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  • Banks slash withdrawal limit as traders hoard cash in Abia

    Banks slash withdrawal limit as traders hoard cash in Abia

    Commercial banks in Umuahia, the Abia State capital and their counterparts in Aba, the commercial nerve of the state have further reduced their customers’ cash withdrawal limits.

    Our correspondent who monitored the current development in the state reports that most commercial banks as of Wednesday, were dispensing ₦20,000 daily limit to customers using their Automated Teller Machines (ATMs), while they pay the same amount to customers through the counter.

    Customers of other commercial banks were subjected to daily withdrawals of ₦10,000 or ₦5,000 per withdrawal.

    Our correspondent reports that things improved on Thursday as most of them now pay ₦50,000 across the counter to their customers, while their ATMs still dispense daily withdrawals of ₦20,000 for bank customers while customers of various banks were limited to ₦10,000 withdrawals on two tranches.

    One of the commercial banks in Abia State Polytechnic, Aba de-selected other options leaving their ATM users with the ₦5000 option alone; for both customers and other ATM users.

    One of the commercial bank staff who spoke to our correspondent on anonymity said that he decided to start paying their customers ₦50,000 because they were able to get more money from the Central Bank of Nigeria’s (CBN) office in Umuahia, the state capital.

    According to the source, the bank dispenses money depending on the amount of money it receives from the CBN.

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    The Nation investigation revealed that operators of Point Of Sale (POS) outlets now buy money from traders in various markets who now prefer to keep their money in their shops rather than taking it to the bank.

    A trader who gave his name simply as Chukwuemeka said that their reason for keeping cash in their shops is to avoid the limited amount of money that banks give them.

    Chukwuemeka who stated that they also receive bank transfers from their customers or shoppers that visit their shops, said it was optional for any trader to stockpile money for POS operators.

    This is even as he added that he has a POS stand where he supplies the cash he made from his daily with little charge above what they charged in the time past.

    A resident of Aba who just returned from a journey in Okigwe said she paid as much as ₦6000 for ₦20,000 by a POS operator.

  • Banks screen manufacturers for N75b palliatives loan

    Banks screen manufacturers for N75b palliatives loan

    • MSMEs, nano firms get conditions to access N200b facilities

    All is set for the disbursement of the N275 billion palliatives support funds announced in July by President Bola Ahmed Tinubu, to mitigate the pains arising from the removal of petrol subsidy.

    Minister for Industry, Trade and Investment, Dr Doris Uzoka-Anite, yesterday said that two programmes under the multi-layered intervention programme- the presidential conditional grant and the presidential palliative loan-are set to kick-off.

    Banks are expected to screen manufacturers and micro, small and medium enterprises (MSMEs) and nano companies seeking facilities under the initiatives as drawdown of the facilities is predicated on applicants meeting risk assessment criteria of their respective banks.

    The government proposed N75 billion single-digit interest loans for 75 major manufacturers at an average rate of N1 billion per company at 9.0 per cent interest rate.

    Also, N125 billion was set aside for MSMEs. This includes N50 billion conditional grants to 1.0 million nano businesses across thee 774 local government areas. A total of 1,300 nano businesses will receive N50,000 each in across  the 774 local government areas.

    Besides, N75 billion will be allocated to 100,000 MSMEs with each company able to access between N500,000 and N1 million at the single interest rate of 9.0 per cent

    Each manufacturer can access up to N1 billion, depending on the capacity of the business.

    For the manufacturers, passing the banks’ risk assessment on their accounts, to confirm willingness and ability to repay the loans, turnover to determine business capacity and amount to be accessed and other conditions precedent to drawdown will be crucial in getting the loan.

    In a statement, Uzoka-Anite said: “In the Presidential Conditional Grant Programme, the Federal Government will disburse a grant sum of N50,000.00 to nano businesses across the 774 local government areas in the country.

    “The Federal Government through the Federal Ministry of Industry, Trade and Investment and Small and Medium Enterprises Development Agency of Nigeria, (SMEDAN) will collaborate with State and Local Governments, Federal Legislators, Federal Ministers, Banks and other Stakeholders.

