is sure what will happen to the naira in 90 days. If you are sure that in 90 days, the naira will be available at the right price, there would not be issue of asking for buffer. Even at the time you need to honour your obligation, dollar may not be available at the official rate at N305 to dollar. You may need to service your obligation at the parallel market,” he said.

    Ezun said banks have learnt their lessons in a very bad way.

    He went on: “Today, we are talking about rising bad loans many of them from the oil and gas sector. That is why at the end of the day, they want to hedge themselves against several risks.

    “The banks need to think ahead. The bad loans are dragging down banks’ profitability and must be stopped. The only way is to provide a buffer, to ensure that the customer is committed to that transaction. That way, he cannot walk away from it.

     

    Security for loans

    “The banks have learnt to pass the risks to the customer, rather than to themselves, so that there will be no need to create loans that the customers will walk away from. The customer will tell you they did not request for the loans, and are not obliged to pay. The 150 per cent started around last year when the naira outlook became uncertain.”

    Ezun said that if after the transaction, the extra 50 per cent was not used, the customer should be refunded.

    He said: “The transactions are open and transparent. There will be a contract letter that the customer will sign, which empowers the bank to act. It follows a willing buyer and willing seller model. The terms are open. There is no ambiguity from day one.

    “The banks would have told the customer that getting the dollar was not automatic, it would depend on the availability of dollar from the CBN. By funding the accounts shows seriousness on the part of the customer because many customers will open LCs in different banks and ask banks to bid on their behalf. But they have to fund the transactions upfront.

    “I am not sure any customer has the luxury and cash liquidity to play around several banks. So, dollar availability is based on supply from the CBN. Even the CBN will tell you that dollar supply is not sure. So, there is no need to make a commitment to the customer that supply is sure.

    “The 150 per cent cover is happening because there is low dollar supply. Even before now, banks used to run after customers to come and open LCs. But today, customers are begging banks to open LCs for them. In those days, when forex was everywhere, banks will market LC customers.”

    Explaining further, he said that banks will prefer to do LCs for customers that funded their accounts with their own cash, than for those borrowing from the banks to fund such LCs.

    “No bank today wants to grow its bad loans positions, because bad loans are weighing down on profitability. Shareholders want returns on their investments and the demand for 150 per cent cover will continue until when forex supply increases, and then no bank will have the gut to ask a customer to provide 150 per cent cover,” he said.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke, said that the CBN’s new forex directives to banks, to provide Personal Travel Allowances (PTA) and Business Travel Allowances (BTA) within 24 hours and medical and school fees within 48 hours to meet demand, has also eased some of the pressures in the parallel market with exchange rate appreciating 14.3 per cent since announcement.

    Chioke said in an emailed report: “Whilst we believe the successful implementation of the new forex directive has eased pressure in the parallel market, flexibility in pricing and allocation of forex at the interbank market remains a sine qua non to restore confidence in the system and reinstall a market framework that would lead to a gradual normalisation of rates and also attract the much needed foreign capital into the economy.”

    The CBN has consistently preached transparency in forex transactions handling. The apex bank renewed its commitment to continuously and to vigorously pursue a transparent, liquid and efficient forex market. It, therefore, foreclosed tolerating unscrupulous actions and that it would wield the big stick against erring offenders, be they banks, or their employees.

  • Association laments effect of FOREX scarcity on telecom sector

    The Association of Licensed Telecommunications Operators of Nigeria (ALTON) has lamented that the scarcity of FOREX is biting hard on the telecommunications sector.

    ALTON Chairman, Mr Gbenga Adebayo said on Monday in a statement in Lagos that the exemption of telecommunications from items to be accorded priority in the allocation of FOREX by the banks had adversely impacted on the industry.

    Adebayo said that the scarcity of FOREX had increased the operating cost of providing services in the industry.

    He said that in the absence of local substitutes for its plant and machinery, the service providers were constrained to source FOREX from interbank market at higher rates.

    According to him, the rates are higher compared to sectors like manufacturing, aviation and agriculture accorded priority in FOREX allocation at reduced rates by the Central Bank of Nigeria (CBN).

    “Owing to the prevailing economic situation in the country, ALTON members cannot transfer the increased cost burden to the consumers, thereby contracting profitability and ability to make further investment to drive growth in the industry,’’ Adebayo said.

