The Nation Newspaper

Tag: Banks

  • Banks shun energy financing over N3tr exposure

    Deposit Money Banks’ (DMBs) commitment of over- N3trillion in the energy sub-sector is discouraging the financial institutions from further financing of energy and power projects, The Nation has learnt

    Energy Market and Rates Consultants  Country Director, Mrs. Rahila Thomas, said this while enumerating the challenges confronting the power sector in Lagos, adding that, the huge exposure of banks to the power sector has made it difficult for operators to access funds.

    She said revenues generated from the sector were substantially lower than expected as a result of factors such as inbuilt deficit in revenue due to tariff sculpting, low generation, low revenue collection due to unwillingness of power consumers to pay, high differential in exchange rate now compared to when the sector was privatised, and gas supply deficit, among others. These factors, Thomas said are responsible for the liquidity crisis confronting the power sector.

    She noted that the sculpting of tariff under the multi-year tariff order (MYTO) methodology requires the distribution companies (DisCos) to operate in such a way to enable them recover their losses in future years, adding that with the overstretch space for recovery, customers don’t pay for consumption.

    On low generation, she noted that the performance agreement the investors signed with government on takeover of the power firms, and with which they went to bank to seek loans, was that power generation would be increased to between 5,000megawatts (Mw) and 7,500Mw by last year, but average generation has remained at 3,000Mw.

    She said at the time of takeover, exchange rate was N197 to a dollar but today it is over N350. Therefore, the cost of buying equipment and gas to power the plants have increased while price of power has not changed appropriately.

    She said all the agreements the investors entered with the government on handover of the power firms, the government has not fulfilled any, adding that the companies have been operating at a loss for the past two and half years.

    Thomas also said if the government had fulfilled its own part of the agreement, the generation plants have over 10,000Mw output capacity.

    According to her, the privatised power stations (successor companies) have capacity to generate 5,155Mw, while the power plants built under the National Integrated Power Project (NIPP) can generate 3,926Mw, and on-grid independent power plants (IPPs) such as Ibom Power, AES, Agip’s Okpai power plant and Shell’s Afam V1 can generate 1248Mw. There is also 244Mw capacity from off-grid IPPs such as Rivers Trans Amadi and Aba Power, power plants that can generate 1,635Mw are in the works, she added.

  • Banks not co-operating with CBN on forex, says MAN

    Banks not co-operating with CBN on forex, says MAN

    Banks are not co-operating with the Central Bank of Nigeria (CBN) on forex policy, Manufacturing Association of Nigeria (MAN) President Dr. Frank Udemba Jacobs has said.

    Dr Jacobs said the CBN was sensitive to the plight of the manufacturing sector, but it was unfortunate the apex bank’s good intention were being frustrated by those who didn’t share the same passion for manufacturers, in particular, or the nation.

    He cited the CBN’s directive to banks to allocate 60 per cent of available forex to manufacturers for the importation of raw materials and spare parts, which the banks had not implemented.

    He told The Nation that the CBN also released about $414 million  recently, with provisions for another $500 million for allocation to manufacturing and other critical sectors, but regretted that banks were not co-operating, thereby frustrating a critical policy.

    Jacobs debunked the allegation that the CBN ‘settled the manufacturing sector with $330 million, saying the CBN announced the release of $314 million but he did not know who benefitted from it.

    Acknowledging that manufacturing was the worst hit by forex scarcity, Jacobs said the case of those included in the list of items excluded from the inter-bank forex was more worrisome.

    But manufacturers and the Organised Private Sector (OPS) had argued that the CBN should not have excluded  the 41 items as some  things in the list were actually raw materials and input for industries.

    On the embedded power supply proposed  by manufacturers  to save their businesses, he said the project was ongoing as planned.

    “We have made remarkable progress in this direction by receiving bids from power companies, and have carried out tariff evaluation following the opening of the bids from which we have shortlisted three companies that we’ve adjudged to be competent. We have also selected four clusters for the pilot project. They are Henry Carr Street, Isolo, Amuwo Odofin and Ilupeju. As I said, these are tentative arrangements which have not been finalised. It must be said that we have not started actual operations yet.”

    On the implication of the planned relocation of a major tomato paste manufacturer, Erisco Foods Nig. Limited to China and some other African countries, the MAN boss said the issue of closure and planned relocation was for the company alone to decide.

    He said the decision of the company to shut its operations in Nigeria would have serious implication for the economy in terms of further job losses at a time that the unemployment rate was soaring.

    He said the planned closure would send wrong signals to potential investors, adding that the action would lead to loss of revenue.

  • Banks set limits on PoS, online transactions abroad

    Banks set limits on PoS, online transactions abroad

    Banks have set limits on overseas Point of Sale (PoS) and online card transactions, The Nation has learnt.

