The Nation Newspaper

Tag: Banks

  • ‘Why banks are running away from SMEs’

    ‘Why banks are running away from SMEs’

    Small and Medium Enterprises (SMEs) are expected to be the soul of the economy. But they have a problem; many of them cannot access loan for their growth. The banks too are shying away from doing business with them. Why? It is because they are not vibrant and are operating in an unconducive environment, says Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi in this interview with reporters on the sidelines of the Bankers’ Committee retreat in Calabar, Cross River State. Group Business Editor AYODELE AMINU was there.

     

    What will be the focus of the Bankers’ Committee in 2013?

    Our focus in 2013 remains the implementation of the financial inclusion strategy, continuation of the agricultural lending programme, moving towards the gas to power plan, privatisation of power, issues around policies and principles. We still have a long way to go, but we are proud of the work we have done in the last four years. I do hope that this industry will produce the generation of central bank and bank chief executive officers that played a catalyst role in the development of the economy. The Bankers’ Committee has said that our focus would be on financial inclusion across the country. But there will be a special focus on Borno State on financial inclusion. The Bankers’ Committee will partner with the government of Borno on financial inclusion in that state. Now, with the conclusion of the power privatisation there are issues. The first is advising the government on funding of power transmission. One thing that is clear to us and what we are going to advocate is that all the proceeds from the sale of power assets should actually be dedicated to improvement in power transmission system. Because there is a huge financial requirement for power transmission development and if $2.3 billion is dedicated to that, it covers a significant part of that cost. Now the announcement of that kind of decision to be taken by the Presidency and the National Assembly and not the Bankers’ Committee, would create the confidence that private investors require to invest in the integrated plant because they know that the big risk in the power value chain now is transmission. A lot of funding is required. So fixing transmission is one, ensuring that we have funding for capital expenditure for generating plants that have just been set up is also key. The committee is working on financing and advising the sector. On the agricultural sector, we will continue with our engagements with the states and continue to address the value chain process. There are outstanding issues and they need to be addressed. We need to improve the engagement with the Federal Ministry of Agriculture and our resolve is to integrate our silos so that all stakeholders can get more value chains to operate. We shall continue with the work which we have started on the modernisation of the payment system, governance, competency, training and financing.

    How does your intervention in the agric sector affect rural farmers?

    The whole idea of the intervention in the agric sector through Nigeria Incentive Based Risk Sharing for Agricultural Lending (NIRSAL) is to address some of those things that have affected the growth of the sector. One of those things that we have tried to do is to work with states and put those farmers into cooperatives so that they are able to raise silos as a cooperative. As a cooperative, they are able to get training, extension services, buy seeds and negotiate for fertilisers. Then, you go to Kagawa, which is 40 kilometres from Kano, you will see how we and the state have put together, tomato farmers to get improved varieties and seeds. Now, we are looking at setting up a processing plant, which will produce tomato and process it on-site. They are producing twice a year now, instead of once with irrigation. We give them seeds, fertilisers and they are able to access financing. But we must remember that agriculture and lending to the real sector is a journey and not a destination. Two years ago, we set a target of getting bank lending to 10 per cent of the loan book of banks by 2017. As at that time, 2011, we were at 1.5 per cent. But today, we are at 3.58 per cent. So, as we continue to implement these reforms, we should get to our target by 2017.

    What is the Bankers’ Committee doing to ensure that lending rate is reduced to support the growth of SMEs and what would be the contribution committee’s to assist flood victims?

    As far as the Committee is concerned, remember that small and medium enterprises (SMEs) only thrive in an environment that is conducive. If you want vibrant SMEs that can borrow from banks, we must fix the power problem, we must fix the agricultural value chain problem. Banks cannot continue to lend to SMEs that are not profitable because they have to continue to run on generators and buy diesel, with bad roads and insecurity. So the environment has to be fixed and that would encourage banks to lend to SMEs. That is why we said there should be focus on power and we should get the reform ongoing. A lot of work has been done on power reform and the funds from banks. Take funding for example, the reform would not have happened if the Central Bank did not provide the funding for the advisory role. So, the Central Bank paid for all the work that was done to privatise power by the Bureau of Public Enterprises (BPE). The objective is to get the power reform completed, and if that is done, then power supply would improve, cost of production would come down, industrial capacity would increase and SMEs would be able to borrow and service their debts. On the rate of interest rate, it is not a Bankers’ Committee issue. Rates of interest are reflective of rates of inflation, therefore there is need to have stability in the system. As we begin to move to a low inflation environment, rates of interest would continue to drop and make it easier for banks to provide financing for the real sector. On the flood, the Bankers’ Committee has agreed that we would support. The CBN would put money into that pool, all the banks would put money into that pool and we would give the funds to the Flood Relief Committee that was set up by the President.

