The Nation Newspaper

Tag: Banks

  • ‘Banks to blame for weak credit system’

    ‘Banks to blame for weak credit system’

    Bankers and financial professionals alike turned the heat on themselves penultimate weekend as they blamed their colleagues for the rather fragile credit system in the nation’s banking sub-sector.

    This was the submission of participants at the Institute of Credit Administration (ICA’s) quarterly Credit Professionals Networking Luncheon (CPNL) and Nigeria Credit Awards which held in Lagos.

    Firing the first salvo was Mr. Andy Ojei, who observed that the nation’s credit system could do a lot better if professionals adhere to standards.

    Echoing similar sentiments, Dr. Chris Onalo, Registrar/Chief Executive Officer of ICA, noted that as professionals, credit experts in the banking and other financial institutions ought to support the growth, development and recognition of credit management in the country.

    “There is need to grant credit in business, and even more important, is the need to manage credit well. Equally important is the need not to approve credit until credit applicant is adjudged worthy for the credit through intra-systemic credit appraisal.”

    In his own submission, Bamikole Samuel Oladokun, Group Head, Emerging Corporates (West), First Bank of Nig, while noting that the level of compliance has greatly improved but was quick to admit that one major area where there are gaps is a situation where some bank officials still bend the rules backward just to satisfy their customers at the expense of CBN rules and standards.

    “If you notice that the credit documentation looks ok but the customer has a bad credit history, you have to tarry awhile. Regulators need to be hard on the bank, that’s the only way to ensure compliance, because not many banks are using the information from the credit bureaus effectively.”

    Corroborating Oladokun, Dr. Victor Alewo Adoji, Head, Corporate Communications, Zenith Bank Plc, while emphasising the fact that credit bureau is not necessarily peculiar to the banks alone, stressed that: “The only way we can derive value from the reforms being put forward by the CBN is the level of sanction is stiff. We don’t have a robust office of statistics. Until we purge ourselves, we will just be running from pillar to post.”

    According to the CBN, any facility above N1million should be submitted to the credit bureau for verification of the client’s credit profile. It is the determination of the apex bank to use biometric capturing as a means to stem the tide of credit abuse. Biometric campaign was announced in November but will take effect in February 2014.

    Mary Akpobome, Executive Director, Heritage Bank Ltd, said: “The issue of integrity remains germane to the credit culture. A loan goes bad due to the way the loan was structured. Sometime bad policies may be at the heart of the problem of credit bureau.”

    Chidi Otunba, Managing Director/CEO, Treasurehall Consulting, said: “Sometimes credit bureaus goes wrong due to bad indicators. There is need to understand credit dynamics.”

    The highpoint of the occasion was the induction of some top echelons in the business circles as fellows into the Institute.

    Among those inducted include: Gimba Ya’u kumo, Managing Director, Federal Mortgage Bank of Nigeria, Tunji Oyebanji, Chairman/Managing Director, Mobil Oil Nig Plc, Basheer A. Koko, Deputy Managing Director, Nigeria Liquefied Natural Gas Ltd, Bashir Mahe Wali, Executive Director, Corporate Affairs, Nexim Bank, Mary Akpobome, Executive Director, Heritage Bank Ltd.

    Others inducted were: Olayinka Abraham Oluseyi, Business Manager, First Bank of Nigeria, Peju Adebajo, Managing Director/CEO, Mouka Ltd, Ernest Azudialu, President/CEO, Nestoil Group Plc, Ahmed Lawan Kuru, Managing Director/CEO, Enterprise Bank Ltd, Chidi Otunba, Managing Director/CEO, Treasurehall Consulting, Emmanuel Ikechukwu Iwunze, General Manager, Finance, Amni International Petroleum, Rabiu Hassan Olayemi, Chief Finance Officer, Resorts Savings & Loans Plc, Aliyu Mohammed Mu’azu, Managing Director/CEO, Niger State Development Company (NSDC) Ltd, Dosumu Mofoluke Benedicta, Executive Director, Finance & Corporate Services, Asset Management Corporation of Nigeria.

     

  • As ASUU members smile to the banks

    SIR: All things being equal, members of the Academic Staff Union of Universities, in the next couple of weeks, will be smiling to their various banks to collect salaries for the five months they did not work. That is in addition to the contraption called earned allowance, where teachers collect pay for marking scripts and supervising students’ projects! That can only happen in Nigeria.