    Many of the lenders, which are battling a tough dollar scarcity, have pegged monthly transactions on PoS and online transactions using cards at $100, British Pounds Sterling 90, Euro 130 and Canadian Dollars 360.

    The ban on cash withdrawals with Automated Teller Machine (ATM) cards while abroad still stands. Travellers are now finding it difficult to pay their hotel bills, make reservations and other transactions using their debit cards after the policy took effect.

    Industry sources said had the lenders not restricted the use of ATM cards abroad, some of them would have been facing hitches meeting the dollar demands of their overseas’ customers. Such would have exposed the lenders to huge liabilities’ shocks and operational challenges as dollar scarcity persists.

    Stanbic IBTC Bank, United Bank for Africa, Access Bank, Stanbic IBTC Bank, Standard Chartered Bank Nigeria (StanChart) and GTBank last week announced the suspension of their overseas ATM card services. Also suspended by the banks were all foreign currency-denominated transactions, including those conducted on PoS machines and online.

    But in a move to ease the pains of customers, some of the lenders are now allowing transactions on PoS and online deals, under a marginally set limit.

    In an emailed note to customers, GTBank said it had reviewed international spending limit on ATM cards downwards but restricted such transactions to cards used on PoS and online transactions.

    As a way out of the crisis, banks are now encouraging travellers to open dollar accounts, which have no spending limit. Such cards are issued by the banks on domiciliary accounts funded directly by customers, but the ongoing dollar scarcity and pains of sourcing the greenback makes funding such accounts a herculean task and at cut-throat rates.

    The naira closed last week at 310 to dollar in the official market and 450 to dollar in the parallel market.

    Chief Economist at Renaissance Capital (RenCap) Charles Robertson, predicted that the naira would end the year at N390 to dollar in the official market, even though it has become undervalued, according to the Forex rate implied by this economist’s 13-year average real effective exchange rate (REER) of N286/ to dollar.

    RenCap is a leading frontier market research and investment firm, based in many countries, including Nigeria.

    “We expect the interbank forex rate to fall further, despite the naira being undervalued, partly due to low market confidence. The widening gap between the parallel forex rate of N450 to dollar and the interbank rate of N310 to dollar implies the market thinks the interbank rate should be lower. However, we do not think the ‘market-clearing rate’ is as low as the parallel rate suggests, because that market is illiquid,” he said.

    “Moreover, the improvement in the current account (CA) to a surplus of 0.3 per cent of Gross Domestic Product (GDP) in June this year against a deficit of 1.6 per cent in June last year, on our estimates, suggests the fall in the parallel forex rate may be overdone. We see the authorities succumbing to mounting pressure – possibly as soon as the November 22 meeting of the Monetary Policy Committee (MPC) – and moving towards a transparent, liquidity-enhancing forex market. Until then, we expect the policy rate to be flat at 14 per cent,” Robertson said in an emailed report.

    Naira forwards have soared to records, suggesting foreign investors see another devaluation coming. Contracts maturing in six months trade at N384 per dollar, their highest-ever level. Those due in a year have climbed to N422 from N325 since the end of June. The naira’s spot price climbed 1.7 per cent to about N310 to dollar.

    The Central Bank of Nigeria (CBN) started tightening capital controls in late 2014 to defend the naira as crashing crude prices crimped export revenues. It then imposed a 16-month peg of N197 to N199 per dollar from February 2015 until June 20 when the flexible foreign exchange policy was unveiled to allow naira float freely in the market.

  • Banks not distressed

    Banks not distressed

    •CBN’s defence of the sector is good, but eternal vigilance is better

    EXPECTEDLY, the Central Bank of Nigeria (CBN) rose in stout denial of the claim by the Dubai-based Arqaam Capital, published by Bloomberg, that some Nigerian banks were experiencing “full-blown financial crisis” arising from “failed fiscal and monetary policies”. The report, credited to two analysts from the brokerage and investment bank, had noted that two lenders were close to being insolvent while two would need a dilutive capital hike.

    “Capital ratios”, they observed, “were set to worsen because of currency depreciation and soaring loans”; they identified the devaluation of the naira and rising bad loans among the factors that the banks are currently grappling with.  The test conducted by the analysts is said to have revealed seven under-capitalised banks with a deficit of $3.2 billion. Not all, “a stress test identified one of the tier-1 banks as the most under-capitalised lender while others were showing deficits if they were to fully provide for non-performing loans”.

    Dismissing the report last week, CBN’s Director of Banking Supervision, Tokunbo Martins, insisted that Nigerian banks have very strong capital buffers to weather the country’s economic crisis. Her words: “I can tell you that the report is false. The banks are adequately capitalised, so the report is not true. That does not mean that the banking sector is not feeling the economic headwinds. The headwinds are also in every other jurisdiction. It is not strange. So, non-performing loans at 11.7 per cent is not what we should focus on”.