    What is the Bankers’ Committee’s level of commitment to the stability of the financial system?

    We affirm our commitment to a stable financial system that contributes to economic development of the country. We commend President Goodluck Jonathan’s economic reform agenda and associate with the objective of growing the Nigerian economy and creating jobs. The Central Bank has taken proactive actions to ensure that the financial system remains focused and committed to the goals of economic development and sustainability. Effective collaboration and partnership across government, banks, private sector and key stakeholders is critical to achieve economic goals and objectives. We reaffirm our aspirations for the transformation of the power, agriculture and oil and gas sectors of the economy, increasing access to finance for the under-banked and unbanked, and to the principles of sustainable banking. To consolidate our progress and achievements to date and address issues that remain, the Bankers’ Committee will continue deliberate advocacy and partnering with the economic team to implement the economic reform agenda to grow the economy and create jobs. We have defined clear objectives and targets for 2013, agreed on the results and outcomes we expect to achieve and assigned responsibilities for implementation. We will continuously monitor our progress on implementation as well as the impact of our actions on Nigeria’s economic development goals and objectives.

    What role is the Bankers’ Committee playing in the development of the economy?

    The Bankers’ Committee is committed to a lead role as catalyst for economic development, improving access to finance by the unbanked and under-banked and growth of the real sector.

    The Committee has focused on the Power, Agriculture and Transport Infrastructure sectors for driving growth and identified opportunities for financial system intervention in the transformation of these critical sectors of the economy.

    Through collaboration with the government, the banking community and real sector stakeholders, the Bankers’ Committee programmes and initiatives have contributed to tangible improvements in the enabling environment and private sector funding for the power and agriculture sectors.

    Progress has been made on several fronts. For example, lending to the agriculture sector has increased. The banks’ lending to agriculture has increased from 1.5per cent of total industry portfolio in 2009 to 3.5per cent in 2012.

    We have established the NIRSAL to encourage the growth of formal credit for the agriculture value chain. We have continued effective advocacy that has led to significant progress in the reform of key sectors of the economy including power, agriculture and oil and gas. Also, the financial excluded population has reduced from 46 per cent of adults in 2010 to 38.7 per cent in 2012.

    Significant capacity is also being built within the financial services sector in the areas of project finance and agriculture lending to support long term finance and agricultural lending.

    The 2012 Bankers’ Committee Retreat focused on strategies to consolidate and improve on the gains we have made in real sector development, determine further opportunities for financial system intervention as well as required actions to sustain and improve stability of Nigeria’s Financial System.

     

  • Banks may review Ghana, Zambia operations

    banks operating in Ghana and Zambia are contemplating closing down these subsidiaries as the deadline for their recapitalisation ended on Monday.

    Findings showed that the banks have not complied with the recapitalisation order by local banks.

    Ghana and Zambia central banks had raised banks’minimum capital requirement, on the ground that the measure would help mobilise additional resources for their economies.

    The Bank of Ghana raised banks capital from $5.28 million to GH¢60 million ($31.7 million). It set the end of last year as deadline.

    Zambian hiked its minimum capital requirements for foreign banks to K520 billion ($98.52 million), from $2.27 million; that of local commercial banks was raised to $19.69 million.

    Central Bank of Nigeria (CBN) Director, Banking Supervisions, Mrs. Agnes Martins, said the increases reflect efforts to strengthen the banking sectors in those countries, adding that global banks have also been seeking ways to boost capital adequacy ratios in their home countries to meet increased capital requirements under Basel III, and one option they have explored has been the disposal of international subsidiaries.

    He said these capital demands are not in tandem with the level of growth in business activities in these lenders.

    She added that it would not allow banks to continue funding their subsidiaries from parent companies but would encourage them to consider mergers and acquisitions with other local or foreign banks in host country.

    “The CBN shall not permit any further capital outlay from parent banks to augment the capital needs of foreign subsidiaries but would rather encourage banks to consider mergers and acquisition arrangements with other local and or foreign banks in the host country. Under no circumstances are parent banks allowed to guarantee the deposit of their foreign subsidiaries,” Martins said in a statement.