    Of course, a couple of ASUU members will tell you that they were doing research while the strike lasted. Yes, research via www.google.com! Let them publish the results of the research. A thorough appraisal of the quality of lecturers will show that at least half of those teaching our children now have no such intellectual capacity. What is, essentially, on parade now on our campuses is intellectual bankruptcy.

    If Prof Ukachukwu Awuzie got 40 per cent salary increase for ASUU after a four-month strike in 2009, including payment for the period of the strike and Dr Nasir Fagge got N40bn earned allowance, including payment for five months that ASUU did not work, any wonder what the next ASUU president will do?

    I feel personally pained that ASUU is merely deceiving the public and cheating the system just like the political class.

    Other labour unions are watching with keen interest.  If you collect salaries for going on strike for five months, we as well can go on strike for 10 or 12 months and then compel government to sign a non-victimisation clause, which, according to ASUU’s dictionary, menas payment for the period they were on strike!

    I once told my lecturer friend that he was free to resign, contest election to the Senate, so he could earn an ‘elephant salary’ a month. But with the caveat that he also risked being kidnapped or assassinated like any typical Nigerian politician. Yes, politics is big business but it’s also a big risk in Nigeria.

    Yes, ASUU members, go and smile to the banks at the expense of your students who stayed at home for five months, wasted their accommodation fees, year of graduation, NYSC (service year) and went into avoidable sundry crimes. We know so many children of members of ASUU in private universities in Nigeria and abroad. Can Dr Fagge contradict that?

    It does not matter how much you pump into the varsities, the funds will still be mismanaged by former ASUU members now in management positions (and they are mismanaging everything, including elections).

    As for the rot in the education sector, who are the profiteers?

     

    • Segun Adebiyi

    Yaba, Lagos

  • ‘Global economy will grow faster in 2014’

    ‘Global economy will grow faster in 2014’

    World economic growth will pick up next year, paced by improvements in the United States of America (USA) and the euro area, Mohamed El-Erian, chief executive officer of Pacific Investment Management Company has said.

    The Newport Beach, California-based asset manager said the world economy is likely to expand 2.5 per cent to 3 per cent in 2014, up from 2.3 per cent this year. US growth will accelerate to 2.25 per cent to 2.75 per cent from 1.8 per cent.

    “The US economy is healing,” El-Erian said in an interview. “Household balance sheets are in a better place.”

    El-Erian, whose firm has $1.97 trillion in assets under management, said it’s virtually certain the Federal Reserve will begin moderating its asset purchases by the end of March, with a 50-50 chance of a move next week.

    He said the Fed is likely to couple any tapering announcement with a cut in the interest rate it pays on banks’excess reserves and a strengthened commitment to keep monetary policy easy for an extended period.

    The euro region’s economy will expand by 0.25 pe cent to 0.75 percent in 2014, after contracting 0.4 per cent this year, he said in a news report by Bloomberg.

    The Pimco executive said he was heartened by the broad-based improvement in the US job market last month. Payrolls increased by 203,000, while the unemployment rate fell to seven per cent from 7.3 per cent in October, the Labour Department reported on December 6. The employment-to-population rate also rose while hourly earnings increased.

    “The breadth of improvement was notable,” El-Erian said.

    The Fed’s “hyperactive” monetary policy has given the US economy time to mend after its deepest recession since the Great Depression, according to El-Erian.

    The Fed is buying $85 billion of bonds per month. It has also promised to keep its target for the federal funds rate near zero at least as long as unemployment remains above 6.5 per cent and forecast inflation is not above 2.5 per cent.

    “You’re looking at a transition where the Fed will remain engaged but will alter its policy mix,” by gradually reducing its bond buying while strengthening its forward guidance on short-term interest rates, he said.

    He said he expects the Fed to cut the 0.25 per cent rate it pays commercial banks on excess reserves as part of that transition. While such a move would not have a “dramatic impact,” it would underscore the Fed’s commitment to keeping rates low, he said.

    Banks’ reserves have mushroomed as the Fed purchased securities from them in its bid to lower long-term interest rates. Banks currently have more than $2 trillion in extra cash at the Fed, according to data from the central bank.

    Even as the economy improves next year, it won’t achieve “escape velocity,” according to El-Erian. The big missing ingredient is stepped-up capital spending by companies.

    “We have yet to see business investment really pick up,” he said. “Companies still prefer to use their excess cash for financial engineering” such as buying back shares or boosting dividends.

    Also, Reuters reported that Goldman Sachs strategists expected economic growth in developed economies to accelerate next year and urged investors to buy U stocks, partly on the likelihood that central banks’ monetary policies will remain accommodative.