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    “The eligible nano business beneficiaries should be willing to provide proof of residential/business address in their local government area, and provide relevant personal and bank account information, including Bank Verification Number, BVN, for verification of identity”.

    Also, for the Presidential Palliative Loan Programme, the minister added: “The Federal Government will likewise disburse N75 billion to Micro, Small and Medium-sized Enterprises, MSMEs, across various sectors and N75 billion specifically to Manufacturers.

    “The loan shall be administered to the beneficiaries at a single-digit interest rate of 9 percent per annum.

    “While MSMEs can access loan facilities up to N1 million with a repayment period of three years, manufacturers can access up to N1 billion to access financing for working capital with a repayment period of 1 year for working capital or five years for the purchase of machinery and equipment.

    “MSMEs and manufacturers can apply for the loans by submitting their application on the portal provided for the programme.

    “The facility would be accessed through their banks, and applicants would be required to meet the risk assessment criteria of their respective banks.

    “As part of its commitment to promote economic development, entrepreneurship and financial empowerment, the Federal Government believes these initiatives will encourage entrepreneurship and job creation”.

    Uzoka-Anite added that eligible beneficiaries can get more information and apply at the website dedicated to the programme.

    For the MSMEs, ministry sources said SMEDAN is also central to the loan approval because the beneficiaries within the segment fall within the group, and its recommendation is critical for the approval and security of the loans.

    These stakeholders, who are closer to the beneficiaries, are expected to shortlist applicants to strengthen their application, approval and eventual disbursement of the funds to beneficiaries.

    The funds already released by the Federal Government will be disbursed through the banks once the shortlisted applicants lists are released to the ministry and payment instruction given to the paying banks.

  • Nigerian banks ready for recapitalization – CIBN

    Nigerian banks ready for recapitalization – CIBN

    Nigerian banks are well-positioned to meet the Central Bank of Nigeria’s (CBN) directive to increase their capital base.

    The president of the Chartered Institute of Bankers of Nigeria (CIBN), Ken Opara, gave the assurance in Abuja yesterday at the 22nd National Seminar on Banking and Allied Matters for Judges.

    Opara highlighted the banks’ readiness and capability to raise the necessary funds through various means, including bond issuance and capital raising from the stock market.

    The CIBN Chief insisted that the banking industry has the financial strength and experience to successfully achieve the recapitalization goal as well as finance the government’s projected $1 trillion Gross Domestic Product (GDP) economy.

    He pointed to the banks’ track record of exceeding previous capital base requirements and the depth of the Nigerian stock exchange as evidence of their ability to raise the necessary funds.

    Opara emphasised that the recapitalization process is ongoing and that the banks are actively engaged in preparing for the increased capital requirements. He assured that the banks will be ready to comply with the CBN’s directive whenever the specific amount is announced.

    According to Opara, “One trillion dollars is something that is very important, it’s achievable because already there has been different capital raising process, you will also see that banks have raised bonds as much as possible and have repaid those bonds when they mature, it’s not a difficult thing to be bothered about funding $1 trillion, I think the major thing is that the industry is deep, they have deep pockets, they have the financial strength.

    “The stock exchange where they are going to go to the market to raise this is also quite deep, the stock exchange for instance is the second biggest stock exchange market in Africa, which tells you clearly that it is a deep market and we have the ability to raise funds that will fund that project as much as possible so we are very prepared.”

    “The CIBN president identified four major challenges giving Nigerian bankers sleepless nights. Specifically, he bemoaned the unlawful harassment of bank officials by the Economic and Financial Crimes Commission (EFCC) among other challenges.

    “With regards to the issuance of Bankers Orders by magistrate courts, the CIBN President noted that magistrate courts were fond of issuing Bankers Orders, which are orders to freeze bank accounts, without proper legal authority.

    “These orders he said are often issued based on a non-existent or repealed law, and they cause hardship for banks, who are open to litigation from their customers if they comply with the orders. He then called on the “Chief Magistrate Court to intervene and ensure that Bankers Orders are only issued by the High Court.”