    Head, Market Risk, Greenwich Trust Limited, Babatunde Obaniyi, said the CBN is being proactive to ensure that the funds that would have been used to develop Nigeria’s economy are not channelled to other economies.

    He said for a bank to operate offshore, it has to raise its capital base to the required N100 billion ($635.72 million) in the country. This means that a bank such as United Bank for Africa (UBA), which has 18 offshore branches may see its funds depleted trying to recapitalise its branches abroad, where such cases arise.

    He explained that although there are some African countries, especially The Gambia where investors cannot bring in hot money to fund banks, polices in many African countries point to the fact that more countries want foreign banks to recapitalise their subsidiaries with funds from home countries.

    Besides, he said some of the banks have learnt to share risks with local banks to reduce the economic burden that come with foray into new markets.

    “The level of aggression most Nigerian banks exhibit in venturing into new markets, if not checked, will raise their operational risk level. Besides, I do not see the restriction of these banks into foreign countries as having the capacity to deplete their group performance because some of these markets are smaller than Nigeria’s,” he said.

    He said most of these banks are expected to develop their own products and services to meet the needs of the people.

    Speaking on the development, Deputy Governor, Operations, CBN, Tunde Lemo, explained that there is no justification for the level of capital requirement imposed by the central banks of those countries hence banks will decide on their own if they can continue with those subsidiaries.

    The policy became exigent after report showed that Nigerian banks have recently witnessed reduced credit lines from their international partners because of the growing need for liquidity of major European banks following mounting sovereign default risks.

    However, Lemo said these developments would not have a debilitating impact of the health of the sector. But he did not rule out the impact on the liquidity of finance from lenders.

    Martins explained that the policy is expected to affect UBA and Access Bank because they have the highest number of offshore operations in the sector.

    Others are Guaranty Trust Bank Plc, has five subsidiaries; Skye Bank Plc – four; Keystone Bank Limited- four ; Diamond Bank Plc, and Zenith Bank Plc – three each.

    Managing Director, UBA, Phillips Oduoza, said he expects the subsidiaries to contribute 25 per cent of its profit this year to the bank.

    He said his bank operating in Zambia would seek a local banking license, which requires a lower capital base of $20 million, to meet the requirements.

    He said the rule may instead make local lenders acquisition targets as the companies have to keep cash in Nigeria.

    Access Bank Plc will cut to 49 per cent its stake in its Zambian unit after the southern African country raised capital requirements, Chief Executive Officer Aigboje Aig- Imoukhuede said.

    He admitted that the requirement to increase funding for foreign units has exerted pressure on the capital base of most parent banks.

     

  • Banks mull foreign collaboration to check rising fraud

    Banks mull foreign collaboration to check rising fraud

    Banks are considering securing international partnership with foreign banks to fight rising cases of fraud and forgeries in the sector, The Nation has learnt.

    The 2011 financial report of the Nigeria Deposit Insurance Corporation (NDIC) released last week showed that the banking sector reported N28.40 billion fraud cases last year, representing 33.4 per cent rise from N21.29 billion reported in 2010.

    Chairman, Nigeria Electronic Fraud Forum (NeFF), Emmanuel Obaigbena, disclosed that there is a plan by banks to partner with their foreign counterparts to fight fraud in the system because of the global dimension the issue is now assuming.

    He spoke at forum’s monthly meeting in Lagos.

    Obaigbena said: “It is advisable for banks to give accurate data on fraud cases. They should not be scared of sharing statistics with each other.”

    He said the forum has set up a committee to sanction erring banks, stressing that the objective of the forum was for banks and relevant agencies to share data to eliminate fraud in the industry.

    According to him, fraud does not only translate to operational risk losses to banks, it erodes the confidence of the public in electronic platforms/systems as a channel for business transaction.

    He said the need to protect customers from fraud cannot be over-emphasised, adding that the electronic payment system is international and, therefore, requires to be approached from global perspective.

    Chief Technical Officer, Digital Encode, Seyi Akindeinde, said the Internet and mobile banking constitute the most frequent avenues through which frauds are perpetrated.

    Also, the NeFF is collaborating with the Economic and Financial Crimes Commission (EFCC) and the Judiciary to fight fraud. He added that the forum was also working with the Nigeria Inter-Bank Settlement System (NIBSS) to enhance the fraud reporting format in banks.