    Much as we understand the responsibility of the apex bank, as the guarantor of financial system stability, to seek to calm the nerves of the operators, particularly at a time like this, we would advise that eternal vigilance be its watchword. For, contrary to the picture of calm being sold by the apex bank, a number of the findings in its latest Financial System Stability Report would appear to attest to the validity of the report, hence the need for tough, proactive measures.

    Top among this is the dramatic rise in Non-Performing Loans (NPLs) from N649.63 billion, representing 5.9 per cent at end-December 2015 to N1.679 trillion or 30.9 per cent by the end of June – a leap of some 158 per cent.  Second is the increasing vulnerability of the medium and small banks. As against the finding that large banks which the report found to be “resilient to credit risk and would be able to sustain an impact of the most severe shock of a 200 per cent rise in NPLs”, the report would equally note that “medium and small bank groups, showed vulnerability to the most severe shock of 200 per cent rise in NPLs”.

    The third is the decline in asset quality – measured in terms of the ratio of non-performing loans to gross loans – said to have “weakened in the first half of 2016, deteriorating by 6.4 percentage points to 11.7 per cent at end-June”.

    None, however, could be as troubling as the finding that some 50 customers owe 33.4 per cent of commercial banks’ entire private sector credit. Says the report: “The  total  exposure  to  the  top  50  obligors  stood  at N5.23tn  (33.4 per cent)  of  total  industry  credit exposure of N15.68tn. In a country said to have some 21 million bank customers, the development not only exposes the farce about the oft-touted claims about financial inclusion, that bank credits in particular, have remained the preserve of the well-connected, a segment that has proven time and time again to be delinquent borrowers. This would obviously explain why the financial system has remained fragile.

    Taken together, the reports are meant to be a wake-up call for tough regulatory actions, not just to avert a looming systemic crisis but to ensure a deepening of the industry.

     

  • Banks in credit crisis, says report

    Banks in credit crisis, says report

    •CBN: no bank in distress

    Some banks may have been experiencing a “full-blown financial crisis” due to a cash crunch arising from “failed fiscal and monetary policies”, according to a report.

    But the Arqaam Capital report published yesterday by Bloomberg is in conflict with a Central Bank of Nigeria (CBN) statement which last month gave all the 22 commercial banks a clean bill of health.

    Arqaam Capital is a specialist emerging markets investment bank bringing regional and international product offerings to the emerging markets.  The company, which is based in Dubai, United Arab Emirates, provides in-depth research on more than 280 listed Middle East and Africa (MEA) companies across 26 countries and 15 sectors, including the largest global coverage of Middle East and North Africa (MENA) equities.

    Its primary role is to provide financial intermediation and create investment opportunities for emerging markets investors looking to invest in their own markets and abroad as well as international investors seeking opportunities in target emerging markets.

    CBN Spokesman Isaac Okorafor could not be reached for comments last night. He is away in Washington, United States for the World Bank/IMF meetings. He had last month cautioned against “rumours”.

    “No bank in the industry is in distress. Therefore, the CBN would like to request the general public to ignore speculations or rumours to the contrary as they could only be the handiwork of mischief makers who do not mean well for the Nigerian banking system and its economy,” he said.

    Okorafor explained that as the regulator of the industry, the CBN reassured the banking and general public that their deposits remained safe in any Nigerian bank and that there was, therefore, no need for panic withdrawals from any bank.

    He said by both the CBN’s examination reports and analysis from market watchers, International Credit Rating Agencies and Development Finance Institutions, the industry remained strong in spite of the global economic challenges emanating from the collapse of global commodity prices.

    “We therefore urge the banking public to remain calm and go about their normal businesses without panic. It is important that we do not create problems when none exists,” he said.

    Jaap Meijer and Tarek Sleiman, analysts at the Dubai-based investment bank and brokerage, told Bloomberg that two lenders were close to being insolvent; two would need a dilutive capital hike.

    The report said capital ratios were set to worsen because of currency depreciation and soaring loans.

    It added that Nigerian banks were grappling with devaluation of the naira, rising bad loans and an oil-dependent economy that’s set to record its first annual contraction in more than two decades.

    “Our acid test reveals seven under-capitalised banks” with a deficit of as much as N1 trillion ($3.2 billion) in the financial system, Meijer and Sleiman said. A stress test identified one of the tier-1 banks as the most under-capitalised lender while others were showing deficits if they were to fully provide for non-performing loans, according to Arqaam.