    The gross domestic product (GDP) growth of the United States and the United Kingdom will exceed expectations, the strategists said, and US stocks look attractive since the Federal Reserve will likely keep short-term interest rates low.

    A key trade in 2014 will be to invest in the Standard & Poor’s 500 stock index while betting against the Australian dollar, said Noah Weisberger, head of the macro equity team within Goldman Sachs’ Global Markets Group. He cited the Fed’s stance of keeping policy rates low through “forward guidance” as a reason to buy US stocks.

    The strategists also touted stocks within the US, Japanese and European banking sectors.

    The S&P 500 has hit record highs this year and surged nearly 27 per cent. The Fed’s $85 billion in monthly purchases of Treasuries and agency mortgages have kept bond yields low, leading investors to seek higher income in stocks.

    Forward guidance refers to the language the Fed uses to tell markets how long it will keep short-term rates near zero. The central bank has kept the key federal funds rate near zero since late 2008 to help the economy recover from recession and has promised to keep it there for a while longer, probably until 2015.

    Risks remain that economic growth could lag their optimistic forecast, the strategists said. Also, if investors in general begin to expect higher economic growth, bonds could sell off and result in volatility for stocks, they added.

    The continued easing of risks stemming from the euro zone will be a positive influence on economic growth in developed economies next year, said Francesco Garzarelli, co-head of the global macro and markets research team. He added that inflation will remain “relatively low.”

    While touting stocks broadly, the strategists recommended betting against commodities such as copper, iron ore and gold. Copper and iron ore prices will suffer from supply growth, said senior metals analyst Max Layton.

    Investors should buy Chinese stocks while “shorting” or betting against copper prices, said Kamakshya Trivedi, executive director within the global macro and markets group. Trivedi said that a stable China might be “good enough” next year.

    Analysts have warned this year of an end to the “supercycle” of strong commodity performance over the past decade in response to a potential unwinding of the Fed’s bond-buying program, along with fragility in the US and European economic recoveries.

  • MY SME STORY: ‘I’ve never enjoyed support from banks’

    MY SME STORY: ‘I’ve never enjoyed support from banks’

    Funsho Okunnwo, Chief Executive Officer, Royal Priesthood Laboratory, is a small and medium scale entrepreneur who has conquered his terrain. In this interview with Bukola Afolabi, the 56 years old pharmacist and graduate of the University of Lagos shares his experience in running an enterprise vis-à-vis challenges and prospects

    Can you tell us exactly what your business is all about?

    I am a pharmacist and I run a pharmaceutical company Royal Safety Laboratory to the class of product and drugs which we call antiseptic disinfectant. These are products that are used to eliminate or kill germs, everywhere like industries, hospital. Some of them are used in theater before the surgery why some are used in the wards, some for patient.

    How much capital did you use to set up shop?

    In 1992 I started with a capital of N100, 000 and I have been turning the money over. Like every small business at that time it was a tough beginning but I got inspiration from the people who encouraged me to start.

    How many employees do you have now?

    Currently, I have about 18 staff.

    Where did you start your business from?

    I started from Ogba Lagos. I rented a three bedroom bungalow in Oke-Ira, Ogba, and that was where I started with just one car, the number continued to increase over the years, but later we had to relocate to Ikorodu due to accommodation problem.

    How much is the business worth now?

    Well I can’t say precisely but I know that we are not less than N2million, if not more.

    How easy was it for you to get the capital then?

    The capital that I started with was gotten through savings from my earning, because I used to work with some companies before I resigned to start Royal Priesthood Laboratory. While I was in the service there was usually one thing or the other that I did to survive. For example, where I have my current office was used for my piggery business. Then I put things together and I was able to raise the starting capital.

    How is your relationship with banks?

    My sincere opinion is that Nigerian banks are not in any way supportive. They have not in any way supported me or Royal Priesthood, I doubt if they are supporting SME’s. For example, I can recall two situations to buttress my point. In the first, I was asking to supply some goods in Lagos sometimes ago and I needed about N600, 000 in the year 2000 but I couldn’t raise the money. I approached the bank but I didn’t have the collateral they were asking for and eventually they didn’t give me. I had to go borrowing from friends and others. Then there was another occasion that I needed to import raw materials and it was going to cost about N500, 000 and I had about N350, 000. So I asked the banks to just give me about N150, 000 to make up the difference, but they did not respond, eventually I had to look for another alternative. So to me even up till today I don’t believe they mean what they say. Interestingly, they are now running after us to come and open account and borrow money; I told them that they want what the Yoruba’s call Ako eyin adiye je ti o mo pe idi ro adiye. (One who eats up a fowl’s eggs voraciously but doesn’t know what it takes to lay eggs.)

