Banks are holding a string of meetings to finalise their recapitalisation plans ahead of the April 30 deadline for the submission of their implementation strategies to the Central Bank of Nigeria (CBN).
The implementation/ work plan will detail how each of the banks intends to achieve its new minimum capital requirement within the two-year timeline stipulated by the apex bank.
The details which will cover the two-year compliance period ending March 31, 2026, comprise step-by-step activities, transactional details, instruments and other options.
The CBN last month released a circular on review of minimum capital requirement for commercial, merchant and non-interest banks. It increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance started yesterday and ends on March 31, 2026.
Banks’ insiders told The Nation yesterday that directors of the banks and professional parties were making final adjustments of market-based values and timelines.
They said about one-third of banks plan to increase their capital base mainly raising their capitals adequacy, while others outline prospects for combination of capital raise and mergers /acquisitions.
Two banks are said to be considering downgrade of their licences as final options in addition to prospects of mergers and acquisitions.
While all the tier 1 banks appeared confident of raising the required funds on a stand alone basis, they also indicated their preparedness to explore acquisition of small banks.
According to timelines of activities, about seven banks are expected to float their share offerings in the second half of this year. The capital market is expected to be busier in 2025.
An investment banking advisor said many big banks were seeking to raise more-than-needed funds in order to be in a position to cherry-pick when the recapitalisation fever pitches in mid-2025.
Under the new recapitalisation framework, banks have three broad options of injection of new equity capital, mergers and acquisitions and upgrade or downgrade of licence authorisation.
A source confirmed that Jaiz Bank has successfully scaled the recapitalisation hurdle with nearly N9 billion in excess of its national non-interest banking new capital requirement of N20 billion.
Jaiz Bank had closed 2023 with share capital and share premium of N18.62 billion. Multiple parties in the know said the bank has raised additional N10.05 billion through a recent private placement of 10.048 billion ordinary shares of 50 kobo each at N1 per share.
It has also secured preliminary approvals to float a rights issue of about 5.41 billion ordinary shares of 50 kobo each at offer price of N1 per share. This may take the bank’s minimum capital base, under the new definition, to more than N34 billion.
A source close to the bank said it could consider acquisition and “other strategic investments” where the offers align with its growth objectives.
Shareholders of Access Holdings at the weekend mandated the company to raise $1.5 billion and N365 billion in a multi-tranche, multi-currency and multi-instrument capital raising plan.
The N365 billion rights issue is expected to be the main plank of the recapitalisation plan, while the $1.5 billion foreign-denominated issuance, which broad mandate also includes equity offering, places the group, with a bold acquisition records, in position to play big in the mergers and acquisitions market.
Access Holdings already has share capital and share premium of N251.81 billion, with about N248 billion to meet its international authorisation category of N500 billion.
Shareholders of four of Nigeria’s largest banks- Zenith Bank, Guaranty Trust Holding Company (GTCO), United Bank for Africa (UBA) and Stanbic IBTC Holdings Plc– are scheduled to meet next month to approve recapitalisation plans involving about N3 trillion.
Zenith Bank, which is rounding off conversion to holding company structure ahead of the recapitalisation, is seeking a broad mandate to double its issued share capital. The bank is creating new 3.4 billion ordinary shares of 50 kobo each for a multi-layered capital raising exercise that could see the bank with nearly N1 trillion.
GTCO is seeking shareholders’ approval for a $750 million multi-tranches, multi-instrument capital raising. The group is creating new 15 billion ordinary shares of 50 kobo each for its new share issuance programme.
UBA, which has called a meeting later next month, is seeking approval to create additional 10.8 billion ordinary shares of 50 kobo each for issuance to both domestic and foreign investors.
Fidelity Bank, which has a subsisting recapitalisation exercise, is expected to roll out additional recapitalisation measures.
FBN Holdings, which had secured earlier approval to raise some N150 billion, at the weekend cancelled an extraordinary general meeting called to consider a N300 billion capital raising plan. Market analysts expected FBN Holdings to review its recapitalisation plan upward.
Nigeria’s ambition to reach a $1 trillion economy hinges on a robust and resilient financial system. Banks play a critical role in this system, acting as the backbone for channeling funds from savers to businesses and individuals who fuel economic activity. However, a healthy banking sector requires well-capitalised institutions that can withstand internal and external shocks. This perhaps explains why the Central Bank of Nigeria has once again set a target for the banks to inject fresh funds into the system. In this report, Assistant Editor Nduka Chiejina examines the issues
●CBN headquarters, Abuja
The Nigerian banking sector plays a pivotal role in the nation’s economic growth and development. Banks act as the backbone, facilitating financial intermediation – channeling funds from savers to borrowers who can invest and contribute to economic activity. However, a healthy banking system hinges on its robustness and resilience to withstand internal and external shocks. In recent times, concerns have been raised about the adequacy of capital held by Nigerian banks. This has reignited discussions on bank recapitalization as a critical strategy to bolster the health and stability of the financial system.
Bank capital refers to the financial cushion a bank maintains to absorb potential losses and continue operating as a going concern. It acts as a safety net, protecting depositors’ funds and ensuring the bank’s solvency. There are two main types of capital: Tier 1 Capital (Core Capital). This is the highest quality and most critical form of capital. It consists of equity capital (common stock and retained earnings) and disclosed reserves. Tier 1 capital acts as a primary buffer against losses, absorbing unexpected financial strains before depositors’ funds are at risk.
Tier 2 Capital (Supplementary Capital). This tier provides a secondary layer of protection and includes instruments such as perpetual preference shares and subordinated debt. While considered less loss-absorbent than Tier 1 capital, Tier 2 capital can still play a significant role in supporting a bank’s overall capital adequacy.
The Rationale for Recapitalisation
There are several compelling reasons why bank recapitalisation is a necessary step to strengthen the Nigerian banking sector:
A higher capital base allows banks to absorb unexpected losses without jeopardizing their solvency. This is particularly important in the face of economic downturns, credit defaults, or unforeseen market fluctuations. Stronger capital buffers prevent a domino effect where a single bank failure can trigger a broader financial crisis.
Adequate capital allows banks to lend more confidently, knowing they have a larger buffer to absorb potential loan losses. This translates to increased credit availability for businesses and individuals, fueling economic activity and investment. A well-capitalised banking system inspires greater public confidence. Depositors are more likely to entrust their savings to banks knowing their funds are well-protected. This fosters financial stability and encourages long-term investment.
Stronger capital adequacy ratios are increasingly becoming a global benchmark for sound banking practices. Nigerian banks with higher capital levels will be better positioned to compete with international financial institutions and attract foreign investment. The Central Bank of Nigeria (CBN) has set minimum capital adequacy ratios (CARs) for banks operating in the country.
Recapitalisation ensures banks meet these regulatory requirements, promoting a level playing field and a safer financial environment.