    According to him, fraud not only translates to operational risk losses to banks, it erodes the confidence of the public in electronic platforms/systems as a channel for transacting business.

    Also, the Nigeria Interbank Settlement System (NIBSS) said it is taking measures aimed at reducing the volume and value of fraud perpetrated in the banking sector.

    NIBSS Executive Director, Operations, Niyi Ajao, said one way it is achieving this objective is through the use of its anti-fraud portal developed by the firm to check financial frauds in the banking sector.

     

     

     

     

  • ‘Banks are poised for better returns’

    ‘Banks are poised for better returns’

    • UBA tops most attractive list

    Most Nigerian banks are poised to deliver better returns for the year ending December 31, 2012 following above-average performances in the third quarter, Renaissance Capital has said.

    In an industry-wide earnings’ review and projections, analysts at Renaissance Capital said the third quarter earnings for banks provided relatively reliable window to preview possible earnings and returns for the full year.

    The Nigerian banks’ earnings report noted that though the fourth quarter had gained notoriety for last-minute adjustments to provisions charges, operating costs and tax rates, the risk of a repeat of such substantial provisions and adjustments that characterized the fourth quarter of 2011 is negligible under the current scenario.

    On the basis of this, analysts at Renaissance Capital reviewed upward 2012 full-year forecasts for several banks while adjusting their investment values for most of the banks.

    The report singled out United Bank for Africa (UBA) Plc as the most attractive banking stock with the highest potential for capital appreciation, based on the strong fundamentals recorded so far.

    The report indicated that while most banks have been strong performers in terms of share prices, there are still significant upside potential for capital appreciation.

    According to the report, from a price-performance perspective, what the banks’ share prices have done was merely to make up for some of the declines in 2011.

    “On a two-year view, the price performances of most of these stocks are still negative, with only Guaranty Trust Bank, Zenith Bank and First Bank in positive territory. Given that valuations – in terms of both price-earnings and price-book value ratios, – are not yet stretched, in our view -although not as low as they were at the beginning of the year, we believe there is scope for further outperformance in the sector,” Renaissance stated.

    The top picks among the banking stocks, according to the report, included UBA, Zenith Bank and Skye Bank. UBA is rated with the highest possible capital appreciation of 59 per cent on current market consideration. Analysts picked Zenith Bank and Skye Bank with upside potential of 21 per cent and 31 per cent ahead of Access Bank, citing concerns that “risks to slippage on the cost reduction front are much higher” for Access Bank.

    “This has been a year of continual upgrades for UBA. We placed a buy rating on this stock beginning of the year under very conservative assumptions, in our view. At each reporting period the bank has outperformed our expectations. The nine-month profit before tax of N45 billion and profit after tax of N38 billion represented 91 per cent and 100 per cent of our full year 2012 forecasts, respectively,” Renaissance stated.

    According to analysts, UBA has fared well in terms of cost management citing both the operating costs and impairment costs.

    “What it has done very well, in our view, is to reduce costs. We applaud the closure of excess branches and the slowdown in the rate of expansion in some of its African subsidiaries. The clean-out of the book has also been a boost this year – despite a 10 per cent provision on the Air Nigeria loan, UBA’s impairment charges are still running well below average, at 0.42 per cent,” analysts said.

    With these, Renaissance Capital upgraded its 2012 full-year forecasts for UBA by 22 per cent and followed this with increase of 19 per cent for 2013.

    Even with the upgrade, analysts said they believed UBA could still beat their full-year forecasts for 2012 if it successful resolves the indebtedness of Air Nigeria in the fourth quarter.

    Analysts said they now expected UBA to post profit before tax of about N56 billion and profit after tax of N46 billion for 2012. They subsequently raised target price for UBA from previous target of N5.7 to N7.5 per share.

    “UBA has been the best-performing Tier-1 bank in our universe in terms of share-price performance, rebounding from a poor year in full-year 2011. We retain our buy rating,” the report stated.

    Renaissance Capital said the banking industry has generally performed well pointing out that four banks reported numbers that were better than expected, four were in line with expectations while only two banks fell below expectations.

    It noted that banks have continued to manage well their non-performing loans with most banks reporting non-performing loan ratios of below 6.0 per cent.

    Analysts said they believed the loan books as they were by the third quarter represented probable assumptions for the year noting that there were no strong indications of any notable clean-up that could vitiate the assumption.