    Opara lamented that EFCC officials were always storming banks and demanding that they place Post No Debits (PNDs) on customers’ accounts without an order from the court.

    He said: “This is a violation of the legal provisions on confidentiality of bank accounts. When banks demand an order of court, EFCC officials harass and intimidate bank officials and, in some cases, arrest them. Banks are calling for EFCC to be held accountable for their reckless actions, in order to curb the abuse of power.”

    Opara also frowned at what he called “inappropriate deployment of garnishee.”

    According to him, “judgment creditors are often proceeding against all banks as garnishees, without first verifying the indebtedness of the bank to the judgment debtor. This practice imposes unreasonable costs on banks, who are forced to pay legal fees even if they do not have the judgment debtor’s funded account. In some cases, banks do not receive a summons from the court for the hearing, and the court may proceed to issue a garnishee absolute judgment on the bank.”

    He then called on the judiciary to address this long-standing problem in order to protect depositors’ funds

    The CIBN president noted that cybersecurity incidents are on the rise across the continent, and the financial sector is especially susceptible to cyber-attacks.

    “The Central Bank of Nigeria (CBN) is taking steps to address this issue, but the judiciary also needs to play a role. Banks are calling for the judiciary to collaborate with relevant bodies to develop a structure and build capacity to adjudicate on cybercrime cases in Nigeria.”

    The governor of the Central Bank of Nigeria (CBN) Mr. Yemi Cardoso who was represented by Mr. Kofo Salam- Alada noted that a robust and efficient judicial system acts as a magnet for Foreign Direct Investment (FDI), as investors seek stable and predictable environments where their business interests can be protected and disputes can be resolved fairly and expeditiously.

    Read Also: N10tr intervention funds: Banks activate debit orders on chronic debtors

    This FDI influx, he said, “strengthens a nation’s foreign reserves, moderates inflation, and stabilizes exchange rates, paving the way for sustainable economic growth and price stability.”

    According to the CBN Governor, “whilst the judiciary does not actively participate in the formulation and implementation of policies geared towards economic development, its role in interpreting and pronouncing on these policies when they are brought before the Courts for adjudication is indicative of the judiciary’s indirect involvement in monetary and economic policy formulation and implementation.

    “Thus, the Judiciary invariably contributes to the effectiveness of the monetary policy, financial system stability, economic growth, and development through their interpretation of statutes and sometimes giving effect to the acts of the Government and its agencies, where such statutes and acts relate to monetary policy, financial system stability, growth, and development.”

  • N10tr intervention funds: Banks activate debit orders on chronic debtors

    N10tr intervention funds: Banks activate debit orders on chronic debtors

    The Central Bank of Nigeria (CBN) and banks are taking major steps to get debtors pay back their loans. To achieve this, the apex bank and banks are activating the Global Standing Instruction (GSI) to debit accounts of loan defaulters in any bank within Nigeria to recover their debts. The GSI has become a game changer to recover huge outstanding debts from the over N10 trillion intervention funds disbursed to borrowers, reports Assistant Business Editor, COLLINS NWEZE.

    It was a busy Tuesday afternoon in Lagos. Business executives and entrepreneurs  were rushing to beat the usual traffic on the Third Mainland Bridge, which separates the Lagos mainland from the Island.

    For Managing Director/CEO, Busyday Merchants   Limited, Silas Stevens, getting to his banker at Ikoyi, Lagos before 10. 00am was priority for two reasons.

    He needed to discuss N1 million un-authorised debit on his account the previous day. Next was to  stop his clients from making further payment into the account till further notice.

    Stevens is one of the several business owners whose accounts were flagged by the Central Bank of Nigeria (CBN) for borrowing and not being able to meet loan payback conditions.

    Intervention funds

    CBN Governor, Dr. Olayemi Michael Cardoso, said over N10 trillion has been loaned to customers under the intervention funds scheme. 

    According to CBN data, between September and October 2022, under the Anchor Borrowers’ Programme (ABP), the Bank disbursed N41.02 billion to several agricultural projects.