The Nigerian banking sector has witnessed significant growth in recent years. However, concerns persist about the adequacy of capital held by some banks. The 2008 global financial crisis exposed vulnerabilities in the system, highlighting the need for stronger capital buffers.
The CBN, recognising these vulnerabilities, has taken proactive steps. In 2014, the CBN introduced a “Vision 20:2020” programme aimed at transforming Nigeria into one of the 20 largest economies globally by 2020. A key component of this vision was strengthening the banking sector through increased capital requirements. Similarly, the recent announcement of a recapitalisation programme for Nigerian banks underscores the CBN’s commitment to a more robust financial system.
Why the CBN Excluded Retained Earnings in Nigerian Bank Recapitalisation
The Central Bank of Nigeria’s (CBN) decision to exclude retained earnings from Tier 1 capital during the ongoing bank recapitalisation exercise has sparked discussions within the financial sector. While official CBN pronouncements haven’t explicitly elaborated on this exclusion, here are some insights into the rationale behind such a move:
Tier 1 capital, consisting primarily of equity capital (common stock) and disclosed reserves, represents the highest quality capital. Equity acts as the first line of defense against losses, as it can be entirely written down before depositors’ funds are impacted. By excluding retained earnings, the CBN might be aiming to ensure a stronger core capital base that can absorb significant losses without jeopardizing bank solvency.
Retained earnings, while technically part of equity, can be influenced by a bank’s profit distribution policies. Dividends paid to shareholders reduce retained earnings. The CBN might be concerned that allowing retained earnings to contribute to Tier 1 capital could incentivize excessive dividend payouts, thereby diluting the core equity base.
Accounting practices and historical profitability can significantly influence the level of retained earnings reported by a bank. The CBN might be concerned about potential manipulation of accounting practices to inflate retained earnings figures. Excluding them from Tier 1 capital would necessitate fresh injections of equity from shareholders, promoting greater transparency and a more accurate picture of a bank’s core capital strength.
By excluding retained earnings, the CBN might be sending a strong signal to banks and investors that a significant capital injection is necessary. This fresh capital injection, likely in the form of new shares issued by the banks, would directly strengthen the core equity base and demonstrate a renewed commitment from shareholders to the bank’s long-term health. A recapitalisation exercise funded primarily by retained earnings might not inspire significant confidence among new investors. Fresh capital injections can attract new shareholders and bolster overall investor confidence in the Nigerian banking sector.
On the flip side, excluding retained earnings can limit the amount of capital banks can allocate towards dividends in the short term. This could negatively impact shareholder returns. Smaller banks with limited access to fresh capital might struggle to meet the new requirements. This could lead to consolidation within the sector, potentially reducing competition.
However, the CBN’s decision to exclude retained earnings from Tier 1 capital reflects their focus on building a more resilient banking system. While there might be short-term implications for profitability and potential consolidation, a stronger core capital base ultimately benefits the entire financial sector by fostering stability, public confidence, and long-term growth. Recapitalisation, when implemented thoughtfully and strategically, is a powerful tool to strengthen the Nigerian banking sector. By increasing capital buffers, banks will be better equipped to weather the storms.
The CBN in reviewing the minimum capital requirements for banks stated that “For existing banks, Commercial banks with: International Authorisation N500 billion; National Authorisation N200 billion; Regional Authorisation N50 billion; Merchant banks, National Authorisation N50 billion; Non-Interest with National Authorisation N20 billion and Regional Authorisation N10 billion, the capital requirements specified above shall be paid-in capital (Paid-up plus Share Premium) only. Bonus issues, other reserves and Additional Tier 1 (AT1 Capital shall not be allowed or recognised for the purpose of meeting the new minimum capital requirements.”
The CBN’s directive that only “paid-in capital (Paid-up plus Share Premium)” will be considered for meeting the new minimum capital requirements reinforces the emphasis on high-quality core capital (Tier 1). This type of capital, unlike retained earnings or bonus issues, represents fresh equity injections from shareholders. Since retained earnings can be influenced by dividend payouts, potentially diluting the core equity base, by excluding bonus issues and other reserves, the CBN directly addresses this concern and ensures a stronger core capital position for banks.
The CBN’s exclusion of “other reserves” further aligns with the potential concern of manipulation of accounting practices. Other reserves can encompass a wide range of items, and their inclusion could potentially lead to inflated capital figures. By focusing solely on paid-up capital, the CBN promotes greater transparency and a more accurate picture of a bank’s core capital strength.
The requirement of fresh capital injections through paid-up shares sends a clear message to shareholders and investors. Banks will need to demonstrate a renewed commitment to the long-term health of the institution by raising fresh equity. This focus on new capital can attract new investors and bolster overall investor confidence in the Nigerian banking sector, a key factor for long-term growth.
Capital Adequacy Ratio (CAR):
The CBN emphasised that while “paid-in capital (Paid-up plus Share Premium)” is the primary focus for meeting minimum requirements, “relevant reserves” will still be considered when calculating the risk-based capital adequacy ratio (CAR). By continuing to consider relevant reserves in CAR calculations, the CBN acknowledges the importance of a comprehensive risk management framework. Reserves can act as buffers against specific risks a bank might face.
The Capital Adequacy Ratio (CAR) plays a crucial role in the ongoing bank recapitalisation exercise in Nigeria, acting as a vital metric for assessing a bank’s financial health and risk management capabilities.
Here’s how it fits into the bigger picture: CAR is a key regulatory ratio that measures a bank’s capital adequacy in relation to its risk-weighted assets. It essentially indicates the amount of capital a bank has available to absorb potential losses before its solvency is jeopardized.
The CBN’s focus on core capital (equity) during recapitalization directly impacts CAR calculations. By requiring banks to raise fresh capital through paid-in shares, the CBN is aiming to increase their core equity base (Tier 1 capital). This directly strengthens a bank’s CAR, as Tier 1 capital carries the highest weight in CAR calculations. A higher CAR signifies a better buffer against potential losses. This allows banks to take on calculated risks associated with lending activities without jeopardizing their financial stability.
The CBN also said it “assessed various factors in determining the appropriate level of the minimum capital requirements. These include: Risk profile of banks; Global and domestic headwinds and their potential impact on banks’ balance sheets; Impact of inflation; and Stress tests of banks’ balance sheets, to gauge their resilience to absorb current and unexpected shocks.”
By assessing the individual risk profile of each bank, the CBN can set targeted capital requirements. Banks with higher risk profiles, due to factors like loan types or exposure to volatile markets, will need to raise more capital to ensure they have adequate buffers. Higher capital requirements for riskier activities can incentivize banks to adopt more prudent lending practices, ultimately contributing to a more stable financial system.
Anticipating potential challenges like economic downturns or global financial crises allows the CBN to set capital requirements high enough to withstand such headwinds. This ensures banks have sufficient resources to absorb potential losses and maintain solvency. By requiring banks to raise capital now, the CBN is proactively strengthening the banking system’s resilience before external shocks occur.