    On loan growth, the report indicated that Tier-2 banks have generally outpaced the Tier-1 banks in loan growth so far this year with the major outperformers being First Bank and Diamond Bank, with growth of 22 per cent and 38 per cent respectively.

    It noted that larger and more liquid banks with large portfolios of fixed-income securities would benefit from lower taxes following the inclusion of tax exemptions on fixed-income securities in the federal government’s official gazette in December 2011. These multi-year exemptions effectively kicked in this year.

    The Nation had earlier reported that Nigerian banks grossed N1.85 trillion in the third quarter, a hefty 59.6 per cent on N1.16 trillion recorded in the second quarter. However, banks’ top-line earnings were still 33.2 per cent short of the industry’s net assets.

    The Nation’s Intelligence Report had shown that banks’ net earnings improved by 45.4 per cent while industry’s shareholders’ funds increased slightly by 6.7 per cent. The report covered all quoted banks, excluding the troubled Wema Bank, which has been in default of periodic release of results. The least impact bank, Wema Bank’s results will not change the industry’s figures.

    Industry’s average return on equity improved from 10.05 per cent in the second quarter to 13.7 per cent in the third quarter, a double-digit position that underlines the fundamental attractiveness of banks’ shares. Six banks performed above industry’s average return on equity.

    Notwithstanding the substantial growth in gross earnings, banks were still relatively underperforming their innate capability with top-line earnings just two-thirds of shareholders’ funds.

    Total industry’s profit after tax stood at N378.52 billion while shareholders’ funds stood at N2.76 trillion compared with N260.27 trillion and N2.59 trillion recorded in the second quarter.

    Nearly all banks witnessed increase in key performance indices of top-line earnings, net earnings and net assets but the income structure and bottom-line still reflected the overt caution in an industry just recovering from a devastating assets bubbles and balance sheet impairment.

    Banks’ chiefs were also optimistic that the third quarter performance could be sustained through the year. On the back of the bank’s 430 per cent growth in net profit, Group Managing Director, UBA Plc, Mr Phillips Oduoza, said the bank would continue to pursue its unique strategy of maintaining diversified business in terms of geography and earnings mix.

    He noted that the bank’s Nigerian operations recorded an impressive growth in deposits and still kept funding costs relatively low despite a spike in interest rates during the third quarter.

    “There are increased contributions across key financial parameters in our pan-African business. In all, UBA remains committed to achieving its targets for 2012 and especially its long term aspirations,” Oduoza assured the shareholders.

  • Banks stop N100 ATM charges

    Banks stop N100 ATM charges

    Deposit Money Banks (DMBs) have agreed to wave the N100 charge imposed on Automated Teller Machine (ATM) transactions across banks, the Group Managing Director of FirstBank, Bisi Onasanya, has said.

    Onasanya, who spoke at the end of the Bankers’ Committee’s Meeting in Abuja, yesterday, said the lenders have decided to stop charges for use of ATMs.

    He said: “At present when you use the ATM of a bank other than your own bank, there is a charge of N100, which is borne by the account holder. We have decided that we will work out the modalities and ensure that with immediate effect, we would pass on the cost to the respective banks, which would bear the cost of this service. No matter where you are drawing your money from, you would not be subjected to any charge for using the ATMs”.

    He explained “this does not cover withdrawals from inside the banking halls. For customers of FirstBank to use the ATM of GTBank is free; you no longer have to bear any cost,” he said.

    Onasanya said the banks have been directed to go back to the drawing board and take a decision as to how this cost will be borne by them. He said: “We need to understand that these services have some inherent costs. What we have just decided is that banks will no longer be passing this cost to their customers.

    “What we need to do now is work out the modalities, and it should be in a very short period of time because we are all committed to it and it was a unanimous decision of the bankers committee.” He added that the decision to stop charging customers for using ATMs, borders on the need for banks to follow the global trend.

    He said in some parts of the world, when you use your card on most of the ATM networks, you don’t have a charge, stating that although there were costs involved in doing this, the Bankers’ Committee agreed “to give back to the society some form of what we benefited from the system”.

    The lenders he said that felt that since they are doing well, they need to encourage the rest of the community to be part of the success story. So we felt that we should be able to bear the cost as a way of cushioning the impact of whatever the situation is in the economy today,” he added.