    The cumulative disbursement under the Programme amounted to N1.07 trillion to over 4.6 million smallholder farmers cultivating 21 commodities across the country.

    The apex bank also disbursed N300 million to finance large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS), bringing the cumulative disbursement to N745.31 billion.

    It released the sum of N48.30 billion under the N1 trillion Real Sector Facility to seven new real sector projects in agriculture, manufacturing, and services. Cumulative disbursement under this Facility currently stands at N2.15 trillion to 437 projects across the country.

    The breakdown of the disbursement in the Real Sector Facility includes projects in manufacturing (240), agriculture (91), services (93) and mining sector (13).

    Under the 100 for 100 Policy on Production and Productivity (PPP), the bank disbursed the sum of N20.78 billion to nine (9) projects in healthcare, manufacturing, and services, amounting to a cumulative disbursement of N114.17 billion across 71 projects.

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    A sum of N4 billion was disbursed under the Intervention Facility for the National Gas Expansion Programme (IFNGEP) to promote the adoption of compressed natural gas (CNG) for transportation and liquefied petroleum gas (LPG) for cooking.

    World Bank: Developing economies under pressure

    Loan default is sometimes linked to economic downturn. The World Bank said private sector in Nigeria and other developing countries are shrinking under intense pressure.

    World Bank Group said a third of developing countries have had a hike interest rates and the private sectors in such countries has continued shrinking.

    Malpass said COVID-19 and the shutdowns are still taking a huge toll, especially on people in the poor countries.

    “In the new GEP, the World Bank is lowering our global growth forecast to 4.1 per cent for 2022. That’s down two-10ths of a per cent from the June GEP and growth was 5.6 per cent in 2021,” it said.

    GSI guidelines amended for action

    The CBN has amended the guidelines on GSI. The GSI is a policy that allows banks to debit the accounts of loan holders in other banks to settle defaults.

    In a circular, ‘Re: Global Standing Instruction (GSI) – Individuals’ the apex bank said the frequency of recovery attempts via the GSI platform will be continuous and unrestricted.

    “Consequently, please be informed that the frequency of recovery attempts via the GSI platform has been amended from a specific number to continuous and unrestricted,” the circular reads.

    “In other words, the GSI automated loan recovery feature applicable to all loans in the industry will henceforth remain perpetually in place throughout the life of the loan and/or until the loan is fully repaid.”

    The CBN said the initiative was conceived to address the recurring instances of willful loan default in the industry to identify and watch-list recalcitrant loan defaulters; enhance recovery from eligible and funded accounts in the industry, and improve credit repayment culture.

    The GSI became operational in August 2020 as part of efforts to reduce the rate of non-performing loans (NPLs) in the banking sector.

    SI policy implementation thickens

    Analysts said many banks expanded their loan base following the CBN’s directive. The banks have got its backing and are also relying on the GSI policy to recover their funds despite losses caused to businesses by the pandemic.

    President, Bank Customers Association of Nigeria, Uju Ogubunka,  said the scourge of bad loans had been a long standing menace to the sector.

    According to him, the issuance of the GSI policy marks a new dawn in credit management and debt recovery processes.

    The CBN said the operationalisation of the exercise requires borrowers to sign a GSI mandate in hard copy or digital form, after which qualifying accounts are linked to the borrower’s  Bank Verification Number (BVN).

    It added that the GSI mandate form authorises the recovery of an amount specified by the bank from any/all accounts maintained by the borrower across all financial institutions. The GSI empowers banks and other financial institutions to debit accounts of chronic loan defaulters in any bank within the country to ease NPLs growth in the country.

    The CBN’s move to get banks to lend more is significant because over the past two years we’ve seen banks develop apathy in terms of credit creation, which has hampered domestic growth.

    “GSI is what we have been looking forward to as a coordinated approach to addressing the NPL issue in the banking industry. You will agree with me that banks’ failure is not ordained, it’s just the behaviour of what we have. So, culture is a very big issue to credit; we need to address it,” the apex bank said.

