The Nation Newspaper

Tag: Banks

  • CBN’s support to banks drops by 36%

    CBN’s support to banks drops by 36%

    The Central Bank of Nigeria (CBN) monthly financial support for banks and discount houses has dropped from N869.98 billion to N550.12 billion.

    This is contained in the CBN Economic Report for December and January.

    The financial leverage, known as Standing Lending Facility (SLF) reflected a daily average of N28.95 billion in January, compared with a daily average of N43.40 billion the preceding month.

    The report showed that the total amount granted indicated a decline of 36.8 per cent, which also reflected the liquidity condition in the market during the review period. There are 21 commercial banks and five discount houses in operation.

    The fund, the CBN said, was given at 14 per cent. The SLF is an overnight CBN credit available on banking days between 2 pm and 3.30 pm, with settlement done on same day value.

    The CBN report showed that money market indicators were relatively stable during the month under review while monetary policy remained largely restrictive in line with the monetary tightening stance of the apex bank.

    Accordingly, the monetary policy rate (MPR) was maintained at 12.0 per cent; public sector Cash Reserve Ratio (CRR) was raised from 50 per cent to 75. CRR is a portion of banks’ deposits kept as reserves with the CBN with the aim of stabilising money supply and local currency.

    According to the report, in spite of the liquidity surge which arose from maturing treasury bills, and the Asset Management Corporation of Nigeria (AMCON) bonds redemption and fiscal inflows, financial market indicators were relatively stable, the report said.

    The report reads: “The CBN discount window remained open to authorised dealers for the Standing Deposit Facility (SDF) and SLF. Federal Government of Nigeria Bonds and treasury bills were issued at the primary market on behalf of the Debt Management Office (DMO).”

    Data from the CBN also showed that banks’ total assets and liabilities amounted to N24.4 trillion, showing an increase of 0.3 per cent over that of the preceding month.

    Funds were sourced mainly from increased mobilisation of time, savings and foreign currency deposits; accretion to capital; and unclassified liabilities. The funds were used, largely, for the acquisition of foreign assets, unclassified assets and Federal Government securities.

    Also, at N12 trillion, banks’ credit to the domestic economy fell by 1.2 per cent below that of the preceding month. The development was attributed to the 1.2 per cent fall in claims on the Federal Government and the private sector during the review month.

    Banks’ total specified liquid assets stood at N6.7 trillion, representing 40.1 per cent of their total current liabilities. At that level, liquidity ratio rose by 0.5 percentage point above that of the preceding month and was 10.1 percentage points above the stipulated minimum ratio of 30 per cent.

    The loans-to-deposit ratio, which stood at 37.5 per cent, was 0.1 and 42.5 percentage points below the levels at the end of the preceding month and the prescribed maximum ratio of 80 per cent, respectively.

    According to the CBN, total assets and liabilities of the discount houses stood at N119.6 billion at the end of January, showing a decline of 10.6 per cent below that of December. The development, it added, was accounted for, largely, by the 11.3 and 35.7 per cent fall in claims on the Federal Government and others.

    Correspondingly, the decline in total liabilities was attributed, largely, to the 25.3 per cent fall in money-at-call. “Discount houses’ investment in Federal Government securities of less than 91-day maturity rose to N36.83 billion and accounted for 42.1 per cent of their total deposit liabilities. Hence, investment in Federal Government Securities was 17.9 percentage points below the prescribed minimum level of 60.0 per cent,” it said.

     

  • Banks to raise new capital to boost capacity

    Banks to raise new capital to boost capacity

    Many banks may consider raising new capital to complement their balance sheet to place them in better position to increase lending and further their expansion.

    Investment banking sources said although the average capital adequacy ratio in the Nigerian banking industry remains considerably high and most banks are above regulatory benchmark, banks have indicated they might seek new capital.

    The banks were said to be considering raising new capital mostly through debt and quasi-equity instruments.

    Sources said banks were being proactive to ensure adequate long-term capital plan for their expansion plans.