    The burden of this decision and the cost implication that the banks are carrying he lamented “are not low but as responsible corporate citizens we do not want to pass this cost on to the public, we will bear the cost,” he said.

     

     

     

  • Banks to raise funds to boost lending

    Several banks are set to raise new capital to boost their balance sheet and provide a headway for increased lending.

    Sources said though the average capital adequacy ratio in the substantially high, banks were considering sourcing more capital to meet increased funding demand in the infrastructure and explorative business sectors.

    The additional funds are expected to be raised through debt and convertible quasi-equity instruments with some strands of supplementary equity issues.

    Sources said banks that are transforming into holding company structure would be raising funds through the holding company for onward distribution to the constituents.

    A top source in a bank transforming into holding company said the group would consider issuing debt instruments to raise funds for Nigerian and other African investments.

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

    Many banks including to tier banks were said to be targeting multilateral organisations such as the International Finance Corporation (IFC) for non-controlling equity investments as well as debt and on-lending facilities.

    Managing Director, Wema Bank Plc, Mr Segun olokituyi, has confirmed that the bank plans to raise about N35billions.

    Another source said banks’ increased appetites for new capital may not be unconnected with the huge funding requirements in the power, oil and gas, infrastructure and telecoms sectors.

    The source noted that Nigerian banks’ total balance sheet is less than N20 trillion, about $128 billion, an amount considered significantly low compared with funding requirements in the newly emerging power sector alone.

    The source said 2013 would see marked increase in new capital raising by banks as banks move from recent consolidation and transformation into new phase of competitive growth.

    Recent analysts report indicated that banks were generally adequately capitalised with several banks deemed overcapitalised based on the level of their capital.

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

  • Banks slash online transaction charges

    Banks slash online transaction charges

    Banks have begun reducing transaction charges on their online deals ahead of final implementation of the ‘Guide to Bank Charges’, being reviewed by the Central Bank of Nigeria (CBN).

    Findings by The Nation showed that banks have started a piecemeal implementation of the draft guidelines, which is at the final stage of approval by the apex bank. The document was circulated for stakeholders’ input last July. Checks also showed that the review is to address complaints arising from bank tariffs and other miscellaneous fees charged on their customers’ accounts.

    For instance, First City Monument Bank (FCMB) last week communicated its decision to reduce charges on online transactions to its customers. In a mail tagged: Reduction of transaction charges on FCMBOnline, the bank slashed charges on transfers by 50 per cent. Transactions which cost N200 has reduced to N100; N300 slashed N150 and N500 reduced N250 respectively.

    “In a bid to ensure you are well informed, please be reminded of the reduction in our transaction fees for funds transferred to other banks on the FCMBOnline platform. Please note that you can also transfer funds up to a limit of N1 million daily, with N500, 000 per transfer,” it said in an emailed statement. The platform, it added further offers customers the opportunity to perform other banking transactions, such as Funds transfer, Forex transfer, Bills payment, Statement download, Cheque book /draft requests among others.

    Diamond Bank also said that deductions will no longer be made on account of customers that use the Diamond Debit cards for withdrawals on other banks’ Automated Teller Machines (ATMs). The lender said the move was to demonstrate its commitment towards customer satisfaction as well as its resolve to drive innovation in the industry.

    United Bank for Africa Plc has equally reduced charges associated with ATMs, significantly lowering the cost of transactions, particularly for its Verve debit card customers. The bank had introduced a pay-as-you-go charge structure instead of the monthly charge of N100, which a flat fee was charged to all ATM card holders. The Divisional Head, e-banking, UBA, Dr. Yinka Adedeji, said the move was aimed at delighting customers, following recent complaints and feedback as well as foster the cash-less initiative of the CBN to the mass market.

    Findings also showed that there have been slashes on Commission on Turnover (COTs) in many banks and downward review of SMS alert fees.

    The CBN said the ‘Guide to Bank Charges’, which was issued to the industry several years ago is being reviewed to protect bank customers’ interest. The review, which is at advanced stage is expected to be harmonised before final approval and implementation by banks.

    The apex bank said complaints arising mainly from high bank tariffs could threaten confidence in the banking system. It said that in reviewing and updating the document on the charges, the CBN will be guided by, among other factors, including considerations of financial inclusion, with particular emphasis on consumer protection, unit cost of banks, and contemporary developments in Nigeria’s banking industry.