     

    He said that the prevailing scarcity of FOREX had created unfavourable credit terms, making it very challenging for ALTON members to honour their obligations to foreign vendors as at when due.

    Adebayo said that this had occasioned delayed payment to equipment suppliers and other foreign vendors who had now resorted to imposing unfavourable payment terms on service providers in Nigeria.

    He said that some of the foreign vendors had issued `Notice of Disconnection of Service’ which could disrupt service availability with attendant impact on customers’ experience.

    “This further underscores the need for an urgent action to be taken toward addressing the lingering scarcity of FOREX facing the industry,’’ the chairman said.

    He said that the FOREX problem had led to delayed implementation of Network Enhancement and Improvement Initiatives.

    According to him, ALTON members made commitments intended to ensure the implementation of National Quality of Service (QoS) Fixing Project.

    Adebayo said that the project was a coordinated network investment plan supervised by the Nigerian Communications Commission (NCC) at designated locations nationwide over a period of time by the operators to ensure improved QoS.

    He said that the continuity of this initiative was dependent on obtaining FOREX to import equipment required to carry out the intended National QoS Fixing Project.

     

    According to him, if proactive measures are not taken to ensure easy access to FOREX, the project is likely to be adversely impacted, to the detriment of the citizenry and economy.

    He said that if the issue of FOREX scarcity was not addressed, it was bound to affect the National Broadband Plan.

    “The government in 2013 published a National Broadband Plan (2013 to 2018) intended to ensure the deployment of pervasive and ubiquitous broadband infrastructure nationwide.

    “The plan is to facilitate the realisation of a fivefold increase in broadband penetration from six per cent as at 2012 to 30 per cent by 2018.

    “On this note, the commission divided the country into seven zones and has licensed two Infrastructure Companies (InfraCos) for Lagos and North Central Zones to deploy metro fibre optic network.

    “The commission recently published a notice on the commencement of the process for the licensing of remaining five InfraCos on Open Access Model for the deployment of optic fibre infrastructure broadband network in the other zones.

    “The zones are the North East, North West, South South, South East and the South West of the country,’’ the ALTON chairman said.

    According to him, it appears that the prevailing scarcity of FOREX has adversely impacted the deployment of metro fibre network, as the earlier licensed InfraCos are yet to make significant progress in their respective licensed locations.

    He said that there was the need for strategic support to service providers by ensuring easy access to FOREX to import required equipment and undertake the pending projects.

    Adebayo said that the support would ensure that operators fulfilled outstanding obligations to foreign vendors without further delay for the continued growth and development of the industry.

  • Banks seek buyers as CBN floods market with forex

    Banks seek buyers as CBN floods market with forex

    Banks  are awash with dollars, as the Central Bank of Nigeria (CBN) continues to support the naira.

    The banks have cleared the backlog of requests for foreign currencies for basic travel allowance, school fees and medicals.

    A banker told NAN that his bank had so much dollars that its marketers were asked to encourage customers to request for the greenback.

    The source said that the bank wanted to avoid a situation where it would be forced to return excess Forex to the CBN.

    Doing so would force the CBN to reduce the quantity of Forex sold to the bank.

    Another source from First Bank said following the CBN intervention, the bank had succeeded in clearing all pending requests for Forex as far back as September, 2016.

    Also, a source in Guaranty Trust Bank commended the decision of the CBN to flood the market with Forex, thereby allowing the banks to meet legitimate requests from its customers.

    It was also gathered from Heritage Bank that prior to now, the bank published the names of individuals and companies it disbursed forex to in a page of any particular newspaper.

    “Right now, we take two or three pages in the newspaper to publish names of legitimate individuals and companies that we disbursed forex to.

    “We have more than enough foreign exchange to meet the request of our customers for school fees and others,” NAN was told.

    In a data released by the CBN, the apex bank, within three weeks, injected more than 1.4 billion dollars for both wholesale and retail intervention into the interbank Forex market.

    Mr Ayo Teriba, Chief Executive Officer, Economic Associates, is optimistic that the CBN would be able to sustain its intervention on the forex market.

    Teriba told the NAN that increase in oil production and high oil prices had increased the foreign reserve base of the country.

    “We are back to a situation where the forex at the disposal of the CBN is likely to go up.

    “The CBN could not intervene in the forex market in 2016 because of low oil production, prices and because foreign reserves were also low.