  • Banks on recapitalisation march again

    Banks on recapitalisation march again

    In a strategic move to fortify the financial sector, the Governor of the Central Bank of Nigeria (CBN), Yemi  Cardoso has articulated a compelling vision: Nigerian banks must recapitalise to align with the demands of a burgeoning economy. This directive signifies a proactive step towards bolstering the banking sector’s resilience, ensuring it becomes a steadfast pillar in supporting the nation’s economic expansion. The call for recapitalisation underscores the imperative of adapting to the evolving economic landscape. As Nigeria inches towards the milestone of a $1 trillion economy, the CBN believes that the financial sector must be fortified to withstand potential shocks and contribute robustly to the nation’s economic growth. Therefore, recapitalisation serves as a strategic tool to enhance the capacity of banks to navigate uncertainties and actively participate in the economic trajectory.

     The CBN, with a firm belief that the current capital base of Nigerian banks is not sufficient to support the desirable level of economic growth, has emphasised that the goal of recapitalisation is not just to ensure the stability of the financial system in the present moment, but also to prepare banks for the future. The CBN believes that a stronger banking sector will be better able to support the growth of the Nigerian economy and create jobs for Nigerians. “it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is not just about the financial system’s stability in the present moment, as we have already established that the current assessment shows stability. However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1.0 trillion economy in the near future? In my opinion, the answer is “No!” unless we take action. Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital,” Cardoso said.

     A well-capitalised banking sector is inherently more resilient. By increasing their capital base, banks fortify themselves against unforeseen challenges, providing a buffer that insulates them from economic volatility. This resilience is pivotal not only for the stability of individual financial institutions but also for safeguarding the broader economic ecosystem. As the backbone of any economy, banks play a pivotal role in facilitating growth. A recapitalised banking sector translates into increased lending capacity, allowing financial institutions to inject more capital into key sectors. This, in turn, fosters entrepreneurship, drives investments, and catalyzes economic expansion—a symbiotic relationship between a robust banking sector and a flourishing economy. In an era of interconnected economies, aligning with global financial standards is imperative. The call for recapitalisation positions Nigerian banks on par with international counterparts, enhancing their competitiveness on the global stage. This alignment not only attracts foreign investments but also reinforces the nation’s economic credibility in the international arena.

     The recurrence of a banking system recapitalisation in Nigeria echoes the events of 2005, where the primary aim was to fortify the banking sector and stimulate economic growth. The results of the exercise were a mixed bag, showcasing both positive outcomes and drawbacks. One notable success was the substantial increase in the capital base of Nigerian banks, rendering them more resilient to financial shocks. This fortified position translated into a decline in loan defaults, fostering an overall healthier banking sector. The augmented capital adequacy and reduced loan defaults, in turn, reinstated investor confidence in the Nigerian banking system for a considerable period. With an expanded capital base, banks ventured into increased lending activities, acting as a catalyst for economic growth and job creation. The triumph of the recapitalisation resonated globally, enhancing the international reputation of the Nigerian banking sector.

     However, the recapitalisation also brought about merger-induced disruptions, triggering a wave of mergers and acquisitions that temporarily disrupted the banking sector. The differential impact on banks underscored the need for a more comprehensive approach, addressing not only capital adequacy but also corporate governance and risk management practices. Subsequent to the recapitalisation, the Central Bank of Nigeria (CBN) took steps to fortify corporate governance structures across the entire banking system. Despite these efforts, the Nigerian banking sector grappled with persistent challenges, including non-performing loans and regulatory issues.

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     Reflecting on the 2005 banking system recapitalisation reveals its significance in fortifying the financial sector and fostering economic growth in Nigeria. While challenges and limitations were evident, the exercise achieved its primary objective of bolstering bank capital, leading to enhanced financial stability and increased investor confidence. This recapitalisation laid a sturdy foundation for a more robust banking system, contributing significantly to Nigeria’s economic progress in the ensuing years. As discussions arise about the potential need for another recapitalisation, avenues to raise new capital become paramount. Banks can explore options such as rights issues, private placements, and retaining earnings. However, economic uncertainties stemming from factors like the COVID-19 pandemic, geopolitical events, domestic insecurity, and regulatory changes pose challenges. Economic downturns increase loan defaults, inflation erodes asset values, and stricter regulations elevate costs for banks. The Nigerian political environment’s volatility, coupled with uncertainties in technology and cybersecurity landscapes, adds complexity to the recapitalisation landscape. Navigating these challenges necessitates a strategic approach, considering the economic recovery, regulatory dynamics, and technological advancements. As banks contemplate avenues to raise capital, the broader economic and political context remains pivotal in determining the success and resilience of the Nigerian banking sector.