    It lamented the current practices in a number of banks, where products and services are deployed at exorbitant costs to the customers, saying that the high costs have helped in no small measure in discouraging a large number of the population from assessing financial services.

    Dissatisfaction of banks’ customers could lead to loss of confidence in not only the affected banks but the entire system, and subsequently, could trigger run on the affected banks as well as the system.

  • Banks commit $1b on vessel financing, says Nwapa

    Banks commit $1b on vessel financing, says Nwapa

    The Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr Ernest Nwapa has said that within the short period the board came on stream, Nigerian banks have committed over $1 billion into financing of oil and gas vessels.

    Nwapa criticised the rush of Nigerians into acquiring vessels indiscriminately or expanding their existing fleet without measuring the demand and specifications applicable in the industry. He noted that the positive side of the board’s decision to ensure that Nigerian vessels get jobs before foreign vessels, is that Nigerian banks have developed interest to fund such vessels.

    Nwapa spoke in Lagos at the christening of the DSV Arianna, a brand new vessel acquired by Broron Oil and Gas Limited through the General Manager, Capacity Building, NCDMB, Mr Omorode Oviasu, an engineer.

    He said there has been an unprecedented interest from Nigerian banks seeking to understand the opportunities and participate in marine vessel financing. Already, there is evidence that Nigerian banks have participated in funding over $1 billion assets in this short period.

    Nwapa, in his paper delivered at the event, said that the board is on course in achieving the target set for it in terms of retaining value in-country and creating jobs, among others.

    He said the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke had at the inauguration of the Governing Council of the Board by President Goodluck Jonathan on September 3, 2010, challenged the Board to within four years ensure retention of over $10 billion out of an average annual oil and gas industry expenditure of $20 billion in the Nigerian economy compared to the current sum of less than $4 billion.

    The board, he also said, was tasked to create of over 30,000 direct employment and training opportunities; consider the scale of activities to be domiciled in Nigeria; and establishment of three to four new pipe mills to service the demands of the industry and other ancillary manufacturing plants for coatings, valves, fittings and components.

    Others include development of one or two dockyards and increased utilisation of existing shipyards for maintaining marine vessels operating in Nigeria, which currently sail out for their maintenance and dry docking; transformation of ownership profile of marine assets supporting industry activity from a current ratio of 20 Nigerian-owned versus 280 foreign-owned vessels to a more equitable ratio of 180:120; integration of indigenes and businesses residing in the oil producing areas into the mainstream of industry economic activity; and capture of over 50 to 70 per cent of banking services, insurance risk placements, and legal services supporting industry activities and transactions.

    Nwapa noted that the structured implementation of the Act and strategic initiatives put in place by the Board around the minister’s medium term target is ensuring a total shift from the faulty perspective held by some persons in the industry regarding the capacity of Nigerians to acquire and manage costly and high tech equipment.

    He said: “The Board’s strategy on marine vessel utilisation is anchored around four pillars – vessel ownership by Nigerians, Nigerian manning of vessels, utilisation of Nigerian owned vessels by operators, expanding vessel maintenance capabilities and a programme to fit out topsides of larger marine vessels in Nigerian yards. These will lead up to the ultimate goal of full blown shipbuilding in the longer term.

    “Significant progress has been made such that today, 85 per cent of category 1 vessels in the records such as crew boats servicing major operating companies on regular contracts are owned by Nigerians. Similarly, the number of indigenously owned PSVs, AHTS and other Category 2 vessels working on regular contracts with operators is steadily on the rise.

    “Within the past one year, over 10 Category 2 marine vessels have been acquired by indigenous interests while feedback indicates that more than 20 more vessels are in various stages of procurement.

    “Working with the operators, we have been able to extract written commitments and identified a total of 49 category 2 vessels slots that will be given to indigenous vessel owners before the end of 2012. This exercise is ongoing and will ensure that a minimum of $3 billion is retained in the Nigerian economy.”

    He however, said this programme of the Board has thrown up fresh challenges, one of which is that many Nigerians have now rushed into acquiring vessels indiscriminately or growing existing fleet without measuring the demand and specifications applicable in the industry. Indigenous companies wishing to benefit from the opportunities must exercise diligence to ensure that vessels being procured meet the requirements.

    But on the positive side, Nwapa said that “there has been an unprecedented interest from Nigerian banks seeking to understand the opportunities and participate in marine vessel financing. Already, there is evidence that Nigerian banks have participated in funding over $1 billion assets in this short period.