    Recent analysts report indicated that Nigerian banks were adequately capitalised with several banks.

    According to analysts, most of the banks are adequately capitalised to absorb losses without requiring emergency capital injections in case of any further write-offs.

    Analysts however noted that the rebasing of the Nigerian economy has created lending space that banks will require more capital to fill.

    Group Managing Director, Skye Bank Plc, Mr. Kehinde Durosinmi-Etti, has already confirmed plans by the bank to raise new capital to deepen its market penetration.

    “We are confident about the successful implementation of our Tier 1 and Tier 2 Capital Raising Project within the year as planned, which would enable us deepen our penetration in existing markets, while also providing the avenue for exploring uncharted segments and other opportunities,” Durosinmi-Etti said.

    Nigerian banks, under the auspices of the Bankers Committee, had jointly decided to increase lending to the power sector.

    The strategic funding plan focused on aligning the Nigerian banking system to provide adequate financing to meet the peculiarities of the power sector.

    The development of the industry-wide funding strategy was part of the outcomes of the discussions at a retreat by banks’ chief executives, Governor and top officials of the Central Bank of Nigeria and several experts.

    The funding strategy would enable banks to provide well-structured finances to support investments in gas transmission pipelines, upstream gas developments, Liquified Natural Gas (LNG) and Liquified Petroleum Gas (LPG) plants, gas processing facilities, key infrastructure, port, real estate, pipe milling and fabrication yards and gas supply and gas transportation infrastructure among other.

    Besides, banks are required to reinforce their energy desk to build capacity for power project financing while the Bankers’ Committee would continuously provide supports for advocacy and programmes that centre on the power sector transformation.

  • Tension Mounts, as Anambra Government seals off two Banks

    There was tension Wednesday in Awka, following sealing off of two commercial Bank in the State by the officials of Anambra State Government over debts.

    The two commercial banks are Ecobank Plc and Skye Bank Plc located opposite the Government House in Awka and zik Avenue respectively.

    The action was as a result of the banks inability to pay the land use charges levied on them by the state government.

    As a result, commercial activities were paralyzed at the banks while customers were disappointed as they could not transact businesses for the day.

    The closure which was carried out by the Anambra Property and Land Use Charge (APLUC) followed an order of an Awka Magistrate Court presided over by Magistrate. O.E. Maduka.

    Following the closure of the Banks Wednesday, the bank workers, customers including one of the traditional ruler in the State, (name withheld) were all stranded.

    Addressing reporters shortly after the operation, the Head, Human Resources and Administration/Media, Mrs. Chinenye Okafor, said the banks as well as a residential building owed the state government over Six  Hundred Thousand Naira.

    Okafor said that the financial institutions deliberately ignored the court summons sent to their offices as well as hearing notices.

    Furthermore, APLUC claimed that no representative was sent by the organizations during the court trial.

    She said that a total of N226, 047 consisting of property rate, tenement rate, ground rate as well as infrastructural development and maintenance fee were due to Ecobank Plc between 2011 and 2012 for payment.

    Also, Skye Bank Plc located along Ziks Avenue, Awka also owed the state government a total of N238, 077 between 2011 and 2012 for the same land use charges.

    Okafor further said that the residential building, Crystal Villa ltd., located at No. 6, Ikebube str. Ifite-Awka, owed the state government a total of N136, 166 between 2011 and 2012.

    However, the APLUC warned that the state government was now out to seal-off property of those who default in payment.

    Okafor further disclosed that the state government had so far secured 14 judgments to seal-off residential buildings in Awka and two other judgments for buildings in Onitsha.

    According to her, “Very soon, list of defaulters in Nnewi will be prepared and actions will follow”.

    “We are awaiting 11 judgments on residential buildings in Awka and 15 others in Onitsha,” she told reporters.

     

  • AMCON’s N7.6tr lifeline for banks

    AMCON’s N7.6tr lifeline for banks

    The Asset Management Corporation of Nigeria(AMCON), through the Banking Sector Resolution Cost Fund (Sinking Fund), has stabilised the banking sector with N7.6 trillion, a survey by Financial Derivatives Company (FDC) Limited has shown.