Inflation erodes the purchasing power of money. Higher capital requirements help to account for inflation, ensuring banks maintain an adequate real capital base to absorb losses and support lending activities. By raising capital through recapitalisation, banks can maintain a stronger capital buffer even in inflationary environments, promoting long-term stability.
Stress tests simulate various economic scenarios and assess how banks would perform under stress. This helps the CBN identify potential weaknesses in individual banks’ capital positions. The results of stress tests can be used to determine which banks require the most significant capital injections during recapitalisation. This ensures resources are allocated strategically to address the most pressing vulnerabilities.
By considering these factors, the CBN has set minimum capital requirements that are tailored to the specific risks and challenges faced by the Nigerian banking sector. The proposed recapitalisation efforts, focusing on raising core capital, directly address these identified needs.
A successful recapitalisation exercise, based on a comprehensive assessment of risks and vulnerabilities, will lead to banks with stronger capital buffers and will be better equipped to weather economic storms and unexpected shocks. A more robust banking system fosters greater public confidence in the safety and security of deposits. Recapitalisation can promote a more stable financial environment, attracting investment and supporting long-term economic growth.
CBN Provides Options for Banks to Meet Recapitalisation Requirements
The circular on the reviewed minimum capital requirements for banks, stated that “Banks may meet the new requirement through the following options: Issuance of new common shares (by way of public offer, rights issues, or private placements); Mergers and Acquisitions (M&As); or upgrade/downgrade of their respective license category or authorisation.
“The CBN will issue guidelines to prescribe the definition, options and approaches to meeting the new minimum capital requirement. The CBN will actively monitor and supervise the recapitalisation process to ensure compliance with set guidelines. This will involve the conduct of on- and off-site reviews, verification of capital, periodic interventions when necessary and broader stakeholder engagements.”
The CBN offered banks three primary methods to achieve the required capital levels: Issuing New Common Shares. This allows banks to raise fresh capital directly from investors through various methods like Public Offers, this involves selling shares to the general public on the Nigerian Stock Exchange (NSE). Rights Issues, in which case existing shareholders are offered the right to purchase additional shares at a pre-determined price. Private Placements, shares are sold directly to a select group of institutional investors.
Mergers and Acquisitions (M&As). This approach allows smaller banks to consolidate with stronger institutions, achieving the required capital base through combined resources. With regards to License Up/Downgrade, banks can adjust their license category (national, regional) based on their new capital position. This option might be suitable for banks that strategically decide to operate with a smaller footprint.
Experts’ opinions
Professor Uche Uwaleke of the Nasarawa State University said, “recapitalisation of banks is justified by the erosion of the Capital base of banks due to huge depreciation of the naira over the years.”
He also stated that “the exclusion of retained earnings is meant to ensure a very high quality of minimum capital requirement for banks given the nature of their operations. This is why the CBN is emphasising fresh capital injection since some proportion of retained earnings may have been impaired by losses.
“Nevertheless, in order to make it a lot easier for banks to meet the minimum requirements within the two years deadline, the CBN should allow the inclusion of retained earnings on the condition that they are unimpaired by losses.”
Mr Gbolade Idakolo, Managing Director/CEO SD&D Capital Management Limited said “the exclusion of retained earnings or shareholders’ funds as additional Tier 1 capital shows the CBN wants to distinguish fresh funds from existing funds which could be subject to regulatory infractions because shareholders’ funds is not a statutory capital base. CBN also wants to be able to trace the legitimacy of funds for the recapitalisation process by banks.”
He added that the recapitalisation of banks in categories is long overdue and advocated for the expansion of our economy. “The Tier 1 banks operating internationally have already envisaged this process and have started making provisions early enough. Nigeria has the highest GDP in Africa and for us to maintain that position and also operate a trillion dollar economy then the banks must be adequately capitalised.
“A trillion dollar economy must have local capacity to initiate and execute million dollar transactions locally without foreign intervention in key areas of development like oil and gas, steel production, mining, mega construction projects and Public Private Partnerships with the government.
“This can only materialise if we have adequately capitalised banks that can rise to the occasion. Nigerian banks also need to take their pride of place in Africa as regards capitalisation because presently Nigerian banks are not among the most capitalised in Africa.
“Therefore, this new recapitalisation policy will adequately position our banks for the emerging economy that will adequately equip them to take on large ticket transactions in Nigeria and African continent,” he stated.
Recapitalisation, when implemented thoughtfully and strategically, is a powerful tool to strengthen the Nigerian banking sector. By increasing capital buffers, banks will be better equipped to navigate economic cycles and support the nation’s ambitious growth targets. A robust and resilient banking system is a cornerstone for a thriving $1 trillion Nigerian economy.
The banking system, supported by higher profit margins, has a historic opportunity in the next few years to reinvent its business model—something it needs to do.
Despite margins strengthened by elevated interest rates, banking is the lowest-valued sector in the world, trading at a 0.8 price-to-book ratio, while the rest of the global economy trades at 2.7. Price to book reflects the theoretical amount that shareholders would get if all assets were liquidated and all debts repaid. Trading below 1.0 means the markets see the banking system in a negative light.
Clearly, the banking model needs future-proofing. Banks are losing share in the global intermediary landscape to nonbanks, which are cherry-picking high-profitability businesses. One reason banks are trading so low is that they are very complex. Banking is a mix of three things: distribution (branches and sales staff), transactions, and balance sheet management, which measures how banks are transforming deposits into loans and managing credit risk. Distribution and transactions are profitable and require little capital, so they create value. Keeping things on the balance sheet does not create value, so the banking system needs to consider a new approach to balance sheet management.
Banks could consider separating the core balance sheet from distribution and transaction, following a path taken by utilities and telcos. You don’t necessarily have to break up the bank, but by unbundling, you could create more transparency for investors into what the bank is doing. Banks could speed up the metabolism of balance sheet management through faster securitization. Technology, especially AI, can reinvent every layer of banking, making it more cost-efficient. One more thing we can’t forget: risk. Ultimately, the best-performing banks are the ones that get risk right. It’s not just traditional credit risk but also new types, including cyber and geopolitical risks.
Banks today have it tough. They are expected to operate with incredible cost efficiency and robustness; to run the general ledger and balance sheet; to do asset liability management, matching everything; and to never make a mistake. That alone is a huge task. But banks are also expected to focus on innovation and growth and produce personalized services for every single customer. These two sets of expectations create tension.
“The best US banks operate at a cost-to-asset ratio of 200 basis points, while the best European banks can do 70 basis points or even less.”
In the next few years, banks will need to get the basics right and at the same time reinvent themselves. On one hand, they need to be digital and AI-driven, low-cost, and efficient. On the other hand, they need to be visionary, go into new sectors, and create end-to-end customer journeys.