     Speaking to the issue of technology specifically and the disruptions new entrants into the banking space will make, Cardoso stated that “technology will continue to play a critical role in delivering financial services and enhancing financial inclusion. However, recent developments in the payment services landscape have raised concerns regarding the use of technology and the existing licensing and regulatory framework. We have observed that some licensees are operating outside the approved activities, breaching the boundaries set for them. Any intentional or unintended non-compliance will be subject to sanctions, as operators have the responsibility to ensure that they are licensed for the activities they undertake,” he said.

    The banking sector in Nigeria faces multifaceted challenges, with competition from various financial entities like fintechs, microfinance institutions, and mobile money operators pressuring traditional banks to reconsider their fees and enhance customer service. As the largest economy in Africa, Nigeria’s continuous growth is anticipated to amplify demand for banking services, providing banks with increased profits for potential recapitalisation. Amid these challenges, the Nigerian government’s supportive stance toward the banking sector is a positive signal, suggesting ongoing assistance for banks engaging in recapitalisation efforts.

     To successfully navigate the recapitalisation landscape, Nigerian banks are leveraging technology to enhance efficiency, expand their customer base, and ultimately boost profits while minimising costs. While the overarching goal of recapitalisation is to fortify banks against shocks and support economic expansion, several hurdles must be surmounted for a seamless process. One significant advantage of recapitalization lies in the realm of enhanced financial stability. A fortified capital base empowers banks to weather financial shocks, reducing the risk of failures and systemic instability. This, in turn, facilitates increased lending to businesses and consumers, fostering economic activity and growth. Investor confidence is a natural byproduct of a well-capitalised banking sector, attracting additional capital and spurring economic development. Recapitalisation can also drive consolidation within the banking sector, with smaller banks merging with larger, more robust institutions.

     The ripple effects of recapitalisation extend to supporting economic growth by providing ample credit to businesses and consumers, fueling investment, innovation, and job creation. Expanding banking reach into underserved areas promotes financial inclusion and equal access to financial services. A well-capitalised banking sector translates to lower borrowing costs for businesses and consumers, further stimulating investment and economic activity. Importantly, a stronger financial system bolsters the economy’s resilience to external shocks, enhancing the country’s attractiveness for foreign investment and fostering global competitiveness.

     While recapitalisation is a pivotal step toward fortifying the financial system, its success in birthing new and larger banks hinges on various factors, including the economic environment, regulatory landscape, and competitive dynamics. Policymakers, by reinforcing banks’ capital bases, not only mitigate risks but also foster a resilient and inclusive financial ecosystem. Ultimately, recapitalization is a strategic maneuver to navigate the complexities of the financial landscape, ensuring the sector remains robust, adaptable, and conducive to sustainable economic growth.

     These potential outcomes of the recapitalisation exercise paint a diverse landscape for the banking sector. The scenario unfolds where smaller, less well-capitalised banks grapple with meeting the heightened capital requirements; their recourse might be merging with larger, more robust banks. This could pave the way for a banking sector consolidation, characterised by fewer but more formidable banks wielding greater market influence. Conversely, if the recapitalisation process opens avenues for new entrants, the industry may witness the emergence of fresh players, injecting heightened competition and innovation into the banking landscape. However, it’s plausible that the recapitalisation may leave the size and structure of the banking sector largely unaltered, with existing banks simply bolstering their capital bases to align with the new mandates.