    Moody’s Investors Service said yesterday that Nigeria’s five biggest banks shared common credit challenges related to the economic slowdown. Moody’s expects non-performing loans to increase to about 12 per cent over the next 12 months. The ratio of non-performing loans to total credit rose to 11.7 per cent at the end of June from 5.3 per cent at the end of 2015.  The CBN requires banks to keep the measure below five per cent.

    The five largest lenders, which together hold 57 per cent of the country’s banking assets, “are able to absorb all losses under our severe stress scenario,” Moody’s said.

    It listed Guaranty Trust Bank Plc as showing “the greatest resilience”. The other four largest lenders are:  Zenith Bank Plc, Access Bank Plc, United Bank for Africa Plc and First Bank of Nigeria Ltd.

     

  • Rohr banks on Iwobi to destroy Zambia

    Rohr banks on Iwobi to destroy Zambia

    • Says Arsenal star will solve goal scoring problem
    • We have Zambia’s video —Rohr
    • Expects changes in strategy from new Coach

    Super Eagles’ Technical Adviser, Gernot Rohr has tipped Arsenal forward Alex Iwobi to help his team score goals when the Nigerian team confronts the Chipolopolo of Zambia in a crucial 2018 World Cup qualifier in Ndola on Sunday.

    The Franco German Coach was excited with the presence of the Arsenal rising star and he did not hide his belief that Iwobi could help unlock the defense of the Zambians to score the needed goal(s) on Sunday. Rohr told the media representatives that covered his first media parley in Abuja yesterday at the team’s Bolton White Apartment Camp.

    “(Alex )Iwobi was injured the last time he was invited to play for Nigeria against Tanzania. He is here now and everybody knows that he is a good player. I hope his integration in the team will make our first team strong enough in Ndola.

    “We cannot change much tactically because the time is short (to do that now). I count a lot on him (Iwobi) that he can help us to win the game.

    “We must have a good striker and a good attack; we must have a good and quality playing game and we must have players who can score.

    “We don’t want the problem that we encountered in Uyo to repeat itself in Ndola. In Uyo (against Tanzania) we had 27 shot on goal but scored only one goal. It was a problem”, Rohr disclosed.

    Super Eagles Technical Adviser, Gernot Rohr has allayed fears over the invisibility of the Chipolopolo of Zambia at home boasting that he knows the strength and the weaknesses of the host team.

    Nigeria will slug it out with Zambia on Sunday in a fierce battle for the only ticket for the 2018 World Cup which also comprise of other top African teams Algeria and Cameroun. Rohr is not afraid of winning his first world cup qualifier  away from home.

    “We have the video of the last five games of the Zambian team. We are also aware of the fact that they have changed their coach so it can be a bit different (in technic and style) but I think the Coach will present the same players against us in Ndola.

    “We know them (Zambians) very well. We have watched their video clips of their last five games together two days ago (Wednesday) and yesterday (Thursday) too. We know much about the team. What we don’t know is the strategy the new coach will employ since he is a new Coach handling the team now.

    “But we have professional players that know the situation so we can have good adaptation concerning the situation. The Zambian Coach can employ another strategy but we have our strategy and we will play our game. The most important thing is our team not the other team.

  • APC criticises Fayose for crackdown on banks

    APC criticises Fayose for crackdown on banks

    •Party: action threatens economic survival

    EKITI  State All Progressives Congress (APC) has criticised Governor Ayo Fayose for his crack down on some banks.

    The party said such an action constitutes a threat to the economic survival of the Fountain of Knowledge.

    It described the governor’s action as “a wrong signal to the investing community and a recipe for job losses among workers in the bank, majority of who are Ekiti indigenes.”

    Fayose, last week, severed business relationships with Zenith Bank by ordering Ministries, Departments and Agencies (MDAs), non-ministerial agencies, government-owned tertiary institutions and workers to move their accounts from the bank within 48 hours.

    The action is believed to be in retaliation for the freezing of his personal bank accounts in Zenith, and the bank’s denial of sponsoring  his campaign in the 2014 governorship election.

    The APC Publicity Secretary, Taiwo Olatunbosun, in a statement yesterday said it was wrong for Fayose to drag government agencies into his private affairs, which have no bearing with state matters.

    He said a similar action had forced a sister bank to close its operations in the state.

    The party spokesman noted that Ekiti was seriously economically challenged and cannot afford a confrontation with banks and other investors at this critical period.

    Olatunbosun berated the governor for tying his personal fate to the fate of 2.5 million citizens.

    Olatunbosun said: “Governor Fayose has personalised Ekiti State to the extent that whoever offends him offends the state and her people, which is dangerous to the economic survival of both the state and her people.

    “Last time, he ordered all government’s agencies and workers to move their accounts from Ecobank simply because the bank refused to surrender the cash for its Community Social Responsibility projects to the governor when the bank insisted that it would carry out the projects like is the practice in other states of the federation.