To create powerful customer journeys, banks can really own the customer relationship. This may enable them to understand clients’ needs and serve them more effectively, bringing higher margins and stronger customer attachment. For example, instead of just offering mortgages, banks could help buyers find a home, move in, and finance it. In payments, banks could offer coupons, e-gifting, online marketplaces, and location-based services. For business clients, banks could add a unified, finance- and payment-enabled platform that integrates services including administrative, tax, accounting, business intelligence, benchmarking, and B2B marketplaces.
An ideal banking model might involve strategies from different geographies. In some areas of banking, the United States is more advanced, because it disintermediates more and does more securitisation. In others, Europe is more advanced, digital, and efficient.
The best American banks operate at a cost-to-asset ratio of 200 basis points, meaning they incur costs of two cents for every $1 of assets managed. The best European banks can operate at a cost-to-asset ratio of 70 to 80 basis points or even less. In Europe, the best banks do 70 to 80 per cent of their sales digitally. Some European banks can approve a mortgage application within a day. At the best American banks, it still takes weeks to get a mortgage. Asian banks, especially Indian banks, are the stars of how to go beyond banking and discover new avenues and differentiate. They operate almost like tech companies in many ways.
A provocative vision for the bank of 2035 might be a platform of networks—essentially a holding company for a collection of businesses—including e-commerce, payments, consumer lending, real estate, and a truly personalized advisory business, moving beyond financial into insurance, healthcare, and other things. This could be a $1 trillion market cap bank. It would still do everything that banking is doing now—it would still be very heavily regulated and very stable—but it would be unbundled to create value.
Dietz, a Senior Partner in McKinsey’s Vancouver office, contributed this piece.
Investors appeared to be realigning their portfolios ahead of the announcement of the audited results and dividends of Nigeria’s leading banks.
Transactions on the shares of three leading banks-United Bank for Africa (UBA) Plc, FBN Holdings Plc and Access Holdings Plc accounted for one-third of turnover at the country’s stock market.
Transaction pattern showed that investors were opening up market orders for banking shares, a practice common when the buy side substantially outweighs the sell side and investors are desirous of closing deals at premium price.
While the overall market recorded average decline of 0.42 per cent, the NGX Banking Index, which tracks the banking sector, posted average return of 4.19 per cent at the weekend.
The Nation had reported that banks’ results are currently undergoing regulatory screening at the Central Bank of Nigeria (CBN), after which the audited financial statements and the dividend recommendations will be released to the investing public.
The boards of the banks, in regulatory filings on the completion of the internal approval processes for their audited results for 2023, had earlier indicated that they had recommended payment of dividends for the business year.
There are expectations that banks, which had reported above-average performance in third quarter 2023, would consolidate their performance and declare higher dividends for the business year. Banks have been on the positive side of the foreign exchange (forex) crisis. However, the CBN has cautioned banks against streaming forex revaluation gains into distributable earnings.
The trio of UBA, FBN Holdings and Access Holdings were the most active stocks at the Nigerian Exchange (NGX) last week with a joint turnover of 564.882 million shares worth N16.990 billion in 8,493 deals, representing 32.56 per cent and 34.85 per cent of the total equity turnover volume and value respectively.
Also, banking stocks accounted for seven out of the 10 most-traded stocks during the week, with banks such as Guaranty Trust Holding Company (GTCO), Zenith Bank, Fidelity Bank and Jaiz Bank among the top 10 most active stocks.
Total turnover at the NGX however dropped marginally to 1.735 billion shares worth N48.755 billion in 45,237 deals as against a total of 1.773 billion shares valued at N52.867 billion traded in 44,713 deals two weeks ago.
The bank-dominated financial services sector remained atop activity chart with 1.273 billion shares valued at N31.077 billion traded in 23,066 deals; thus contributing 73.36 per cent and 63.74 per cent to the total equity turnover volume and value respectively. The conglomerates sector followed with 123.237 million shares worth N1.772 billion in 3,205 deals while the consumer goods sector placed third with a turnover of 104.854 million shares worth N5.292 billion in 6,166 deals.
The All Share Index (ASI)- the common, value-based index that tracks share prices at the NGX, closed weekend down at 104,647.37 points as against its week’s opening index of 105,085.25 points. Aggregate market value of all quoted equities also declined from its week’s opening value of N59.416 trillion to close weekend at N59.169 trillion.
There were 50 gainers and 32 losers during the week compared with 55 gainers and 24 losers in the previous week. Juli Plc continued its chart-leading appreciation with a gain of 46.10 per cent to close at N7.86. NEM Insurance trailed with a gain of 45.11 per cent to close at N9.65. International Energy Insurance followed with a gain of 22.95 per cent to close at N1.50. JAIZ Bank rose by 20.40 per cent to close at N2.42 per share while Thomas Wyatt Nigeria added 19.78 per cent to close at N2.18.
On the negative side, Julius Berger Nigeria led with a drop of 17.15 per cent to close at N60.15. DAAR Communications followed with a loss of 14.1 per cent to close at 67 kobo. UPDC Real Estate Investment Trust dropped by 12.73 per cent to close at N4.80. DEAP Capital Management & Trust lost 12.50 per cent to close at 63 kobo while MTN Nigeria Communications dipped by 12.25 per cent to close at N235 per share.
The Nation had reported that total assets of Nigerian publicly quoted banks rose by more than N40 trillion to about N125 trillion in the third quarter 2023, indicating the underlying strength of the Nigerian banking industry.
A market intelligence report by The Nation had shown that the total assets of the publicly quoted banks had risen from N85.52 trillion in December 2022 to N125 trillion by the nine-month period ended September 30, 2023, representing an increase of 46.2 per cent.
The report was based on the published third quarter reports of the publicly quoted banks, including the main first tier banks, nationally regarded as systemically important banks. The publicly quoted banks account for more than 90 per cent of Nigeria’s banking operations and mirror the sectoral performance.
The banks included five of the six largest banks-Access Holdings Plc, Zenith Bank International, United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO) and FBN Holdings, which control more than three-quarters of the industry’s total assets.
Other banks included Wema Bank, Sterling Bank, Stanbic IBTC Holdings, Jaiz Bank, Fidelity Bank and Unity Bank. Three other publicly quoted banks- FCMB Group, Ecobank Transnational Incorporated and Union Bank of Nigeria (UBN) were yet to release their third quarter results as at the time of the report.
Total assets of the 14 publicly quoted banks had closed the year ended December 31, 2022 at N85.52 trillion.
The report indicated that total assets of 11 banks that have so far released their third quarter results rose from N66.37 trillion in December 2022 to N94.18 trillion in September 2023.