     The economic backdrop plays a pivotal role in determining the success of new entrants. A robust economy provides a conducive environment for new banks, while a weaker economic setting may pose challenges to their viability. Regulatory policies further shape the landscape; supportive regulations foster an environment conducive to new bank formations, while stringent regulations can impede the entry of new players. The existing level of competition within the banking sector also stands as a determinant. In an already saturated market, new entrants may find it challenging to compete effectively. The recapitalisation of Nigerian banks stands as a transformative event with far-reaching implications for the banking sector and the broader economy. Whether Nigeria eventually witnesses the emergence of new, larger banks hinges on a nuanced interplay of economic conditions, regulatory frameworks, and the competitive dynamics at play.

    Challenges and opportunities

    While the mandate for recapitalisation presents challenges, it also unveils opportunities for innovation and strategic restructuring within the banking sector. Banks will need to explore diverse avenues, from optimising operational efficiency to embracing technological advancements, to meet the new capital requirements. This transformative journey could usher in a new era of agility and competitiveness. The success of the recapitalisation initiative hinges on collaboration between regulatory bodies, financial institutions, and stakeholders. A transparent and consultative process will be essential to navigate the complexities of this transformation. Engaging all stakeholders ensures a collective commitment to the vision of a resilient and dynamic banking sector. CBN’s call for recapitalisation marks a decisive chapter in Nigeria’s financial narrative; it is a visionary stride towards ensuring that the financial sector becomes a driving force in shaping a $1 trillion economy. As banks embark on this transformative journey, the landscape of Nigerian finance stands poised for innovation, resilience, and sustained economic growth. The recalibration of the banking sector is not just a regulatory measure; it is a strategic investment in the nation’s economic future, if well managed.

  • NLC strike: Banks, judiciary under lock in Ebonyi

    NLC strike: Banks, judiciary under lock in Ebonyi

    The Ebonyi state Judiciary and banks in the state refused to open for business on Tuesday, November 14, in obedience to the strike ordered by the Nigeria Labour Congress (NLC) and the Trade Union Congress of Nigeria (TUC)

    The gate of the State Judiciary Headquarters in Abakaliki remained under lock when The Nation moved around to monitor compliance.

    Staff were seen in clusters outside the court premises discussing the situation

    Emmanuel Awoke, the secretary of the state chapter of the Judiciary Staff Union of Nigeria (JUSUN) said that the strike became necessary in order to protest against injustice on workers across the nation.

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    Awoke said that he was in the office as early as 7:30 am to ensure that no judge or magistrate entered the court premises.

    Awoke stated: “As you can see, the main gate is already locked and nobody is allowed to walk inside. This is in compliance with the National directive in support of the nationwide strike.

    “JUSUN as an affiliate of NLC has to live by the principles of the union’s laws and directives. As it stands, there are no court that is sitting. The workers are here to do their work but we cannot allow them to violate the law of the NLC.”

    A lawyer, Onwe Solomon, said the strike has disrupted his matter in the court but noted that the move was in the right direction.

    He said: “My matter is one that requires urgent attention but on getting here this morning, I found out that nobody is allowed to go inside the court because of the strike.

    “I believe, they are fighting for their right and the good interest of the nation. The situation in the country today is worrisome, especially the assault on the NLC National President. It is uncalled for.”

    A bank customer, Uchenna Elom, hailed the move for the strike and urged the federal and state governments to take steps to protect the rights and interests of workers.

    Elom said he was at the Bank to obtain a new Automated Teller Machine (ATM) card but found that they were closed.

    The ATM machines in most banks including First Bank, Ecobank, UBA, and Union among others visited the capital city and were fully working with long queues of customers.

    Reacting to the development, Dr Egwu Ogugua, NLC Chairman in Ebonyi, said the compliance to the strike was 90 percent in the state.

    He stated: “All banks are closed, except Zenith Bank but they later closed. You know an injury to one is an injury to all. The ruling class should stop intimidating the Nigerian workers.”

  • Banks assets base rose to N125 trillion in third quarter

    Banks assets base rose to N125 trillion in third quarter

    Total assets of Nigerian publicly quoted banks rose by more than N40 trillion to about N125 trillion in the third quarter, indicating the underlying strength of the Nigerian banking industry.