    Can you tell us your challenges during these periods?

    On the challenges, there were many. From the start I had accommodation problem because shortly after we started, in less than two years the landlord ejected us from where we started from. We then needed a place that would be acceptable to the regulatory agent, the NAFDAC and Pharmaceutical Council of Nigeria. This must be a self-contained apartment that we will be the only one in the compound, and that sort of accommodation was not so easy to get for rent.

    So, for about a period of one and half years I was looking for another place after we were ejected from the old place because my nature is not to make trouble with anyone. When the landlord ejected us, we just left the place.

    I did not question or query him before we got another accommodation in Ikorodu another rented apartment but by the grace of God we are now operating the business in our own accommodation now. Part of my initial challenge therefore was capital and this would always be there. There was also the challenge of acceptability and when we started many of the hospitals then were skeptical of the quality of the products. Luckily for us, the quality was good and the glory of God today many of them are no longer skeptical about us. Another challenge we were faced with was meeting the requirement of the regulatory body. Many times they came complaining that it was not up to standard in terms of this and that.

    I will say to a large extent that it is a positive challenge and it helped us to continue improving standard. Today, even if they are coming not that they won’t have one thing or the other to say, and we are confident that for any fair or reasonable person everything is in place.

    If you want to advice somebody who wants to start a business, what are the three most important things?

    The first thing I will tell the person is that Leoshe should not look at the capital irrespective of how high the capital may be. Don’t look at the capital, start with whatever you have and then start improving on it. This way you will cut some expenses and save more. Many people actually spend on those things that are not so important and when you have a big project before you, then you would be forced to save towards it. The second thing I will say is the place of honesty in your business because it goes a long way to create credibility for your brand. Today, it’s unfortunate that a lot of people are not honest and they want to cut corners and compromise, especially in terms of the products standards. It is very important to be very honest with your customers, because with time they will get to know you for that and this in itself will be a selling point for you.

    What are the most important mistakes they must avoid?

    I would say that one should never think that without a big capital they cannot start. Interestingly, that is the mistake that many people make and most times they would say I don’t have money or I cannot start. It is sad to note that a lot of Nigerians are not honest when it comes to business; I think that’s a mistake on our part. In addition to all this, it is important to feel free to talk to people about your needs ,there are doors that can be opened to you, just because you opened up to someone.

    What are the prospects SMEs in Nigeria with banks and government policy?

    Well, the government policy I will say it is just in the papers. Government in my mind are not making enough effort to implement the policy and then the banks are ready to give loans to those who will only give them some quick turnover. These would be people who will just go and collect contract papers and terms of collateral are not within the reach of many SME’s. Usually what you find are situations where SMEs have to provide their own capital, electricity, water, to mention just a few.

    Recently the federal government said they have spent N7billion on SME’s through Bank of Industry including N9billion for SME’s, how directly or indirectly are SME’s really benefiting from it?

    I believe that some of the SME’s are accessing the funds. But on my own part the times I needed such money has passed. I have resorted to just doing things my own little way, I don’t think I need them so much because the type of fund they are saying they want to give. I don’t believe that those kind of capital are beyond my reach , so I can generate it within, why do I go out to get it? I am not saying that we are there yet but I will rather want a situation we grow gradually not fast like some people do because that its own problem.

  • U.K. banks must meet Basel rule five years ahead of schedule

    The largest U.K. banks will have to comply with tougher capital rules five years ahead of an international timetable as the Bank of England seeks to bolster lenders’ resilience to crises.

    U.K. banks and building societies including Barclays Plc, HSBC Holdings Plc and Royal Bank of Scotland Group Plc will have to meet capital requirements of the Basel Committee on Banking Supervision by Jan. 1, 2014, the Prudential Regulation Authority said in a statement today. The requirements include a debt limit, known as a leverage ratio, that forces lenders to have equity equal to 3 percent of their assets.

    Enlarge image Bank of England in London

    The largest U.K. banks and building societies will have to meet capital requirements set by the Basel Committee on Banking Supervision by Jan. 1, 2014, the Prudential Regulation Authority, the arm of the British central bank that supervises the largest finance firms, said in a statement today. Photographer: Chris Ratcliffe/Bloomberg

    “These decisions will enhance the stability of the financial sector and strengthen the capital regime in the U.K.,” the regulator, a unit of the British central bank, said.