The three other banks with delayed results, which had total assets of N19.15 trillion in December 2022, were estimated with total assets of about N31 trillion by the third quarter, based on recent data and growth rate. Ecobank had grown its total assets from N13.37 trillion in December 2022 to N20.45 trillion in second quarter 2023. FCMB had also grown its total assets from N2.98 trillion in December 2022 to N3.72 trillion. Union Bank’s total assets had grown from N2.79 trillion in December 2022 to N2.92 trillion in first quarter 2023.
There are 12 other unquoted banks, but none of them is regarded as first tier or systemically important bank, implying they have less control over the direction of the industry. These included Lotus Bank, Parallel Bank, Providus Bank, Titan Trust Bank, Standard Chartered Bank, Citibank, Heritage Bank, Keystone Bank, Polaris Bank, Globus Bank, SunTrust Bank and TajBank.
The report showed that all banks recorded double-digit growth in their balance sheet, with the exception of Unity Bank, which suffered a contraction of 17.1 per cent.
A breakdown indicated that Stanbic IBTC Holdings recorded the highest growth, in percentage terms, with an increase of 54.3 per cent over the nine-month period while Sterling Financial Holdings recorded the lowest growth rate of 21 per cent.
Access Holdings remained the largest bank, in terms of total assets, with total assets of N21.405 trillion by September 2023 as against N14.998 trillion in December 2022, representing an increase of 42.72 per cent. However, there is a strong indication that Ecobank, which had delayed the release of its third quarter results to December 2023 due to ongoing audit, may emerge the topmost bank in total assets.
Nigeria’s leading banks dominated trading yesterday at the stock market as investors stepped up bargain-hunting for value stocks ahead of the peak in earnings season.
First tier banks- United Bank for Africa (UBA), Access Holdings, Zenith Bank and Guaranty Trust Holdings Company (GTCO) were four of the five most active stocks in a trading session that saw the market recovering from a three-day bearish trend.
The four banks accounted for about 41 per cent of total turnover at the Nigerian Exchange (NGX).
The momentum of activities had increased with total turnover rising by12.8 per cent to 336.816 million shares valued at N9.285 billion in 8,790 deals.
UBA was the most active stock with a turnover of 63.882 million shares worth N1.722 billion. Access Holdings followed with 32.02 million shares valued at N750.038 million. Zenith Bank ranked third with 21.772 million shares valued at N846.995 million. Transnational Corporation (Transcorp) recorded 20.619 million shares worth N300.491 million while GTCO saw exchange of 19.038 million shares worth N894.623 million.
Market analysts said the upwardly trend in trading on banks’ shares in recent period might not be unconnected to dividend expectations.
Most banks’ boards announced decisions to pay dividends, only waiting for the final approval of the Central Bank of Nigeria (CBN) to release their results and dividends to the investing public.
Benchmark indices at the NGX indicated average gain of 0.13 per cent, equivalent to net capital gain of N74 billion.
The All Share Index (ASI)- the value-based index that tracks all share prices at the Exchange, rose by 130.66 points to close at 104,387.47 points.
Aggregate market capitalisation of all quoted equities rose by N74 billion to close at N59.022 trillion.
The positive overall market position was driven by gains recorded by large-cap stocks such as BUA Cement, Guinness Nigeria, Zenith Bank, GTCO and Transcorp.
There were 23 gainers to 30 losers. Juli led the gainers with a gain of 10 per cent to close at N7.15 per share. Transcorp followed with a gain of 9.96 per cent to close at N14.90. International Energy Insurance increased by 9.66 per cent to close at N1.59 per share. E-Tranzact International rose by 9.65 per cent to close at N6.25 while Guinea Insurance rallied by 8.33 per cent to close at 39 kobo.
On the negative side, Deap Capital Management and Trust led with a drop of 10 per cent to close at 63 kobo share. Tourist Company of Nigeria followed with a loss of 9.86 per cent to close at N2.56. CWG dipped by 9.09 per cent to close at N5.50 per share. Caverton Offshore Support Group depreciates by 8.57 per cent to close at N1.60 while Omatek Ventures lost 8.05 per cent to close at 80 kobo per share.
Justice Oluwatoyin Odusanya of an Ikeja High Court has ordered four banks to pay N23,050,237. 54 as special and general damages to a claimant, Dr. (Mrs) Oluwatosin Sanu in a N53 million suit instituted against them .
Justice Odusanya awarded N3,050,237.54 as special damages, N20,000,000 as general damages against the defendants while interest was ordered to be paid on unauthorised withdrawal of N3,050,237. 59 at the prevailing bank rate from September 6, 2013 till August 5, 2014 and thereafter interest on the judgment sum at 10 per cent per annum from February 2, 2024 to the date of payment.
The court, however, declined the claimant’s request for exemplary damages in the sum of N25million for being unable to prove the offence of “wanton, cruel and insolent conduct” against the 1st to the 4th defendants.
The court gave the award having established “negligence and lack of duty of care” against the four out of five banks listed as defendants in the suit marked ID/ADR/195/14..
A copy of the judgment obtained by The Nation showed that Justice Odusanya gave the awards while delivering judgment on February 2, 2024 in the suit marked ID/ADR/195/14 filed by Dr (Mrs) Sanu through her lawyer, Prof. Akin Ibidapo-Obe.
The suit was commenced by a Writ of Summons dated August 5, 2014 in which the claimant who owns and runs’ a current and savings accounts at the Idi-Araba Branch of the 1st defendant bank stated that the two banking accounts had credit in the sum of N2,568,847.94 in the current account number and N477 379.55 in the savings account number of the 1st defendant.
According to the writ, the claimant travelled to the United States when she received an e-mail from one Mr. Olatunbosun Alakija informing her that there were purported transactions going on in her banking accounts and that the claimant promptly repudiated the purported transaction as she had her cheque book and ATM card with her on her trip to the USA.
“The claimants was then informed by the 1st defendant that a total sum of N3,050,237 had been transferred to various purported beneficiary accounts through the bank’s internet banking transactions.
The claimant stated that the 1st defendant breached the duty of care owed to her and was negligent in the management of her current banking account when it facilitated such huge withdrawals without the claimant’s knowledge and authorisation.
In their variours amended statement of defence, the 1st to 5th defendants stated that they were not negligent in handling the account of the claimant and that they observed safe practice in handling the internet and electronic banking transaction activities on the account.
Led by her counsel, Prof. Akin Ibidapo-Obe in her examination in-chief, the claimant adopted both the written deposition dated August 5, 2014 which were admitted as evidence in her testimony before the court.
Other exhibits which were tendered and admitted included a letter dated September 17, 2013 admitted and marked Exhibit A:, Letter dated August 26, 2013 admitted and marked Exhibit B”; Statement of Account with the Certificate of Identification and marked Exhibit C1 and C2 “
Delivering judgment in the matter, Justice Odusanya, citing several decided cases held that superior courts have held that “ a bank has a duty under its contract with its customer to exercise re:care and skill in carrying out its part with regard to the operations of contract with its customers. The duty to exercise reasonable care extends over the whole range of banking business within the contract customers.”