    The report titled: “AMCON: Leading Stabiliser Among Peer Countries”, released by FDC said the aid, the first in the series of AMCON bonds for the exercises, have been redeemed without any systemic disruption.

    Its Managing Director, Bismarck Rewane, said the expenditure also included a carrying-cost for the banks.

    “The AMCON model of financial stabilisation involves a sinking fund set up by the banks to underwrite the funding cost of the detoxification of the system-wide risk asset portfolio. The total amount of the exercise, including carrying cost is estimated at $47.5 billion (N7.6 trillion). The first in the series of bonds have now been redeemed without any systemic disruption,” he said.

    Rewane said the size of the banking crisis relative to the economy showed that 21 per cent of nominal Gross Domestic Product (GDP), 35.8 per cent of total banking assets and 71.6 per cent of total banking deposits were all at risk.

    He said banking systemic crisis in the country was historically a post-devaluation phenomenon, adding that the naira remained stable for approximately six years before a drastic adjustment.

    “The consequence of significant currency depreciation in a country with a high propensity to import cannot be overemphasised. The overvalued exchange rate is the most important factor price in Nigeria and source of elite subsidy.

    “Thus, whenever there is devaluation, it almost leads to a sharp reduction in the exchange rate subsidy while magnifying the cross border risk impact on the risk asset portfolio of banks,” he said.

    He explained that in the past, when banks failed, the Nigeria Deposit Insurance Corporation (NDIC) paid depositors after many years up to the maximum of its guarantee. The larger depositors, he said, lose their fortunes and savings leading to a flight to quality and more banks, especially new ones become fragile and pushed closer to the borderline.

    He explained that the 2009 banking crisis was unique in that bank managements were sacked and the Central Bank of Nigeria (CBN) put in place interim management teams.

    “The AMCON option was post the interim management process. Therefore, AMCON as an institution, was set up with a limited life (cycle) as a tactical response to self and externally induced crisis. Therefore, AMCON will need to be a strategic institution that will serve the purpose of stabilising the banking industry through its peaks and troughs,” he said.

    The report reviewed the operations of bad banks in five countries that cut across four continents globally. They include the United States, Sweden, Ireland, Malaysia and Nigeria.

    He said the countries were chosen based on their similarities on the magnitude of the crisis, the spread, and duration of the crisis, among others. “Based on this evaluation grid, AMCON was tied in the first place with Malaysia, Sweden was third, the United States came in fourth and Ireland fifth,” he said.

    He said the total deposit premium of NDIC to date is N425.2 billion, adding that the bulk of this would have been disbursed if not for the AMCON exercise.

    Rewane said some believe AMCON’s existence poses a moral hazard and, therefore, suggested it should close its operation. He, however, said such thought, including the International Monetary Fund’s (IMF), fail to understand that the aggregate corporate, mortgage and government debt was still very low compared to its GDP at 19.4 per cent.

    He said AMCON should be institutionalised as a financial system shock absorbing detoxicant while the economy continues to undergo fundamental shifts to its structure.

    It said among the countries reviewed, cutting across four continents, AMCON ranked third, ahead of Republic of Ireland and Sweden. The study also showed that AMCON’s dual role of recapitalising insolvent banks and asset detoxicant, duration of the exercise may exceed the date originally anticipated.

  • ‘Nigerian banks remain best buys’

    ‘Nigerian banks remain best buys’

    Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc, among others, have been recommended for investment because of their valuations and growth potential.

    Exotix Ltd., a leading investor in Africa, said the banks were an investors delight.

    “We strongly believe that now is the time to have a strong bias toward Nigerian banks,” Kato Mukuru, an analyst at Exotix Frontier Equities, told Bloomberg. “Nigeria also offers something that few sub-Saharan African banking systems can hope to offer — scale.”