    Lenders that will have to comply with the faster timetable also include Banco Santander SA’s U.K. unit, LLoyds Banking Group Plc (LLOY), Co-operative Bank Plc, Nationwide Building Society, and Standard Chartered Plc, the PRA said.

    The largest global banks cut the shortfall in the reserves they’ll need to meet Basel capital rules by 82.9 billion euros ($113 billion) in the second half of 2012, leaving a gap of 115 billion euros, according to Basel committee data published in September. The biggest lenders in Europe accounted for 70.4 billion euros of the remaining shortfall.

    Culled from Bloomberg

     

  • Banks mull cut in contributions to Sinking Fund

    Banks mull cut in contributions to Sinking Fund

    Deposit Money Banks(DMBs) are working be-hind the scenes to ensure that the Asset Management Corporation of Nigeria (AMCON) Banking Sector Resolution Cost Fund (Sinking Fund) levy is slashed, The Nation has learnt.

    The Central Bank of Nigeria (CBN), banks and AMCON established the fund to absorb the cost of banking crises. The banks have been contributing 0.3 per cent of their total assets to it since 2010, but the levy was raised to 0.5 per cent earlier in the year. The contributions represent about three to four per cent increase in banks’ total operating costs.

    The CBN contributes N50 billion yearly to the fund which stands at N500 billion after this year’s remittances were credited in September.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke, said in a report titled: ‘Nigerian banking league – The fate of small players,’there is a likelihood of renegotiation of this levy in the near term, as banks continue to effectively use their assets to ameliorate their rising cost-to-income ratio (CIR).

    He said banks’ rising CIR was, particularly, obvious in Access Bank and Ecobank Transnational Incorporated (ETI) among the tier-1 (bigger) banks as at September. Union Bank had the highest CIR in the tier-2 (smaller) banks while Diamond Bank was the only tier-2 bank that reported a significant decline.

    He said a further review revealed that the average CIR increased from 57.3 per cent in June to 64.8 per cent in September, highlighting the impact of the recent policies, including hike in the levy from 0.3 per cent to 0.5 per cent.

    “This presents the need for banks to come up with more innovative way of taming costs especially through the use of technology. In addition, the payment of the 0.5 per cent AMCON levy will constitute further pressure on the banks earnings, due to the increasing rate of the absolute amount in fees paid to the AMCON sinking fund,” he said.

    He explained that on a regional basis, a peer comparison among African countries revealed that Nigerian banks have a higher average CIR of 64.8 per cent while Middle and East African countries reported an average 42.97 per cent CIR.

    “This highlights the ‘uphill climb’ the industry might encounter with the consistent liquidity tightening policies. The dilemma, however, is how the CBN can continue to maintain its price stability objective and equally ease liquidity required to stimulate growth in 2014,” he said.

    According to Renaissance Capital (RenCap), an investment and research firm, the levy’s collection may worsen the liquidity condition in the sector. Its Associate, Africa Equity International Sales, Akintola, Akinbamidele, said the levy is placing additional pressure on more illiquid banks.

    The AMCON was setup to revive and stabilise Nigeria’s banking industry through the purchase of non-performing loans (NPLs) from banks.

    AMCON Chief Executive Officer, Mustafa Chilke-Obi said the corporation has so far acquired over 10,000 NPLs.

     

  • Fashola tasks banks on project financing

    Fashola tasks banks on project financing

    Lagos State governor, Raji Babatunde Fashola, has impressed on banks, not only on the need to get involved in financing public private partnership projects, but to follow up and be sure that such projects are well executed.

    Fashola spoke through his representative, the State’s Commissioner for Finance, Mr. Ayodele Gbeleyi, at Bank Directors Association of Nigeria (BDAN) stakeholders’ forum in Lagos.

    “Bankers do not rise to the occasion in terms of monitoring of these projects. Monitor projects that are financed with depositors’ money. This market is evolving and we need to evolve with it. We need to see better understanding of PPP projects and better structuring of proposals. As banks, we need to manage risk optimally; we need to build capacity for long term funding. There should be continuous market infrastructure that will rise up and support PPP projects,” he stated.

  • ‘Banks biggest beneficiaries of secure environment’

    Banks and financial institutions have been identified as the biggest beneficiaries of a secure environment.

    As such a campaign for the dissemination of information on how to make the environment very secure has been launched between the police and United Bank for Africa (UBA).