The judge said this duty applies to interpreting, ascertaining and in accordance with the instructions of the customer.
Justice Odusanya also held: “It is trite law that customers’ monies in the hands of the banker in the custody or under the control of the customer and such monies are property in the custody and control of the banker and payable when a request is made. Thus if anything happens to the money thereafter e.g. theft or unauthorised withdrawal, it is the banker and not the customer that absorbs the loss.”
Justice Odusanya, citing decided cases, held: “ in an action on negligence, for a plaintiff, to succeed, must in addition to pleading and establishing the particulars of negligence relied on, and also state and establish the duty of care owed to him by the defendant facts upon which that duty is founded and the breach of that duty by defendant.”
Citing more authorities, the judge further held: “It is also accepted in law that there can be no action in negligence unless there is damage. Negligence is only actionable if actual damage is proved. The gist of the action is damage and there is even no right of action for nominal damages. Negligence alone does not give a cause of action. Damage alone does not give a cause of action. The two must co-exist.
The judge listed the essential ingredients of actionable negligence to include the existence of a duty to take care of the amount owed to the complainant by the defennt; failure to attain that standard of care prescribed by the law and damage suffered by the complainant, which must be connected with the breach of duty to take care.”
The judge said once these requirements are satisfied, the defendant in law will be held liable in negligence.
Justice Odusanya held that it has been established that 1st to 4th defendant banks owed duty of care to the claimant and were negligent in the performance of their duties and that it follows that she is entitled to damages that she is claiming. .
The judge said all the defendants failed to comply with the CBN Regulation and were negligent in account opening of their customers and failed to exercise the requisite duty of care.
The judge said they also failed to comply with what even a reasonable man and professional should do especially in respect of information obtained from customers addresses and identity card.
She said the court however found that the case of negligence has not been established against the 5th defendant and consequently dismissed the case of the claimant against the 5th defendant bank accordingly.
Bank customers at home and abroad who are yet to link their Bank Verification Number (BVN) or National Identity Number (NIN) to their accounts are seeking more time from the authorities to enable them comply.
Banking halls across the country were packed full yesterday by such customers after their accounts were put on “Post No Debit or Credit” following the expiration of the March 1 deadline given by the Central Bank of Nigeria (CBN).
A senior manager in one of the tier-1 banks, who spoke on condition of anonymity because he was not authorised to speak, said the CBN circular on March 1 deadline for NIN-BVN linkage to accounts was clear.
“We will be restricting transactions in accounts without BVN or NIN. It is regulatory directive that must be complied with or it will attract sanctions. It is all about banking security and the need to ensure enhanced diligence and KYC standards,” the official told The Nation.
Continuing, he said: “The accounts will be restricted first, and normalised when customers comply.”
The CBN had, in a December 1, 2023 circular, directed that banks should place restrictions on all Tier 1 bank accounts without BVN.
Tier 1 accounts are those that can be opened with a valid identity or proof of address. The maximum daily transaction limit for a Tier 1 account is N50,000 while the maximum account balance is N300,000.
The move, the apex bank said, was to promote financial system stability and firm up the Know Your Customer (KYC) procedures in financial institutions.
The banks were also directed not to open new accounts without NIN or BVN.
It is mandatory for all Tier-1 bank accounts and wallets for individuals to have BVN and/or NIN. It remains mandatory for Tiers 2 & 3 accounts and wallets for Individual accounts to have BVN and NIN.
The CBN circular said: “The process for account opening shall commence by electronically retrieving BVN or NIN related information from the NIBSS’ BVN or NIMC’s NIN databases and for same to become the primary information for on boarding of new customers, and all existing customer accounts/wallets for individuals with validated BVN shall be profiled in the NIBSS’ ICAD immediately and within 24 hours of opening accounts/wallets.”
The News Agency of Nigeria (NAN) reports that customers stormed their banks as early as 8 a.m. yesterday for the purpose of linking NIN with their bank accounts.
Bank officials were on hand to attend to customers on what to do.
Some customers were worried about the security implications of registering online, while others requested an extension of the deadline given the challenges faced during the process.
A security officer at a GTCO branch in Abule Egba axis, while addressing customers who were eager to gain entry into the banking hall, said that the message sent out by the bank to its customers concerning the directive was a random one.
He said not all customers that got the message were affected by the directive.
This got the people infuriated, as they said that the bank should have sent out messages to only those affected.
Also, at another GTCO branch in Egbeda, the bank advised customers to register online using specified codes displayed on the walls outside the banking hall.
An official was assigned to assist customers with generating codes and then providing tally numbers for entry into the banking hall.
Customers numbering about 100 were advised to begin the registration personally by going online to apply codes written and pasted on the walls outside the banking hall.
However, at Polaris Bank, the crowd was not allowed to converge. Those that went into the banking hall were told by the Customers Service Desk to produce their NIN slips.
Those without the slips were turned back. Customers who explained their mission to the bank’s security officers before entering the banking hall were told to get the slips.
NAN correspondent also observed that the bank’s customers without their NIN slips were not allowed for the process by the Customer Service Desk.
“We can only accept the NIN slip now,” the official insisted.
Those with NIN slips were admitted but an angry customer who walked away said, “you cannot be treating customers this way in this era of high competition”.
The banking hall of the Stanbic IBTC Bank was filled with customers as they were allowed in by the security operatives while others waited on queues to take their turns.
A customer, who gave his name simply as Raheem, claimed that his BVN, which was generated using his NIN some three years ago, revealed that upon receiving several letters from his bank to have his biometric verified, he visited his bank but was unable to perfect the process due to network glitches.
The duo of Sola Olayinka and Korede Sanusi, both customers of one of the Tier 2 banks, said their BVNs were yet to be linked with their NIN, as such had to visit the NIN office at Akowonjo, Lagos but they could not endure the mammoth crowds all gathered under the sun and so had to leave after the drudgery.
Following the deadline announced by the CBN, it is expected that an estimated 85.51 million bank customers may not be able to access their bank accounts, owning to their inability to link their NINs and/or BVNs to their accounts.
Data from the Nigeria Inter-Bank Settlement System (NIBSS) revealed that Nigeria has 146 million active bank customers (individual) as of December 2022.
As of January 26, 2024, the BVN count on the NIBSS portal was 60.49 million. On NIN, about 104 million NINs had been issued as of December 2023. Nigerians raised issues surrounding verifying their NIN with the National Identity Management Commission (NIMC)
Also reacting to this development, the director-general of National Identification Management Commission (NIMC), Abisoye Coker-Odusote, said at the commission’s management retreat in Lagos that the commission saw numerous violations and unethical behaviour at NIN enrollment and modification procedures, prompting it to put a temporary stop to its NIN enrollment efforts for Front-End Partners (FEPs).