    “Today, oil price is up, reserves have also gone up, the outlook of the oil prices is stable and production in Nigeria is going back to capacity; so it has the capacity to intervene.

    “In a couple of months, the apex bank should be able to meet all of the demands and all the multiple exchange rates will converge.”

  • Forex: Banks seek buyers as CBN continues to flood market

    Forex: Banks seek buyers as CBN continues to flood market

    The new strategy of the Central Bank of Nigeria (CBN) to meet all legal demand for foreign exchange (Forex) has led Money Deposit Banks to contend with expending all the dollars in their possession.

    A check by the News Agency of Nigeria (NAN) in Abuja showed that the banks had cleared all backlog of demands for foreign currencies for basic travel allowance, school fees and medicals.

    A source in the United Bank for Africa, told NAN that UBA had so much dollars that the bank’s marketers had been asked to encourage customers to request for foreign currencies.

    The source said that the bank wanted to avoid a situation where it was forced to return excess Forex to the CBN.

    It explained that doing so would force the CBN to reduce the quantity of Forex it sold to banks.

    Another source from First Bank said following the CBN intervention, the bank had succeeded in clearing all pending requests for Forex as far back as September, 2016.

    Also, a source in Guaranty Trust Bank commended the decision of the CBN to flood the market with Forex, thereby allowing the banks to meet legitimate demands from its customers.

    It was also gathered from Heritage Bank that prior to now, the bank published the names of individuals and companies it disbursed Forex to in a page of any particular newspaper.

    “Right now, we take two or three pages in the newspaper to publish names of legitimate individuals and companies that we disbursed Forex to.

    “We have more than enough foreign exchange to meet the request of our customers for school fees and others,” s0NAN was told.

    In a data released by the CBN, the apex bank, within three weeks, injected more than 1.4 billion dollars for both wholesale and retail intervention into the interbank Forex market. (NAN)

  • Nigerian banks’ credit report poorest worldwide

    Nigerian banks’ credit report poorest worldwide

    The entire 22 deposit money banks in the country process a paltry 1, 500 credit report on a daily basis, The Nation has learnt.

    Making this disclosure recently was Mr. Miguel Llenas, who sits atop Dun and Bradstreet Credit Bureau Limited, a world acclaimed credit reporting agency with headquarters at the Dominican Republic.

    Mr. Llenas, who was the lead speaker at a public forum organised by CRC Credit Bureau Limited in Lagos, noted that most banks in the country today were technically in distress because they chose to jettison core banking regulations.

    Specifically, he said most businesses in the country were experiencing stagnant growth because they lacked access to finance from banks, who favour conglomerates and corporates with better loan facilities at the detriment of hundreds of businesses that can actually drive the economy.

    “South Africa records over 60, 000 credit report on a daily basis alone. Argentina does about 160, 000. Sri Lanka does over 25, 000, Egypt processes over 50, 000, Dominican Republic does 40, 000. But sadly, Nigeria with a population of over 170million people process a ridiculous 1, 500 credit report. This may account for the slow economic growth witnessed across the sectors,” he said.

    “Most Nigerian banks are not involved in serious lending, especially to the retail market,” he said.

    Raising some posers, Llenas, who boost of over three decades experience as a credit expert said: “Do banks really need a credit bureau? How do you extend credit to customers if you don’t use credit report?”

    Most of the banks in the country today, he insisted, “Have swift from lending to survival mode. Most of the banks are risk averse. This is partly why the economy is not moving forward.”

    According to him, Nigeria with 22 banks only process just about 1, 500 credit reports, which are prerequisite to loan requests.

    Most deposit money banks in the country today are still smarting from the losses incurred over the years as a result of toxic debts.

    Llenas who leads the over 170 year old credit bureau firm, said Nigeria’s credit reporting was very poor for a size of the country when compared to countries within Africa and globally.

    Speaking further, Llenas, who has traverse over 40 countries as part of his commitment to help grow the capacity of credit bureaus, stressed that Nigerian banks have the potential to drive the economy by lending to the critical sectors, especially the retail market rather than the high end market in order to enable them better manage risks when they occur.

    “With credit monitoring, and a credit score, banks and lenders alike can easily predict the future. The use of credit report has to be a powerful tool if well harnessed,” he maintained.

    Speaking earlier, Tunde Popoola, Managing Director/CEO, CRC Credit Bureau Limited, observed that most of the banks were exposed to a lot of risks, especially oil and gas, whose revenue projections have been badly affected by the economic crunch.