    Speaking at the unveiling of the police anti-crime media campaign in Abuja, the Group Managing Director of the United Bank for Africa (UBA), Mr. Phillips Oduoza, said a pointer to fact that secure environments are essential for financial institutions can be seen from the fact that UBA has presence in 19 African countries because of the secure environment presented by the countries.

    Philips Oduoza noted that the reforms intiated by the present Inspector General of Police M D Abubakar has benefited banks and financial institutions which explains why the bank decided to collaborate with the police to create awareness on how to make the environment secure.

    According to Oduoza, UBA “believes that information is very key we are in an era of information technology in may forms and there must be collaboration between the police and the general public.”

    The bank he said also believes that “the general public should be able to pass relevant information to the police and the police has the responsibility to use that information in such a manner to reduce the wave of crime.”

    The bank he added “believes that awareness is key in the fight against crime” and he urged “other financial institutions to join hands with the police to fight crime as UBA will continue to support police in this regards.”

    Also speaking at the unveiling, the Inspector General of Police, Mohammed Abubakar called on other private and corporate bodies to “as a matter of corporate social responsibility, partner with the police in their stride to provide a safe and secure environment for economic development and other life’s pursuits.”

  • How banks can help SMEs create jobs

    How banks can help SMEs create jobs

    Small and Medium Scale Enterprises (SMEs) hold the ace for job creation.Banks have realised that their survival depends largely on creating quality loans and volume deposits from the SMEs. They can do this by keeping the interest on loans low and making access to funds easier for the SMEs to create jobs, writes COLLINS NWEZE.

    There is good news from the Small and Medium Scale Enterprises (SMEs) subsector. Banks have recognised that the SMEs and medium-sized enterprises sector have significant growth potential and hold the key to job creation.

    At Skye Bank, Diamond Bank, FirstBank, Ecobank and Heritage Bank, among others, there is a new drive to get SMEs off the ground and keep them running. The best way of doing that is through SMEs funding from the lenders’ balance sheets and via the Central Bank of Nigeria’s (CBN) N220 billion special fund for the subsector.

    The Chief Executive Officer of African Guarantee Fund, Felix Bikpo, made this known, saying that the sector has the capacity to create two-thirds of the jobs needed to tackle unemployment has made the subsector more significant. He said the subsector holds the ace to taming unemployment in the country and, as such, must be made active if the unemployment rate, which is put at 24 per cent of adults between the ages of 18 and 60, is to drop.

    But he put a caveat: “Nigeria must tackle the challenges of infrastructure, especially power and roads, to create new SMEs or keep existing ones in business. There is also the need to create access to market and provide capacity, especially in keeping company financial records.

    The CBN defines SMEs according to asset base and number of employees. The criteria are an asset base of between N5 million and N500 million, and a staff strength of 11 to 300 employees.

    Findings showed that banks are becoming interested in the SMEs sector as yields on government securities drop. Equally, the raise to 50 per cent of Cash Reserve Requirement on public sector deposit makes SMEs the best place for banks to raise cheap deposits.

    Director, Enterprise Development Centre (EDC), Pan Atlantic University, Peter Bankole, said if a country wants to develop, it must start taking SMEs’ lending seriously. He said the National Bureau of Statistics (NBS) survey conducted last year showed that the SMEs sector will continue to play a dominant role in job creation in the economy.

    Bankole said the challenge remains that majority of SMEs are micro, stressing that the government was trying to move as many as possible from micro to small businesses because that will give better multiplier effects for the economy and create jobs.

    The International Finance Corporation (IFC) is partnering with 10 local banks to de-risk lending to the SMEs. IFC’s Nigeria Country Manager Solomon Quaynor said the corporation has realised that banks decry high risk transactions, such as lending to SMEs. He noted that when the subsector is unable to access funds, jobs may be lost and creating new ones becomes a mirage.

    He said the IFC has stepped in to de-risk such loans by providing financial infrastructure and developing collateral registry that will assist banks in lending to the subsector.

    Quaynor said since a lot of the SMEs do not have landed assets, except receivables, IFC is working with Corporate Affairs Commission (CAC), the Ministry of Trade and Investment to build a Registry system that will include the ability of SMEs to borrow from banks.

    General Manager, IBM Africa, Taiwo Otiti, said the SMEs tools help entrepreneurs manage their businesses properly, and in the process, making it attractive for banks to grant them loans and subsequently create jobs. He said SMEs remain the engine of growth for the economy, adding that they are the largest employer of labour within the economy. He said that when the SMEs businesses are run well, they will have the capacity to employ more people. “Part of the SMEs teaching is how to package their businesses to attract bank loans making it easier for them to create jobs,” he said.