“My decision to direct the revalidation of all FEPs was not targeted at anyone or group. It was a step towards sanitising the system and processes while ensuring the integrity of data in the country’s identity database. Now that we have revalidated and re-issued licences to about 96 FEPs, we believe NIN registration will be faster and secure,” she added.
“While we welcome the expansion of our National Identity Database to over 104 million captured NINs, and targeting additional 20 to 25 million NINs registration by the end of 2024, we cannot rest on our laurels. Millions more are waiting to be enrolled. They include students, farmers, businesspeople, and the elderly. They are the heartbeat of our country.
Meanwhile, speaking on NIN-SIM Linkage, the executive vice chairman/CEO Nigerian Communications Commission (NCC), Dr Aminu Maida, said NIN-SIM linkage is a process of connecting one’s NIN to his phone number to authenticate and protect his identity.
To link NIN to SIM, Maida urged telecom subscribers to submit their NIN to their respective Service Providers to complete the process of NIN-SIM linkage.
Some claim the CBN and the banks did not do enough to get customers to comply.
It was gathered that some banks are asking customers to use digital platforms like WhatsApp to submit and link their NIN to their bank accounts.
A Nigerian based in the United Kingdom, Michael Obinna, said it costs 70 Euros for NIN to be linked through bank agents abroad.
He said: “I expected banks with offshore branches to allow their customers in those countries to be linked in such branches, but not much of that is happening.”
But Okonkwo Okorie, a bank customer based in Lagos, said the deadline for compliance should be extended to mid year to allow further sensitization by the banks and regulatory authorities.
“I think placing restrictions on customers’ accounts will not be in the best interest of the industry. How many communication channels did the banks activate to ensure the message reached customers at the grassroots? Publishing the deadline and consequences in national dailies is never enough. What about taking the message to homes and markets? I do not think the banks did that,” he said.
Banks’ failed responsibilities
The CBN action stemmed from a recommendation of the Financial Action Task Force (FATF), an independent inter-governmental body created to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction.
The FATF recommendation of which Nigeria is a signatory prohibits banks from keeping anonymous accounts or accounts in obviously fictitious names.
Investigations showed that although CBN policies mandated financial institutions to undertake customer due diligence (CDD) measures when establishing business relations, many of the banks are not complying with the directive.
Part of the FATF recommendations is that banks should identify the customer and verify customer’s identity using reliable, independent source documents, data or information.
The lenders are also expected to identify the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner, such that the financial institution is satisfied that it knows who the beneficial owner is.
Financial institutions are also required by law to understand the ownership and control structure of the customer, obtain information on the purpose and intended nature of the business relationship and conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship.
This is to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.
“Where the financial institution is unable to comply with the applicable requirements, it should be required not to open the account, commence business relations or perform the transaction; or should be required to terminate the business relationship; and should consider making a suspicious transactions report in relation to the customer,” the FATF stipulates.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), yesterday increased the base interest rate by 400 basis points to 22.75 per cent.
A major fallout from the MPC decision is that the measure has further increased the cost of borrowing from the Deposit Money Banks (DMBs).
By implication, customers and borrowers seeking loans from commercial banks and other lenders will pay more to secure the required facility.
The MPC said the decision to hike the interest rate was taken to combat inflation and stabilise the foreign exchange market.
The MPC, led by CBN Governor Mr. Yemi Cardoso, made the key decision yesterday.
The benchmark interest rate, known as the Monetary Policy Rate (MPR), was raised by 400 basis points to 22.75 per cent from 18.75 per cent.
This is the highest MPR since 2017 and aims to make borrowing more expensive, thereby reducing the money supply and curbing inflation.
The Cash Reserve Ratio (CRR), the portion of customer deposits that banks must hold as reserves with the CBN, was also raised from 32.5 per cent to 45 per cent.
This further restricts the amount of money available for on-lending in the economy.
The asymmetric corridor around the MPR was adjusted to +100/-700 basis points from +100/-300 basis points.
This provides the CBN with more flexibility to manage liquidity in the banking system while the Liquidity Ratio, the minimum amount of liquid assets that banks must maintain, remains at 30 per cent.
The rationale behind the decisions, the CBN Governor said, is a result of the MPC’s commitment to tame inflation which has been persistently rising.
He acknowledged the trade-off between economic growth and inflation control, but stated that “long-term growth is only possible in a stable environment with low inflation”.
Going forward, Cardoso said the CBN has acknowledged the importance of working with the government to address non-monetary factors contributing to inflation, such as “insecurity and infrastructural deficits”.
The MPC commended the ongoing fiscal initiatives aimed at reducing living costs and improving food supply.
Cardoso, while fielding questions from reporters, raised concerns about potential illicit activities and suspicious flows within the cryptocurrency sector, specifically mentioning Binance Nigeria.
He said: “In the case of Binance, in last year alone, $26 billion has passed through Binance Nigeria from sources and users who we can not adequately identify.
“We are concerned that certain practices go on that indicate illicit flows going through a number of these entities and suspicious flows, at best.
“There is a lot that is going on now as a result of collaboration between the different agencies which includes EFCC, the Police and the Office of the National Security Adviser and in due course as we progress and have more information to share, we will certainly share.
“We are determined to do everything it takes to ensure that we take charge of our market and not allow others to manipulate our markets in a way that creates distortions for all Nigerians.
“We will not accept it and we will do everything possible to prevent any of these kinds of infractions from taking place.”
He emphasised CBN’s commitment to collaborating with law enforcement agencies to regulate the market and prevent manipulation.
The CBN has assured Nigerians that it is committed to clearing the backlog of genuine requests for foreign exchange and recently paid out another “$0.4 billion to those identified”.
Cardoso stated that the CBN aims to improve market liquidity and transparency by attracting more foreign exchange and minimising distortions.
He disclosed that “recent tools have already attracted $2 billion”, and they expect further progress.
He said the apex bank is adopting a stricter regulatory environment with zero tolerance for non-compliance, especially by banks playing in the system.
They are collaborating with law enforcement agencies to investigate and address infractions.
According to the CBN Governor, “What we are doing at the moment is a collaboration between the CBN and the law enforcement agencies to ensure that we can understand better what is going on in the market and where infractions are taking place, that they are speedily dealt with.
“I must say that we are moving to a very aggressive regulatory environment where those policies have been coming out and tolerance for people not to abide by the regulations that are coming out and to comply is zero.
“People will have to abide by those regulations and those that do not, will face the consequences for not doing so.”
Cardoso insisted that a thorough investigation is ongoing to identify past issues in the FX market and promised to share the findings and take necessary actions while ensuring a more transparent and efficient market going forward.
Gross external reserves, the governor revealed, now stands at “US$34.51 billion as of February 20, 2024, compared with US$32.23 billion at end-January 2024.
The improvement was driven by reforms in the foreign exchange market and an increase in oil production, among others”.
In the coming months, he said it has been forecast that the economy will grow in 2024 by 3.38 per cent (CBN), 3.88 per cent (FGN) and 3.00 per cent (IMF).