    Almost half of Nigeria’s more than 170 million people don’t have access to finance, according to the country’s central bank. With loan penetration in the West African nation increasing by only five percentage points over the past 10 years, the potential for asset growth in Nigeria is probably much larger than in other parts of the continent, said London-based Exotix, which started building an Africa equity team last year.

    Zenith may improve its return on equity to 22.4 per cent by 2017 from the 19.6 per cent that Nigeria’s third-largest bank by market value reported last year, Exotix said.

    Barclays Bank of Zimbabwe Ltd., Standard Chartered Bank Ghana Ltd. and Ghana Commercial Bank Ltd. are Exotix’s top sell recommendations, Mukuru said. The Zimbabwean bank runs the “risk of an acute deterioration in domestic liquidity and a rapid deterioration in its asset quality” amid macroeconomic turbulence, he said.

    The Ghanaian lenders face asset quality and operating cost risks due to increasing interest rates, Mukuru said. The Bank of Ghana raised its key lending rate to a four-year high of 18 per cent in April.

     

  • Banks to decide limits, frequencies for naira cards

    Banks to decide limits, frequencies for naira cards

    TThe issuance of cards and guidelines for the naira, under review will, henceforth, be defined by each bank.

    The Central Bank of Nigeria’s (CBN) Director, Banking and Payment System, ‘Dipo Fatokun, said the limits would not exceed the total combined amount of foreign currency that each individual bank can access through Business Travel Allowance and Personal Travel Allowance, which is pegged at $150,000 per annum.

    In a circular to all deposit money banks, mobile money operators, switches and payment services providers, Fatokun said card users shall render monthly returns to the CBN on the volume of transactions and gross amount of transactions done internationally using their cards for inclusion in the national statistics on payments.

    He said power to issue the guideline was derived from Section 47 (3) of the CBN Act 2007, adding that all stakeholders who process, transmit, and or store cardholder information, should ensure that their terminals, applications and processing infrastructure comply with the minimum requirements for the sector.

    Fatokun said all terminals, applications and processing infrastructure should also comply with the standards specified by the various card schemes.

    He said only licensed banks with clearing capacity shall issue payment cards to consumers and corporations in the country, adding that banks without clearing capacity can issue in conjunction with those with clearing capacity. He said all banks should seek approval from the CBN for each card brand they wish to issue.

    The guidelines also stipulated that the cards issued can be ‘pay now’ such as debit and prepaid, or ‘pay later’ such as credit. He said the use channels, limits, and frequencies shall be defined by the issuing banks.

    It said an issuer should have risk management framework in place that enables it identify, measure, monitor, and manage the range of risks that arise or are borne by its operations.

     

  • Banks’ N320b romance with power

    Banks’ N320b romance with power

    About N320 billion of the N400 billion realised from the sale of Power Holding Company of Nigeria (PHCN) assets came from the banks. With such a huge commitment, banks are having a stranglehold on power financing. COLLINS NWEZE reports.

    Banks’ credit to the economy is expected to rise by 20 per cent in the year, with a significant contribution from the power sector. This will cushion banks’ dwindling earnings over tough regulatory policies by the Central Bank of Nigeria (CBN).

    Findings showed that the lenders coughed out N320 billion of the N400 billion earned by the Federal Government from the sale of the Power Holding Company of Nigeria (PHCN) assets.

    Nigeria, in its desire to be among the top 20 economies of the world by 2020 is targeting an 40,000 mega watts (MW) of electricity.

    With a 167 million population, its current maximum electricity generation capacity – approximately 4,500MW – is inadequate to meet the demand estimated at 10,000MW.

    The Chairman/Chief Executive Officer of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, said to meet the generation targets set for 2020, significant private sector investment was required in the supply chain, including generation, gas-to-power infrastructure and distribution networks. He identified inadequate financing, especially with regards to the distribution companies, as one of the major challenges facing the power sector.

    Amadi said improvement in the industry was necessary to sustain the political will behind the power project. He said the role of banks in solving this crisis, by providing the needed financial backbone to the projects, cannot be overemphasised.