    Analysts said reforms in the banking sector have also put higher risk management plans in place to ensure that SMEs get loans and repay them as and at when due.

    A Lagos-based SMEs Trainer and Facilitator, Chima Maduka, said the subsector constitutes an important vehicle for national development and could integrate a large segment of the populace in productive economic activities. He said the economies of the Asian Tigers or Asian Dragons of the highly free and developed Hong Kong, Singapore, South Korea, and Taiwan, owe their climb to economic pre-eminence largely to the existence of well-organised and efficiently run SMEs.

    He said SMEs remain a vehicle for employment generation and they provide opportunities for entrepreneurial sourcing, training, development and empowerment. Developing nations, such as Nigeria characterised as low income earners by the World Bank, value SMEs for several reasons.

    Banks have also taken major steps to see the emergence of well-structured and funded SMEs. Ecobank last week, signed a $50 million agreement with African Guarantee Fund to enable the institutions to work together to unlock the potential of SMEs in Benin, Burkina Faso, Cameroon, Côte d’Ivoire, the Democratic Republic of Congo, Kenya and Nigeria to deliver inclusive growth.

    Ecobank Group Chief Executive Officer Thierry Tanoh said the agreement reaffirms the lender’s commitment to supporting small and medium-sized businesses. He said the collaboration with AGF will further enable the SMEs to play a critical role in the socio-economic development of Africa, especially as it concerns job creation.

    The Managing Director/Chief Executive Officer of Enterprise Bank Limited, Ahmed Kuru, reiterated the bank’s commitment to supporting SMEs. He described the SMEs’ sector as critical to the development of the economy and job creation.

    Kuru, who spoke in Lagos while receiving the leadership of the Nigerian Association of Small and Medium Enterprises (NASME), led by Lizzy Okereke, the association’s Deputy President, Finance and Administration, said the lender realised the importance of SMEs in growing the economy and has since thrown its support to SMEs.

    He said the bank also supports organisations like NASME that champion the course of SMEs in the country. He called for knowledge sharing and capacity building among those that are interested in benefiting from the support that the banks are giving to the sector.

    FirstBank is giving SMEs the opportunity to grow their businesses so they can create the much-needed jobs. The bank said although the sector has the potential to employ a large portion of the population, lack of support from banks has derailed the sector’s vision.

    Diamond Bank reiterated its commitment to supporting small and SMEs in a bid to contribute to the economic development in a sustainable manner. The Managing Director, Diamond Bank, Mr Alex Otti, said there is need to empower micro and medium entrepreneurs in the country in areas where there were lack of funds.

    Skye Bank Plc has also organised a capacity building seminar for entrepreneurs and other small scale business owners to help them succeed in their businesses. The bank’s Group Managing Director/Chief Executive Officer, Kehinde Durosinmi-Etti said the seminar was part of the lender’s plan to support and promote the growth of the sector and indirectly create jobs for the population.

    The maiden Skye SMEs seminar with the theme: It is possible had in attendance many operators in the SMEs sector who came to gain fresh and new insights and trends into the operations, financing and management of SMEs.

    Durosinmi-Etti, who was represented by the bank’s Executive Director, Corporate and Investment Banking, Timothy Oguntayo, said the SMEs sector provides more opportunities and employment than the mining, oil and gas sectors. “The SMEs sector has the capacity to drive business and rural economic development in the country”, he said.

    Noting that over 32 million Nigerians were involved in the sector, Durosinmi-Etti said if the sector was well developed, it would have the capacity to solve the unemployment problem in the country. He promised that the lender would continue to play the role of a facilitator and development partner to help young businesses grow and realise their full potentials to the benefit of the nation, the people and the economy.

    Heritage Bank has unveiled plans to provide funding for the micro, small and medium enterprise (MSME) sub- sector of the economy.

    Speaking at the bank’s MSME Clinic held in Lagos, the bank’s Managing Director, Ifie Sekibo expressed the lender’s commitment to assisting MSMEs to become large corporate organisations that can be quoted on the Nigeria Stock Exchange (NSE) in the next three years.

    To further strengthen the partnership, the bank offers financial advisory services to the MSMEs, it is already collaborating with Enterprise Development Centre, Fate Foundation, Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and Lagos Chamber of Commerce and Industry (LCCI) on training the MSME operators.