    According to him, the challenges confronting most of the banks is how to reduce their risk portfolio given the bad debts they incurred these past years, especially at a time they are have more risk assets.

    Thankfully, he said, the CRC Credit Bureau has been able to develop fool-proof measures that can help the banks contain the incidence of bad debts.

    At the risk of sounding immodest, Popoola said what banks need to do to reduce the incidence of bad debts is to be more circumspect in the way they spread risks.

    “Most of the toxic debts within the banking sector happened because they were done without proper due diligence analysis as it were. But that can be taken care of with our products and services like I-CON Plus, which can help to build a good credit industry.”

    Echoing similar sentiment, Mrs. Peggy Chukwuma-Nwosu, Haed of Sales and Marketing at CRC Credit Bureau Limited, who gave a presentation on CRC Credit Monitors: Useful Tools to better manage Customer Loans, disclosed that the different products developed by her organisation rsets on the wing of technology.

    Specifically, she said, the CRC Prospector, which is one of her company’s offerings, “Provides alternative contact information of customers you can no longer reach.”

  • Etisalat in talks with banks over $1b loan

    Etisalat in talks with banks over $1b loan

    Global Systems Mobile Communication (GSM) service provider Etisalat is locked in discussions with its creditors who are battling to recover a $1billion loan.

    In the talks are three banks – Zenith Bank, Access Bank and Guaranty Trust Bank—which advanced the telco the loan about two years ago.

    A large portion of the loan, which  was meant to expand the telco’s network, is unpaid. The banks are threatening to invoke a segment of the loan agreement, which allows the creditors to assume the management of the company.

    The Nation had reported exclusively on Tuesday that creditors were contemplating assuming ownership of the GSM operator.

    Following the report and the unfolding events, a segment of the media reported, albeit falsely, that the telco had been taken over by the banks. However, Etisalat, the sector’s regulator, the Nigerian Communications Commission (NCC) and  the Association of Telecoms Companies of Nigeria (ATCON), the  umbrella body of all the practitioners in the information communications technology (ICT) industry, said there was no truth in the news that Etisalat had been acquired by the banks.

    A source at Access Bank told The Nation that there was nothing to suggest that the bank had taken any steps to acquire Etisalat. There were no comments from Zenith Bank and Guaranty Trust Bank (GTB). An expected feedback from GTB to an email request on the issue had not come as at the time of filing this report.

    However, NCC   said it had requested Etisalat to  furnish it with details of the issues, assuring that there was no cause for alarm. Its Director of Public Affairs, Tony Ojobo, said the regulator will advice based on the facts made available to it by Etisalat.

    He said the insinuation that the Commission had given its blessing for the alleged takeover of Etisalat was far from the truth.

    Ojobo said:  “We have requested Etisalat to write a formal letter to the Commission detailing what transpired. It is based on this that the Commission will take whatever decision that would be deemed necessary. But let me assure you that there is no cause for alarm. All the issues will be resolved amicably for the good of the telecoms industry and the country.”

    ATCON urged the Federal Government to save the telecoms industry from collapse by easing access to foreign exchange to carriers.

    ATCON’s President Olushola Teniola said the report that Etisalat had been taken over by lenders was incorrect.  He said the telco failed to meet its repayment obligation because of the current economic downturn.

    Said Teniola: “The situation is that Etisalat owes some interest rate payments which have not been met, so, that means that they have basically not met their obligations. They are currently negotiating with the said banks to come to a conclusive resolution.

    “The reason why this has happened is that at the time Etisalat took this facility two years ago, the naira was very favourable to the dollar and the size of this loan is quite huge, it is above  $1billion.

    “So, the problem that has happened since they took the facility to expand the network, the dollar exchange rate to naira has gone in the opposite direction. At the point when they took it, naira was 160/dollar.  Now the dollar is 450 at the black market. So, you can see that it doesn’t matter what amount of planning you do, it’s going to be very difficult to continue to sustain the payment on the initial loan that was taken, and because of this, it is causing Etisalat some difficulties to meet its obligations. I am sure that the management is doing everything possible to bring about an amicable settlement with the lenders.