    The World Bank and other local and international lenders have showed renewed commitment to power sector funding. Zenith Bank Plc said it expects to increase loans to the privatised power companies. In Bloomberg report, the lender said loans to the power sector may rise to 10 per cent of the bank’s loan book by this year, up from 4.3 per cent in the third quarter and 1.3 per cent at the end of June.

    Its Chief Executive Officer Mr Godwin Emefiele, said: “Opportunities in power opened up and we took advantage of it. It is a very essential utility that we all need for our survival.”

    The value of Zenith Bank’s loans to power firms was about N40 billion in the third quarter after the handovers, said Emefiele. Zenith Bank gave loans to companies including Eko Electricity Distribution Company and Ikeja Electricity Distribution Company.

    There was a $350 million infrastructure financing agreement for Africa between global infrastructure giant General Electric and Standard Bank. The bank explained that the partnership would provide affordable access to power infrastructure meant to augment traditional large scale grid capacity development. The partnership will target Nigeria, Angola, Tanzania, South Africa and Ghana. Others are Kenya, Mozambique, Uganda, Ethiopia and South Sudan. Financing activity will center on project finance, equipment finance, trade finance and advisory.

    Speaking at a ceremony to announce the partnership, President/Chief Executive Officer of GE Africa Jay Ireland said the partnership comes at the right time when there are concerted efforts to boost access to energy across the continent. He said partnerships of this nature would certainly support efforts by respective governments in finding captive power solutions to meet the growing demand for alternative fuels.

    Chief Executive, Stanbic IBTC Holdings, Mrs Sola David-Borha said the bank was committed to partnerships of this nature that help energise the sector. She said the power challenges identified in the focus countries for this partnership were opportunities for growth through sustainable investment. Mrs She also disclosed that through the partnership, financing will also be available for off-grid solutions that rely on cleaner fuels such as biomass and biogas across sub-Saharan Africa.

    Another international lender, Ecobank Nigeria said it will invest $25 billion in five years to help solve Nigeria’s power sector crisis. Ecobank Country Head, Power & Energy, Olufunke Jones said the investment is in line with its policy to support the growth and development of the power sector in Nigeria.

    She said it has played a major role on the buy-side of the power sector privatisation exercise by providing financial advisory services, lead arranger role, acquisitioning financing and guarantees to Distribution Companies (DISCOS), Generating Companies (GENCOS) and National Integrated Power Plants (NIPP).

    She said: “Nigeria has one of the largest gaps between demand and supply for electricity. To bridge this gap the country requires a combination of favorable government policies, private sector participation and Foreign Direct Investment (FDI) as well as transparency and persistent monitoring that will guarantee an improved business environment.”

    According to her, the power reforms have created opportunities for Capital Expenditure (CAPEX) and Operating Expenditure (OPEX) funding, a consequence of the handover to the new owners. “There is the urgent need to rehabilitate the distribution networks in order to make them robust and flexible enough to accommodate the nation’s demand for power,” she said.

    Local Account Manager, Corporate Banking Group, Mrs. Funmilola Ogunmekan said the power sector is faced with the challenges of upgrading mostly obsolete equipment and processing under a traditional technology framework. This, amongst others, is the immediate challenge before the potential of the industry is fully manifested.

    Mrs. Ogunmekan reiterated that this year, the lender will leverage its position as a bank with the third largest branch network to provide effective Utility Collections and Cash Management services while providing the required additional CAPEX/OPEX funding requirement for at least five of the Distribution Companies across the country.

    Likewise, the United Bank for Africa Plc (UBA) said it has so far extended $700 million, about N113 billion, in funding to different investors towards the acquisition of power assets in Nigeria’s recently privatised power sector. Its Group Managing Director/ Chief Executive Officer, Phillips Oduoza said: “It is a growth sector we are playing very big.”

    World Bank’s role

    The Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala said the World Bank is providing $1.4 billion to Nigeria to support power infrastructure.