    Despite these claims of supporting SMEs financially by banks, Ubiji Eke, an entrepreneur based in Lagos said the lenders are not doing enough. He said accessing bank loans has a lot of bottlenecks that make it difficult for SMEs to survive left alone creating jobs for the economy. He cited high interest rate which is over 25 per cent for SMEs. He said a lot of businesses cannot cope borrowing at that rate.

    He said banks need to review their rates, if they are serious about creating jobs through SMEs. “The rates at which are given have to be reviewed downwards if jobs are to be created,” he said.

    He said that by allowing SMEs access to credit at a reasonable rate, will create opportunities for the subsector and enhance their productive capabilities. He said high level of production will lead to distribution and merchandise of produced goods which will keep a large number of the population busy and committed to the role of job creation.

     

     

  • Banks threatened as AMCON begins levy collection

    Banks threatened as AMCON begins levy collection

    Banks may face hard times as the Asset Management Corporation of Nigeria (AMCON) begins to collect the mandatory 0.5 per cent levy from them.

    The sinking fund levy is 0.5 per cent of banks’ total assets. It is in line with the regulatory requirement setting up the corporation. The fee was increased from 0.3 per cent to 0.5 per cent earlier in the year. The rate hike represents about three to four per cent increase in total operating costs.

    According to Renaissance Capital (RenCap), an investment and research firm, the levy’s collection may worsen the liquidity condition in the sector.

    Its Associate, Africa Equity International Sales, Akintola, Akinbamidele, said: “AMCON may be looking to collect its annual levies from the banks. To date, the banks have been providing for these, but the cash has not been collected. It now looks as if these funds could be removed from the banking system, placing additional pressure on more illiquid banks.”

    He said the liquidity crunch that saw the Nigeria Interbank Offered Rate (NIBOR) climbing to 60 per cent on September 18, was caused by the delayed impact of the increase in the Cash Reserve Requirement (CRR) for public sector deposits to 50 per cent. The policy was introduced August 7. The CRR is a portion of banks’ deposits kept with the CBN and was at 12 per cent before the present hike.

    “On our estimates, that raised the blended CRR for the average Nigerian bank to 17 per cent versus Kenyans at 5.25 per cent and Ghanaians at nine per cent,” he said.

    He said efficient and liquid banks, such as, GTBank could adapt and have good balance sheets, while the best in class liquid banks, with high Cash Adequacy Ratios (CAR) like Zenith, United Bank for Africa (UBA) may emerge net placers on the interbank market.

    Data obtained from the Financial Market Association of Nigeria (FMDA), showed that as a result of these restrictions, NIBOR call (overnight) tenor rose 3,225 basis points to 60 per cent on September 18. The rate was at 44 per cent on September 16, from 28 per cent the previous day. The NIBOR was at average of 14 per cent before the CRR hike took effect, FMDA said.

    Analysts at Afrinvest West Africa Plc, equally expressed concerns over both policies, saying there will be ‘unavoidable impact’ of the new 50 per cent CRR on majority of the banks going forward. The CRR policy, they said, implies significant increase in the banks’ cost of funds, a tensed pressure on the Net Income Margin (NIM) as a larger proportion of the deposits will now be held in CBN’s coffers as reserves.

    Afrinvest said the affected banks might have to sell down on investment securities to call back the 38 per cent, and also consequently, may re-navigate their deposits mobilisation strategies, re-price risk assets in line with their “cautious” lending strategy and adjust business models.

    Also to affect banks’ profitability is the implementation of the revised guide to bank charges. The CBN said bank customers will from 2016, begin to enjoy free Commission on Turnover (COT) on all their transactions. The policy took effect on April 1, has seen the COT gradually drop to N3 per mille this year. It will be N2 per mille in 2014; N1 per mille in 2015 and zero per cent per mille in 2016.

    Banks have also agreed to put a stop to all charges associated with the use of Automated Teller Machines (ATMs). The agreement was the highpoint of a meeting between the Bankers Committee made up of Chief Executive Officers of Deposit Money Banks, directors and top officials of the CBN and Nigeria Deposit Insurance Corporation. Before now, account holders had been made to pay a flat rate of N100 per withdrawal any time they used other banks’ ATMs.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke said the banking industry is now confronted with the reality of declining fee incomes, mobile money and dollar denominated capital sourcing.

    He predicted that the era of “real banking” appears to be gradually re-emerging as traditional sources of high income/profitability continue to come under threat from increased competition and tighter regulation. He predicted that in the next five years, outlook on yields and fee income remains downwards, necessitating the need for banks to focus on lending to the real sector. Also, banks are expected to develop and grow the depth of their core retail banking businesses to retain and amplify cheap deposits.