    Teniola urged the Federal Government “to step in now to ensure that any telecoms equipment; any telecoms development; be it for broadband, be it for quality of service, be it for the capacity upgrade of the network, that the sourcing of infrastructure to achieve this should be done at a reasonable dollar to naira rate, so as to be able to sustain the industry. Otherwise, we will have what we call a ripple effect in this market, and we should not allow that to happen. The example that Etisalat is demonstrating to us that it is coming to a head, and I am confident that the management of Etisalat will resolve the problem”.

    A spokesperson of the telco, Seyi Osuntedo, said talks were going on with the banks, adding that the management of the telco was intact.

    Part of the options being explored by the parties, it was gathered, is for Etisalat to inject equity since the telco missed its payment schedule for February. The banks have asked the Abu Dhabi-listed telecom group to inject fresh equity into Etisalat Nigeria after the affiliate missed a payment on its $1.2 billion loan, a senior banking source told Reuters.

    The banking source with knowledge of the matter said Etisalat Nigeria had given notice to lenders that it would miss a February payment which triggered a debt discussion, adding that they were yet to agree on terms.

    The source said lenders had asked Etisalat Nigeria to convert shareholder loans in its books into equity and inject fresh capital to free up its cash flow, in addition to asking that its parent firm should increase its 40 per cent stake in the affiliate.

    It was learnt that since the story broke, the directors and management of Etisalat have intensified efforts, including reaching out to the sector’s regulator, the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) to prevail on the creditor banks to afford them more time to resolve the financial imbroglio, a plea that a source at NCC said, was yet to be considered by the banks.

    “The banks appear not to be favourably disposed to the company on this score at the moment,” the source said,

    An NCC  official said it was keen on preserving the status quo by keeping Etisalat in the business so as to provide subscribers with enough choice. It will serve no one any good to allow any of the GSM providers to be eased out of operation, he said. The official confirmed that senior officials of NCC accompanied the management of Etisalat to the meeting the telco had with the Central Bank of Nigeria (CBN) in a bid to resolve the crisis.

    While efforts to bring succour the way of Etisalat are ongoing, one of the leading GSM providers is already lurking in the wind to acquire the troubled entity. The competitor, The Nation learnt, is scheming to buy off Etisalat and add its about 21million subscribers to its existing customer base, making it the dominant player in the sector, should the deal sail through.

  • Banks get 24hrs for BTA, PTA requests

    Banks get 24hrs for BTA, PTA requests

    Banks have up to 24 hours to meet all foreign exchange requests for Personal Travel Allowances (PTA) and Business Travel Allowances (BTA), the Central Bank of Nigeria (CBN) has directed.

    The maximum volume of BTA approved for sale per customer is $5,000 quarterly. A PTA customer gets $4,000.

    The CBN also announced at the weekend a 48 hours timeline for banks to meet all foreign exchange requests for school fees (including allowances) and medical bills applications. The regulator expects such retail transactions to be settled at a rate not exceeding 20 per cent above the interbank market rate or at N375 to the dollar.

    A circular to all authorised dealers signed by CBN Director, Financial Markets Department, Alvan Ikoku, said the new timeline was meant to increase foreign exchange liquidity in the market, and ensure availability to end-users.

    The CBN also directed commercial banks to open teller points in all locations to ensure access to foreign exchange by their customers.

    The banks were warned that non-compliance with the directives would attract sanctions, including but not limited to being barred from all CBN foreign exchange interventions.

    According to the circular, lenders are also expected to have electronic display boards in all their branches showing rates of all traded currencies.

    “Banks are hereby directed to process and meet the demand for Personal Travel Allowances and Business Travel Allowances customers within 24 hours of such applications. They are to equally process and meet the demands for school fees (including allowances) and medical bills within 48 hours of such applications,” the circular said.

    The CBN has been implementing a new foreign exchange policy, which makes greater provisions for commercial banks to get more dollars to fund forex users at the retail end of the market. The apex bank has subsequently increased its level of interventions in the interbank market where it constantly injects dollars to raise market liquidity and stabilise the naira.

    “Having cleared the historic backlog of matured letters of credit at the inception of the current flexible exchange rate system, the CBN would immediately begin to provide foreign exchange to all commercial banks to meet the needs of both PTA and BTA for onward sale to customers. All banks would receive amounts commensurate with their demand per week, which would be sold to customers who meet usual basic documentary requirements,” the CBN said.

    The CBN had earlier promised to meet the needs of parents, guardians and sponsors for school fees. Such payments must be made by commercial banks directly to the institution specified by the customer.