    She said the global lender was planning to set up an infrastructure facility and that Nigeria would be among the first set of countries to benefit from it, given the nation’s large size and the scope of its infrastructure needs.

    “They want to concentrate on power, and are already actively working with several private sector companies that want to invest in Nigeria. They are promising to give Nigeria about $700 million under the International Bank for Reconstruction and Development (IBRD) guarantees for the power sector, as well as a willingness to invest another $700 million to support transmission,” she said.

    She explained that the power infrastructure support finance was derived from the initiative of the World Bank Group and its affiliate, the International Finance Corporation (IFC) which lists Nigeria as one of the focused countries in Sub-Saharan Africa to benefit from such funding.

    Also, the Board of the African Development Bank Group (AfDB) has approved an African Development Fund (ADF) Partial Risk Guarantee (PRG) programme of $184.2 million to support the power sector privatisation. It also provided an ADF loan of $3.1 million, for capacity building for the country.

    The Director of the AfDB’s Energy, Environment and Climate Change Department, Alex Rugamba, said the PRG programme in Nigeria would increase the country’s electricity generation by catalysing private sector investment and commercial financing in the power sector through the provision of PRGs.

    “The PRGs will mitigate the risk of the Nigeria Bulk Electricity Trading Plc (NBET), a Federal Government of Nigeria entity established to purchase electricity from independent power producers (IPPs), not fulfilling its contractual obligations under its power purchase agreements with eligible IPPs. This in turn will increase the comfort level of private sector financiers and commercial lenders investing in the power sector privatisation programme,” he said.

    Continuing, Rugamba said an effective and steady power supply is critical to the sustainability of Nigeria’s development path. The Board’s decision today will allow the AfDB to support the Nigerian Government’s efforts to reform the power sector and position the country for sustainable and inclusive growth.

    Bonds to the rescue

    Banks have also drawn huge funds from the bond market to fund power projects. Four banks raised $1.45 billion in the last three years through Eurobonds to assist them in meeting their power sector funding obligations, Debt Management Office (DMO) Director-General, Dr. Abraham Nwankwo said.

    GTBank issued $500 million; Access Bank issued $350 million while Fidelity Bank and FirstBank issued $300 million each.

    Nwankwo said the funds will be instrumental in helping Nigeria meet its infrastructural needs especially power adding that ambitious banks can explore the funding opportunities that the power sector presents.

     

  • How banks can increase profits

    Banks and other firms can reduce their cost of opera-tions and raise profits by deploying sound Business Process Management (BPM) tools in running their businesses, Managing Director, SPNS Consulting, Debo Adebayo, has said.

    Speaking during a breakfast meeting with key industry operators on how to implement BPM processes, he said strategic success comes not simply from crafting sound strategy and implementation plans.

    He said both are essential ingredients, but results come from activities that people engage in.

    Adebayo, who spoke on the theme: ‘Discovering the value of business process management for business productivity and profitability’, said company’s staff can only deliver strategic results if their actions are closely aligned with those of their employers on the course, direction, implementation plans, and priorities established in their strategic planning process.

    He said a business process is a set of logically related business activities that are combined to deliver something of value to the staff and company. Adebayo said the combination of task that constitutes an activity flow tailored towards achieving a set process goal.

    He said business process management helps company owners to determine how to direct, monitor and measure company resources.

    It has the capacity to reduce costs, enhance efficiency and productivity, and minimise errors and risks – thereby protecting and optimising corporate resources.

    “It increases accountability and helps avoid waste, improves reliability, simplifies regulatory compliance and promotes safe working conditions while protecting company resources and information,” he said.

    He said BPM also enables organisations to align internal business functions with customer needs. He said there is need to continuously evaluate customers’ needs and how they want them met.

     

  • Banks lose N1.75tr to cash reserve policy

    Banks lose N1.75tr to cash reserve policy

    Deposit Money Banks (DMBs) lost about N1.75 trillion to the increase in Cash Reserve Ratio (CRR) on public sector deposits from 12 per cent to 75 per cent within six months, The Nation has leant.