The revaluation of dollar-denominated loans triggered drop in banking industry solvency position, the Central Bank of Nigeria (CBN) Financial Stability Report (FSR) released yesterday has shown.
The FSR which highlighted developments in the financial system during the first half of 2023, said that the banking industry’s solvency, measured by regulatory capital to risk-weighted assets, declined to 11.23 per cent, from 13.76 per cent.
The report, signed by CBN Governor, Olayemi Cardoso, linked the drop in banking sector’s solvency to growth in risk assets following the revaluation of foreign currency-denominated risk assets.
However, the sector’s solvency position remained above the regulatory minimum. It said the regulatory tier-1 capital to risk-weighted assets also decreased to 9.60 per cent, from 11.93 per cent in the preceding period.
The CBN said it continued to assess the soundness and stability of the financial system through top-down solvency and liquidity stress testing to identify and analyse Commercial, Merchant and Non-Interest Banks (CMNBs) vulnerabilities and risks, with a view to implementing appropriate regulatory measures.
The quality of banks’ assets improved during the review period as the non-performing loans (NPLs) ratio decreased marginally to 4.14 per cent from 4.21 per cent at end-June 2023, and remained below the 5.00 per cent benchmark. The improvement was due, mainly to enhanced credit risk management practices coupled with the continued implementation of the Global Standing Instruction (GSI) policy.
The report said capacity of banks to withstand losses on NPLs not fully provisioned declined, as the ratio of non-performing loans net of provisions to capital increased to 2.57 per cent at end June 2023, from 1.59 per cent at end-December 2022.
The increase was attributed to the effect of policy changes governing the operations of the foreign exchange market, which resulted in a revaluation of FX denominated risk assets. This led to a significant growth in total risk weighted assets (TRWA) when compared with the change in total qualifying capital.
The report said fuel subsidy removal and forex reforms resulted in over 100. 00 per cent overnight increase in the pump price of fuel and over 60.00 per cent depreciation of the Naira against the dollar, thereby increasing inflationary pressures.
“The June 2023 stress tests assessed the respective impacts of these reforms, the interest rate hikes, and other exogenous factors on the solvency and liquidity positions of the banking industry by end December 2023. The stress test results show that the banking industry could withstand shocks of up to 30.00 per cent increase in the industry’s NPLs, as CAR would remain above the regulatory requirement of 10.00 per cent,” it said.
Despite the contractionary monetary policy stance, the banking industry’s liquidity ratio remained robust at 48.38 per cent, significantly above the 30.00 per cent regulatory minimum.
“A severe scenario stress test was conducted to determine the potential impact of the foreign exchange reforms, removal of fuel subsidy and the tightened financial markets arising from interest rate hikes on banks CAR and LR by end December 2023. See Box 2 below for stress test scenario and key assumptions.”
“The results showed that CAR and LR will moderate to 7.24 and 44.45 per cent, from 11.23 and 48.38 per cent, respectively. The results highlight the robust liquidity position and relative resilience of the industry to the current headwinds impacting the industry. The Bank will continue to monitor developments closely with greater attention paid to the most vulnerable institutions”.
It said the CBN sold US$6.44 billion foreign exchange in the first half of 2023, compared with US$8.19 billion in the second half of 2022, reflecting a decrease of 20.92 per cent.
Furthermore, the CBN purchased US$900.19 million, resulting in net sales of US$4.24 billion in the first half of 2023, compared with US$655.53 million and US$5.78 billion, respectively, in the second half of 2022.
Forwards contracts valued at US$5.68 billion matured, while US$4.88 billion was outstanding at end-June 2023. Forwards contracts amounting to US$4.24 billion matured, while US$4.84 billion was outstanding in the preceding period.
According to the report, the rate at the Investors’ & Exporters’ (I&E) Window opened at N461.00/US$ on January 3, 2023 and closed at N769.25/US$ at end-June 2023, reflecting a depreciation of 66.87 per cent, compared with 7.91 per cent at end-December 2022.
The huge depreciation during the review period was due largely to the reforms in the operations of the foreign exchange (FX) market, which included the collapse of all foreign exchange market segments into the I&E window.
The notional amount of over-the-counter (OTC) FX Futures contracts executed and matured at end-June 2023 decreased to US$1.23 billion and US$0.17 billion, from US$2.61 billion and US$2.38 billion at end-December 2022, respectively. Thus, the outstanding contracts increased to US$6.79 billion at end-June 2023, from US$4.65 billion at end-December 2022
Foreign Portfolio Investment (FPI) inflows totaled N95.04 billion, while divestments (outflows) stood at N123.00 billion, reflecting a net outflow of N27.96 billion in the first half of 2023.
“In comparison, inflows in the second half of 2022 amounted to N75.25 billion, while divestments stood at N60.50 billion, reflecting a net inflow of N14.75 billion. Of the total equity transactions, foreign portfolio transactions accounted for 15.03 per cent in the review period, compared with 20.50 per cent in the preceding half yea,” the report.
Also, domestic transactions accounted for the balance of 84.97 per cent, compared with 79.50 per cent in the preceding period. The net outflow recorded during the review period reflected the cautious approach adopted by foreign investors in anticipation of policy reforms by the new administration.
The Federal Government has said one of its agencies, the Nigerian Data Protection Commission (NDPC), is investigating 17 major cases of data breaches and violations.
The commission’s National Commissioner and Chief Executive Officer, Dr. Vincent Olatunji, announced this while addressing reporters yesterday at the Continental Hotels in Abuja as part of activities marking this year’s Data Protection Week with the theme: Take Control of Your Data.
Although he did not give details of the probe, Olatunji said it would spread across financial institutions (banks), technology, education, consulting, lottery and gaming services, as well as logistics services, among others.
According to him, over 1,000 complaints were received from concerned individuals and corporate bodies about data infractions.
The NDPC boss said while 50 of the cases had been verified, 17 others were under investigation.
He promised that the government would sanction individuals and the corporate bodies found culpable in the breaches to ensure the integrity of data industry in Nigeria and for compliance with regulations in the sector.
Olatunji also said there were over 220 million data subjects in Nigeria, stressing that the country could not afford to put them at risks because of the volume of activities in the sector.
He said: “With over 220 million data subjects, Nigeria has made significant progress in data exploration. However, unlike the crude oil mined onshore and offshore, data, its volume, value, veracity, velocity, and variety are derived through our individual activities as well as inactivity. “
“This obviously poses a grave risk of abusive exploitation, assault to privacy and the dignity of human person and, ultimately, it may put the entire nation in peril, if we fail to regulate this value chain.
“Considering the impact on over 8 billion people across the globe and the digital economy, which is estimated at about 15 per cent of the global Gross Domestic Product (GDP), the world cannot afford to let the data value chain grind down to an avoidable disaster.”