    The apex bank also promised to ensure that this process is as smooth as possible and that as many customers as possible get the foreign exchange they genuinely demand.

    The new foreign exchange rules will also apply to customers seeking to make payments or purchase foreign exchange for medical bills and paid directly to hospitals. The supply of foreign exchange to retail end-users will be sustained by the CBN.

    The CBN’s objective is to continuously and vigorously pursue a transparent, liquid and efficient foreign exchange market. The regulator said it would neither tolerate unscrupulous actions nor hesitate to impose sanctions on offenders, be they banks or their staff.

    The CBN urged market participants to assist in ensuring that these new measures engender the preservation of our external reserves, stability of the financial system, and growth of the economy to the benefit of all Nigerians.

  • 16 banks fund $220m with N72b at Forex forwards

    16 banks fund $220m with N72b at Forex forwards

    With N72 billion, 16 banks funded $220 million Central Bank of Nigeria (CBN) allocations under the Forex Forwards policy meant to stabilise the naira, it was learnt yesterday.

    Banks are calling for bids from retail end-users in preparation for the business travel allowances, school fees and medical bills auction. The CBN is expected to from tomorrow begin releasing weekly forex cash (every Tuesday) to commercial and merchant banks to meet needs at retail end of the market.

    The lenders are informing customers interested in buying Personal and Business Travel Allowances, and paying school fees and medical bills about requirements for getting forex.

    A CBN Financial Markets Department report released yesterday showed that 10 banks, which could not be identified as at press time, with N54 billion funded $162 million Forex Forwards for 30-day tenor maturing March 27. The wholesale intervention rate was between N330 and N335 to the dollar.

    Six banks, also unnamed, funded $58.52 million Forex Forwards for 60-day tenor, maturing April 25 with N18.6 billion. The wholesale intervention rate was between N315 and N320 to the dollar.

    The intervention, the CBN said, was meant to deepen dollar liquidity in commercial banks, sustain efforts to strengthen the naira against the dollar and ensure that forex is available to genuine users.

    Specifically, the drastic fall in the price of crude oil, which constitutes the largest component of Nigeria’s forex reserves, has cut dollar earnings from about $3.2 billion monthly to about $1 billion. This has negatively impacted on the value of the naira.

    Some of the measures put in place by the CBN to end the crisis include the first Naira-Settled Over-the-Counter (OTC) Forex Futures Market (FFM) launched on June 27, 2016 with FMDQ OTC Securities Exchange.

    Also, last week’s announcement by the CBN making more dollars available to commercial banks to fund Personal and Business Travel Allowances as well as settle medical bills and school fees forex users was also meant to strengthen the naira.

    The Naira-Settled OTC Forex Futures are non-deliverable forwards or a contract where parties agree on an exchange rate for a pre-determined date in the future, without the obligation to deliver the underlying dollar on the maturity/settlement date.

    On the maturity date, it will be assumed that both parties would have transacted at the spot forex market rate. The OTC Forex Futures contract is an effective exchange rate management tool supported by a transparent price driven by a two-way quote market. The contracts assist the CBN in managing the volatility in the spot forex market, thereby promoting stability and entrenching market confidence.

    A report by Afrinvest West Africa Limited, an investment and research firm, said the naira shed 46.5 per cent and 66.3 per cent in the interbank and parallel markets between June 2014 and January 2017. The spread between the two rates reached an all-time high of N215.00 last week.

    “However, the political and economic implications of the forex shortages motivated the directive issued by the National Economic Council to the CBN last week for a more flexible forex market structure and closure of the gap between interbank and parallel market rates. In light of this, the CBN issued a new policy action on the 21st February, 2017, which is expected to increase forex allocations to retail end users while reducing the demand pressures in the parallel market,” it said.

    The success of the CBN’s aggressive intervention and moderation in demand in the unofficial market led the naira to post its biggest one-week rally of 13 per cent in more than three years in the parallel market, appreciating from a trough of N520 to dollar to a three-month high of N460 to dollar as speculators with short naira positions sold off.

    “Personal and business travel allowances, school fees and medical fees have been estimated to account for less than 20 per cent of total forex demand in the country, hence there is still a large volume of demand  that could pressure rate at the parallel market. While we believe the successful implementation of the new FX directive would ease pressure in the parallel market, flexibility in pricing and allocation in the interbank market remains a necessity to restore confidence in the system,” the firm said.