    “For this reason, the governor took offence, destroyed the culvert at the entrance of the bank and ordered government offices and workers to move their accounts from the bank, thereby forcing the bank’s closure in the state with Ekiti indigenes working in the bank losing their jobs.

    “This time, because Zenith Bank washed its hands off election sponsorship fraud through which Fayose assumed power; he is fighting back by severing relationship with the bank by ordering all government offices and workers to move their accounts from the bank.

    “As expected, Zenith Bank will close shop with attendant job losses among Ekiti indigenes working there, including sending wrong signals to the investing community that Ekiti is under a siege of a reckless and maximum governor that promotes  anti-investment policies.”

     

  • Banks derail CBN’s N1tr battle to boost economy

    Banks derail CBN’s N1tr battle to boost economy

    Lenders prefer traders to manufacturers, farmers

    MPC retains tight monetary measures

    Highlights of MPC meeting

    •Monetary Policy Rate (MPR) 14%
    •Cash Reserve Ration (CRR) 22.5%
    •Liquidity Ratio 30%
    •Asymmentric Window +200 -500

    ADVOCATES of lower interest rates lost their battle yesterday.

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) failed to bring down rates, but tightened measures because banks:

    • have refused to lend to the agriculture and manufacturing sectors, despite the injection of N1trillion into the economy;
    • are lending to traders who pump the cash into foreign exchange trading, thereby increasing the unusual pressure on the naira, which exchanged for N325 and N425 to the dollar in the official and parrallel markets yesterday; and
    • attempts to inject more cash without corresponding increase in industrial capacity will worsen inflation.

    The MPC of the Central Bank of Nigeria (CBN) shocked pundits by retaining all the monetary policy instruments at their current levels.

    Addressing journalists at the end of the MPC meeting in Abuja, CBN Governor Godwin Emefiele said “the Committee assessed the relevant risks and concluded that the economy continues to face elevated risks on both price and output fronts”.

    Emefiele said: “Given its primary mandate and considering the limitations of its instruments with respect to output and conscious of the need to allow this and other measures, like the foreign exchange market reforms, to work through fully, the Committee decided to retain the MPR at 14.00 per cent; the  CRR at 22.5 per cent; the Liquidity Ratio at 30.00 per cent; and the Asymmetric Window at +200 and -500 basis points around the MPR.”

    Defending the MPC’s decision, Emefiele said it decided to tighten measures because banks were not lending money to agriculture and manufacturing, but instead were funneling credit to traders who used the money to demand for foreign exchange.

    Emefiele said: “There was a time when the MPC took a decision not only to reduce the monetary rate but also the cash reserve. These were intended to lower rates and encourage spending by the private sector. After we did that, because we did not see the impact on the private sector, we further reduced the CRR from 30.5% to 25%; N1 trillion was injected into the economy through the banks to loan this money but rather than loan this money those credits went to traders who used them to demand for foreign exchange, thereby putting pressure on the foreign exchange market.”

    The CBN governor went on: “Thereafter, we reduced CRR to its current 22.5%, that is about N300billion to N500 billion but we said we were not going to allow the banks to have the cash until they send proposals to the CBN for primary agric projects, real manufacturing projects and other types of projects that will support industrial capacity and manufacturing output. I must confess that the proposals that we received were mainly for the purpose of refinancing the liquidity of the banks and thought that that was not what we wanted. That is the reason we have been circumspect about releasing some of those liquidity.”

    Very few banks, he said, “have submitted proposals for agric and new manufacturing projects that we will be considering in due course.”

    Emefiele explained that “if we lower interest rate, what that will do is make it possible for the fiscal authorities to borrow at a lower rate. If they borrow at a lower rate to stimulate the spending, yes it will stimulate the demand for goods. When you stimulate spending by proving cash or money without taking action to boost industrial capacity, what will happen is that there will be too much money chasing too few goods, which will worsen the current inflationary situation we are in right now.”

    The option the apex bank wants to adopt “is that while the fiscal is going ahead to spend, what we want to do is to say, ‘maintain the rates where they are’, since we want to maintain a fairly tight situation and since the tightening, we have seen inflow of FX of above $1 billion between July and now.

    “These were used to procure raw materials. This will lead to price of goods moderating and growth of industrial and manufacturing capacity. We want to match the demand so that it does not lead to further inflationary pressure,” Emefiele said.

    On the efforts of both fiscal and monetary authorities to synchronise their actions, Emefiele said: “We are working together to achieve what we want to achieve so that we don’t hurt the economy.”

    The CBN governor added that “the Committee acknowledged the weak macroeconomic performance and the challenges confronting the economy, but noted that the MPC had consistently called attention to the implications of the absence of robust fiscal policy to complement monetary policy in the past. The Committee also recognised that monetary policy had been substantially burdened since 2009 and had been stretched.”