    The policy, introduced by the Central Bank of Nigeria (CBN) had seen the CRR first raised to 50 per cent in August, and 75 per cent last month during which the lenders lost N1 trillion and N750 billion.

    CRR is a portion of banks’ deposits kept with the CBN as reserves.

    This policy direction, analysts believe, represents a major challenge for the lenders, especially those that are heavy on term deposits.

    A market analyst, Biodun Ekundayo said the CBN may further raise the CRR to 100 per cent, because the naira has not fared better despite the initial hike. He said the stability of the naira is the most significant threat to the current CRR figure.

    “We believe that even with the 75 per cent CRR on public sector deposits, a policy aimed at increasing the scarcity of the naira, the local currency still remains vulnerable. Market still hurts from the 75 per cent CRR on public sector deposits,” he said.

    Also, pressure on the naira will continue due to shortfall in government revenues, increased demand for dollars.

    “We believe the 75 per cent CRR on public sector deposit is a stop-gap measure on the International Monetary Fund (IMF) prescribed Single Treasury Account (STA). If the pressure on the naira persists, we believe the CBN can increase the CRR on public sector deposit even to 100 per cent which would ultimately mean it has achieved the objectives of the STA, a tool for consolidating and managing governments’ cash resources, thus minimising borrowing costs,” he said.

    Across our four Sub-Saharan African countries, Nigeria’s banking sector has the highest CRR, at 12 per cent for private-sector customer deposits plus 75 per cent for public sector deposits, a report by Renaissance Capital (RenCap) has said.

    RenCap said it cannot rule out the possibility of further CRR hike as the regulator appears to be using the CRR as the primary monetary tool for mopping up excess liquidity.

    “Our reading of the above is that the risk of a further hike in the CRR cannot be ruled out if the Monetary Policy Committee sees renewed pressure on the naira. The worst-case scenario, we believe, is that the CRR on public-sector deposits could be raised as high as 100 per cent, increasing our estimate of the blended CRR in Nigeria to 23 per cent. On our numbers, the hit to interest income over a year would increase to three to 14 per cent,” it said.

    Head, African Research at Standard Chartered Bank, Razia Khan, said in view of increased market liquidity following the AMCON bond maturity in December, as well as an increased spread between the interbank foreign exchange rate and BDC rates, the move is not surprising.

    “It is a clear demonstration of the CBN’s continued commitment to foreign exchange stability, even in a more difficult environment. Should the foreign exchange rate come under further pressure, key threats might be related to quantitative tapering, concern over the transition at the CBN, and ongoing concern about oil receipts as well as Nigeria’s political cycle – then more tightening cannot be ruled out,” she said.

     

  • Banks at risk from corporate governance issues, says S&P

    Banks at risk from corporate governance issues, says S&P

    Nigerian bank ratings are threatened by corporate governance issues and rapid loan growth as competition increases credit risk, said Standard & Poor’s.

    “We see a risk that the momentum behind regulatory improvements may slow after leadership changes at the central bank this year,” Samira Mensah, a Johannesburg-based credit analyst at S&P, said in a statement today. “The future growth and stability of the Nigerian banking sector will largely depend on a cohesive regulatory framework, together with political and institutional stability.”

    Central Bank of Nigeria Governor Lamido Sanusi, 52, will step down when his contract ends in June and he said last month his successor’s main challenge will be to maintain the regulator’s independence. During his five-year term, he fired bank executives to clean up an industry that was near collapse.

    Nigerian economy is projected to grow 6.5 percent this year and stable inflation in Africa’s biggest oil producer will support loan growth of as much as 30 percent in 2014, S&P said.

    Fitch Ratings said on Jan. 31 that pan-African banking companies face regulatory risks after the Nigerian Securities and Exchange Commission criticized Ecobank Transnational Inc. (ETI) for failing to address governance issues amid allegations of executive fraud and misconduct.