    “It is therefore, imperative that assets procured by Nigerians in this way must be put to work so as to guarantee the viability of the investments. Anything less than this will not only kill the Nigerian companies, which are exposed to the loans but also threaten the local banks that funded the assets,” he added.

    He assured that the Federal Government through the Nigerian Content Development and Monitoring Board will not permit a situation Nigerians that invest in marine vessels that meet set technical requirements stay without work while foreign owned vessels are engaged by the industry.

    “At the practical level, we must address the following issues if we are to make sustainable gains from this initiative: How do we ensure that the vessels are genuinely owned by Nigerians? How do we ensure that these vessels optimise employment for Nigerians and keep money earned in the Nigerian economy? How do we ensure that these vessels will continuously be maintained in Nigeria? How do we address the issue of temporary import permit so that it does not stifle vessel acquisition drive by Nigerians? Are the vessels insured by Nigerians?

    “In order to address these posers, the Board has requested all the indigenous vessel owners to upload their details onto the Nigerian Content Joint Qualification System. Having done this, we are now in the process of verifying the authenticity of these claims before further categorizing marine vessel owners in line with marine vessel strategy,” he added.

  • ‘Why banks are denied ISO certification’

    ‘Why banks are denied ISO certification’

    The British Standard Institute (BSI) has said poor security and information management system are hindering many Nigerian banks from getting the ISO 27001 certification.

    ISO 27001 certification, an initiative of the British Standard Institute, is awarded to companies or financial institutions that have complied with the all known information and security management standards globally.

    First Bank of Nigeria Plc, Fidelity Bank Plc, and a few others, have so far received the certification.

    The Strategic Business Manager, Middle East and Africa Region, BSI, Omar Rashid, told The Nation that many banks were denied the certification because their security management processes were not complete. Omar, who was on a short visit to Nigeria, said many banks have not documented their security management programmes to meet the BSI’s requirements.

    He said: “It is not that the local banks are not putting the information and security management processes in place, but their inability to document the processes in a way that would meet the requirements of the institute is the issue. I think that is one of the challenges facing the banks.

    Once the banks have been able to do the proper things in this area, they are sure of getting the certification. We have received a massive amount of interests for certification and training services.”

    He said banks need to do what is called “top-down commitments” on the issue of security management, arguing that the development would help them in winning the confidence of many globally acceptable rating agencies.

    “By top-down commitments, I mean the interest in information and security management programmes, must come from the management to the least workers in the banks. It should not be at the level of the managements or the boards of the financial institutions only.” he added.

    He said the issue of information security is beyond putting technology in place, adding that it is a major governance issue that can directly or indirectly affect any organisation’s reputation and its survival.

    He said ISO certification demonstrates to stakeholders that the banks are run effectively, improve performance, profitability, corporate governance, widen market opportunities, and improve staff responsibility and commitment.

  • Shareholders of FCMB, FinBank approve merger scheme

    Shareholders of FCMB, FinBank approve merger scheme

    Shareholders of First City Monument Bank (FCMB) and FinBank have unanimously approved the proposed merger of the two banks.

    The News Agency of Nigeria (NAN) reports that the shareholders gave their approval on Friday at both banks’ Court Ordered Meeting held in Lagos.

    The shareholders also authorised the banks’ directors to consent to any modification on the merger scheme by the Securities and Exchange Commission (SEC).

    Speaking at the meeting, Mr Ladi Balogun, the Group Managing Director of FCMB, said that the merger would provide considerable benefits and opportunities to the shareholders.

    He said that customers, staff and other stakeholders of the banks would be better off after the merger.

    Balogun said that the merger would enhance the market reach and customer convenience through an expanded 270 branch networks for shareholders.

    According to him, the merger would strengthen the commercial banking business they would engage in.

    “This merger will deepen our capabilities.

    “ It will merge FCMB’s strength in investment banking and FinBank’s competitive advantage in commercial, retail and mobile banking,“ he said.

    Balogun also assured the shareholders of increased returns on their investment in the years ahead.

    “The merger of the two banks will ensure a more robust platform for retail growth,“ he said.

    NAN recalls that FCMB, in February, completed the acquisition of the entire paid-up capital of FinBank and had proposed the merger in line with the Transaction Implementation Agreement of July 14, 2011.

    FCMB was selected as the preferred investor by the board of directors of FinBank after a special examination of commercial banks in 2009. (NAN)