    Against this background, members, he said, “reemphasized the need to prioritise the use of monetary policy instruments in dealing essentially with stability issues around key prices (consumer prices and exchange rate) as prerequisites for growth”.

    Emefiele said that “the MPC noted that stagflation is indeed a very difficult economic condition with no quick fixes: having been imposed by supply shocks as well as fiscal and current account (twin) deficits. Consequently, the policy framework must be reengineered urgently to provide a lever for reversing the negative growth trend. While the imperative for ensuring financial system stability remains, the MPC reiterated the fact that monetary policy alone cannot move the economy out of stagflation.”

    Emefiele said: “The MPC considered the numerous analysis and calls for rates reduction but came to the conclusion that the greatest challenge to the economy today remains incomplete fiscal reforms which raise costs, risks and uncertainty”.

    “The calls came mainly from the belief that reducing interest rates will spur credit growth, not only in the private sector but also by the public sector, which will help provide liquidity to stimulate consumption and investment spending.”

    The Committee, the CBN boss added, “was of the view that in the past, the MPC had cut rates; but found that rather than deploy the available liquidity to provide credit to agriculture and manufacturing sectors, the rate cuts provided opportunities for lending to traders who deployed the same liquidity in putting pressure on the foreign exchange market which had limited supply, thus pushing up the exchange rate.”

    On providing opportunity to the public sector to borrow at lower rates to boost consumption and investment spending, the Committee agreed that while it was expected to stimulate growth through aggressive spending, doing so without corresponding efforts to boost industrial output by taking actions to deepen foreign exchange supply for raw materials will not help reduce unemployment nor would it boost industrial capacities.

    “The Committee was also of the view that consumer demand for goods, which will be boosted through increased spending, may indeed be chasing too few goods which may further exacerbate the already heightened inflationary conditions. The urgency of a monetary-fiscal policy retreat along with trade and budgetary policy,to design a comprehensive intervention mechanism is long overdue,” he said.

    The CBN, Emefiele noted, “has since 2009 expanded its balance sheet to bail out the financial system and support growth initiatives in the economy”. ”While stimulating economic growth and creating a congenial investment climate always is and remains essentially the realm of fiscal policy; monetary policy in all cases only comes in to support sound fiscal policy. Nevertheless, the CBN has and shall continue to deploy its development finance interventions to complement the overall effort of fiscal policy towards reinvigorating the economy. The interest rate decisions of the CBN are, therefore, anchored on sound judgment, fundamentals and compelling arguments for such policy interventions.”

    The Committee also feels that there was the need to continue to encourage the inflow of foreign capital into the economy by continuing to put in place incentives to gain the confidence of players in this segment of the foreign exchange market. Consequently, the Committee considers that loosening monetary policy now is not advisable as real interest rates are negative, pressure exists on the foreign exchange market while inflation is trending upwards.

    The Committee noted the positive response of the deposit money banks (DMBs) to the CBN’s call for increased credit to the private sector between July and August. As the growth in the monetary aggregates spiked above their provisional benchmarks, headline inflation continued its upward trajectory in August 2016, and now close to twice the size of the upper limit of the policy reference band.

    “Supply side factors, including energy and utility prices, transportation and input costs, have continued to add to consumer price pressures. Members emphasised that improved fiscal activities, especially, the active implementation of the 2016 budget, and payment of salaries by states and local governments, will go a long way in contributing to economic recovery. In the same direction, the Committee urged the fiscal authorities to consider tax incentives as a stimulus on both supply and demand sides of economic activities,” Emefiele said.

    On the outlook for the future, the CBN governor stated that “the data available to the Committee and forecasts of key variables suggest that the outlook for inflation in the medium term appears benign. First, month-on-month inflation has since May 2016 turned the curve; second, harvests have started to kick-in for most agricultural produce and should contribute to dampening consumer prices in the months ahead; and third, the current stance of monetary policy is expected to continue to help lock-in expectations of inflation which, has started to improve with the gradual return of stability in the foreign exchange market.”

    In this light, the MPC believes that as inflows improve, the naira exchange rate should further stabilise. Overall, the major pressure points remain the challenges in the oil sector (production and prices), output contraction, and other financial system vulnerabilities as well as foreign exchange shortage.

    Reacting to the MPC ‘s decision, analysts have conflicting views on the development. Dr Ogho Okiti President/CEO of Time Economics Limited noted that “cutting the MPR could do more to erode the credibility of the CBN with regards to the conduct of monetary policy. Such action, in our opinion will help worsen the already growing negative real interest rate and could further discourage the return of foreign investors – something the CBN has worked so hard to avoid. Moreover, the pursuit of an expansionary monetary policy in order to support growth, in the face of rising inflation and currency depreciations could prove to be counter-productive, particularly in the absence of complementary fiscal policy reforms.”

    Mr Basil Odilim Enwegbara, an Abuja development economist, aligned with the fiscal authorities by arguing that “a country deep in recession caused mostly by high cost of doing business with one of highest MPRs and CRR among peer economies, has its MPC members behaving as if the economic is in high growth mode,  calls for sober reflection. What it tells us is that the 2007 CBN Act forced on the country’s President is a great fraud that should be stopped. I strongly believe that we have come to the point in our monetary policy stance when the amendment of the CBN Act of 2007 is now urgent. The goal of the amendment is for the Commander-in-Chief of Nigeria’s economy, President Buhari who was elected by millions of Nigerians to better the lives and improve the overall economy should be the one to have the final say about the country’s MPR, CRR and forex policy.  Mr President should call members of MPC to a close door meeting and demand their immediate resignation. In the meantime he should appoint an acting team to be working directly with him until a new team is put in place.”

     

  • Knocks for banks over corruption

    Knocks for banks over corruption

    •Magu: Jonathan’s wife under probe

    Banks and their officials who help in concealing stolen funds will soon have their day in court, Economic and Financial Crimes Commission (EFCC) Acting Chairman Ibrahim Magu said yesterday.

    He said it was unfortunate that some banks encourage looting by creating an “enabling environment” for it.

    “The banking sector is creating a fertile ground for corruption,” the EFCC chairman said.

    Magu spoke in Lagos during an interactive session with the commission’s external lawyers and civil society organisations.

    According to him, it was as if the banks were telling looters: “Go and steal and I’ll hide it for you”, a development he said must stop.

    “We’ll zoom in on the banks. We need to stop them from creating an enabling environment for corruption to thrive,” he said.

    On whether the commission would invite former First Lady Patience Jonathan  for questioning over the $15,591,700 she claims belongs to her, Magu said investigation was ongoing.

    “We are on it. You see, we work for the long-term. We must complete our preliminary investigations before we come out,” he said.

    Magu told the forum that EFCC sometimes spends up to nine months investigating a case before inviting suspects for questioning, adding that no one who has stolen public funds would be spared.

    “We’ll not spare anybody. We can’t protect anyone from answering to the people. Determination is key. I believe we’ll go a long way and that our tomorrow will be better than our today,” he said.

    The EFCC chair said the commission did not characterise all lawyers as “rogues”, saying the statement was misinterpreted.

    According to him, “just as there are bad eggs within the EFCC, there are also corrupt lawyers. We can’t just come out and condemn people,” he said.

    Magu said the EFCC has begun an in-house cleansing to weed out corrupt employees.

    “You need to be here to know that corruption is fighting back. Corrupt people have people on their payroll. They have easy money. We’re very serious, so, we want to cleanse the inside,” he said.

    Executive Director, Coalition Against Corrupt Leaders (CACOL) Debo Adeniran, urged the commission to invite Mrs Jonathan for questioning.

    According to him, the law empowers the commission to question anyone who lives above his/her means.

    Lagos lawyer Wahab Shittu, who also serves as EFCC’s external counsel, said the war against corruption cannot be fought by the commission alone. He urged Nigerians to support the agency.

    “EFCC is our collective enterprise. If it fails, all of us have failed. Corruption hurts us all. So, fighting it should be a collective responsibility,” he said.

    National President, Committee for the Defence of Human Rights (CDHR) Malachy Ugwummadu said there was a growing concern about EFCC’s respect for the rule of law. He urged the commission to look into it.

    Activist-lawyer Jiti Ogunye urged the commission to be careful about issuing sensitive statements, such as the one issued ahead of the rescheduled Edo State governorship election, saying that the Peoples Democratic Party (PDP) candidate, Pastor Osagie Ize-Iyamu, was still under investigation.

    He said such statements create the impression that EFCC works primarily in the interest of the party in power.

  • Nigerian banks lead in equities’ N372b loss

    Nigerian banks lead in equities’ N372b loss

    Banking stocks suffered the most among 25 top losers in the equities’ market as share price decline left investors with a net capital loss of N372 billion.

    There were 10 banking stocks among the top 25 that lost 30 per cent and above in the past eight months. Some of the top losers recorded as much as 60.1 per cent in equities price reduction.

    Conversely, only one banking stock made the few top gainers’ within the period. Altogether, there are 15 banking stocks quoted on the Nigerian stock market.

    Three other banking stocks recorded various gains, while a bank dropped by 12.3 per cent.

    The Nation’s market intelligence at the weekend indicated that investors in banking stocks have suffered the highest losses with nearly three-quarters of quoted banking stocks running with double-digit losses. Losses in the banking sector generally significantly outweighed the overall market’s average loss, according to data review by The Nation.

    The benchmark indices for the Nigerian stock market indicated eight-month average decline of 3.64 per cent, equivalent to a loss of N372 billion. The aggregate market value of all quoted companies on the Nigerian Stock Exchange (NSE) closed August at N9.479 trillion as against its year’s opening value of N9.851 trillion. The All Share Index (ASI), which tracks prices at the Exchange, dropped to 27,599.03 points by the month-end as against its year’s opening index of 28,642.25 points.

    Banking stocks were deep in the red with the troubled Skye Bank leading the top 25 losers with year-to-date loss of 60.13 per cent. The Central Bank of Nigeria (CBN) had sacked the board and management of Skye Bank over corporate governance issues. Diamond Bank followed with a loss of 54.35 per cent. Other top losers in the banking sector included Ecobank Transnational Incorporate, -31.3 per cent; Fidelity Bank, -40.67 per cent; Sterling Bank, -49.18 per cent; Union Bank of Nigeria, -39.13 per cent; Unity Bank, -30.36 per cent; Wema Bank, -34.0 per cent; FBN Holdings, -40.53 per cent and FCMB Group, which market value had dropped by 39.64 per cent. Stanbic IBTC Holdings meanwhile, dropped by 12.3 per cent within the period.

    While consolidation, steep price declines and emergence of highly capitalised non-bank stocks such as Dangote Cement had reduced the hitherto overwhelming dominance of the market by banking stocks, banking stocks still account for some 25 per cent of the total market value of the Nigerian equities market.

    Head, financial advisory group, GTI Capital Group, Mr. Kehinde Hassan, said the negative performance of the banking sector was weighing heavily on the overall market performance.

    He noted that the unstable policy environment and the knee-jerk approach of the Central Bank of Nigeria (CBN) to regulatory decisions have compounded the tough operating environment for banks, many of which had warned of lower earnings due to the headwinds.

    Only Guaranty Trust Bank (GTB) ranked within the top gainers’ list with 8-month gain of 45.76 per cent. United Bank for Africa (UBA) meanwhile, posted a heartwarming return of 28.7 per cent. Access Bank followed with 14 per cent, while Zenith Bank, against all expectations, trailed with a modest gain of 6.05 per cent.

    Other top losers for the period included Livestock Feeds, -33.1 per cent; UACN Property Development Company, -42.5 per cent; Honeywell Flour Mills, -35.12 per cent; Vitafoam Nigeria, -43.99 per cent; AIICO, -30.77 per cent; Union Homes and Savings, -39.24; Fidson Healthcare, -32 per cent; GlaxoSmithKline Consumer Nigeria, -45.88 per cent; Berger Paints, -31.1 per cent; Cement Company of Northern Nigeria, -35.8 per cent; Lafarge Africa, -40.1 per cent; Portland Paints and Products Nigeria, -53.2 per cent; Forte Oil, -47 per cent; Tourist Company of Nigeria, -43.1 per cent and Caverton Offshore Support Group, which lost 40.9 per cent.

    Nigerian equities have writhed under sustained losses in the past 32 months. Aggregate market value of all quoted equities on the NSE closed 2015 at N9.851 trillion as against its opening value of N11.478 trillion for the year, representing a loss of N1.627 trillion. The ASI indicated a negative full-year average return of -17.36 per cent. The ASI closed 2015 at 28,642.25 points as against its opening index of 34,657.15 points.

    The losses in 2015 worsened the downtrend that had in 2014 marked out Nigerian equities among the worst-performing stocks globally with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities had closed 2014 at N11.478 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year.

    Altogether, investors have lost more than N3.75 trillion in the past 32 months as the stock market groaned under political tension, steep decline in crude oil prices, foreign exchange crisis, uncertain policies and other domestic and global macroeconomic concerns.

    The second half of 2016 has however seen considerable share price recovery compared with the steep losses in the first half. In the first quarter alone, Nigerian equities had recorded a net loss of N1.15 trillion.

    Notwithstanding the negative overall market situation, many stocks have posted substantial returns so far this year. Dangote Flour Mills, which saw the reemergence of Aliko Dangote’s Dangote Industries Limited as the core investor, recorded the highest gain of 240.7 per cent. E-Tranzact followed with a gain of 97.4 per cent. United Capital returned 74.8 per cent while Total Nigeria posted eight-month return of 63.3 per cent. Other top gainers included Presco, 37.2 per cent; AG Leventis, 43.6 per cent; Union Dicon Salt, 39.3 per cent; Neimeth International Pharmaceutical, 32.6 per cent; DN Meyer, 30 per cent; Seplat Petroleum Development Company, 49.4 per cent; Eterna, 33.7 per cent and RAK Unity, a second-tier stock that posted a year-to-date return of 61.3 per cent.