    A market intelligence report by The Nation at the weekend showed that the total assets of the publicly quoted banks had risen from N85.52 trillion in December 2022 to N125 trillion by September, 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) are yet to release their third quarter results.

    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.

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    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.   

    On the basis of actual results published so far, Zenith Bank emerged with the second largest balance sheet, growing its total assets by 47.8 per cent from N12.3 trillion in December 2022 to N18.2 trillion. United Bank for Africa (UBA) followed with total assets of N16.24 trillion in September 2023 as against N10.86 trillion in December 2022, an increase of 49.5 per cent.

    The analytical report showed that FBN Holdings’ balance sheet expanded by 36.7 per cent from N10.58 trillion to N14.46 trillion. GTCO’s total assets grew by 33.7 per cent from N6.45 trillion to N8.62 trillion. Fidelity Bank followed with total assets of N5.41 trillion compared with N3.99 trillion in December 2022, an increase of 35.7 per cent.

    Stanbic IBTC Holdings’ total balance sheet expanded by 54 per cent from N3.03 trillion to N4.67 trillion. Sterling Financial Holdings grew its total assets base by 21 per cent from N1.86 trillion to N2.25 trillion. Wema Bank’s total assets also grew by 38.8 per cent from N1.44 trillion to N2.00 trillion.  

    Jaiz Bank, the only publicly quoted non-interest bank, grew its total assets by 44.1 per cent from N379 billion in December 2022 to N546 billion in September 2023. However, Unity Bank was a contrarian, dropping by 17 per cent from N510 billion in December 2022 to N423 billion in September 2023.

    In a study on ‘Balance Sheet Strength and Bank Lending During the Global Financial Crisis’, researchers at International Monetary Fund (IMF) examined the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy.

    The study found that “banks with strong balance sheets were better able to maintain lending during the crisis”.

    According to the study, banks that were ex-ante more dependent on market funding and had lower structural liquidity reduced the supply of credit more than other banks.

    “However, higher and better-quality capital mitigated this effect. Our results suggest that strong bank balance sheets are key for the recovery of credit following crises, and provide support for regulatory proposals under the Basel III framework,” IMF report stated.

  • ‘Nigerian banks need fresh capital injection’

    ‘Nigerian banks need fresh capital injection’

    Nigeria’s deposit money banks need fresh capital injection to stay afloat, experts have said.

    The experts spoke at the launch of Proshare of Proshare Impact Report on Nigeria’s banking sector entitled: ‘Reassessing Tier 1 Banks – The Class of 2023,’ examined: “Banks are Dead, Banking is Reborn: Bridging Regulatory Compliance, Changing Business Models and Rising Expectations.” 

    The Group Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, said banks would likely embark on a new recapitalisation drive due to regulatory capital pressure and increase in transaction cost.

     “Nigeria banks have a compeling need beyond increasing their liabilities and to also increase their operating capital because of the shift in exchange rate,” he said, adding that banks need to shore up their operating capital to fund big businesses.

    Chukwu said the return investors make from investing in banks was another factor that would compel banks to embark on new recapitalisation drive to retain investors and make more money.

    He said banks generate higher return even in a difficult environment when compared with other investment class.

    “If you look at the Nigerian capital market performance as of Oct. 12, the All-Share Index had gained 30.93 per cent, the banking sub-sector had gained 60.43 per cent, that’s far higher than the All-Share Index. There’s no other investment class that will give more than 60 per cent return like the banks. So, in the interest of investors, it makes more sense for them to give their money to the banks because they have the capacity to read the market, trade and generate better returns even in a difficult environment,” he said.

    Also speaking, the Chief Financial Officer, EcoBank Nigeria Ltd., Mrs Ibukun Oyedeji, stressed the need for capital and liquidity for banks to remain in business. She said banks must reduce cost through investment in technology to remain in business. She also said that banks must learn how to replicate the Fintech model in order to play actively in that space.

    Founder and Chief Consultant at B.Adedipe Associates (BAA Consult), Dr Biodun Adedipe said the major problem of Nigeria was the devaluation of the Naira.

    “Everything changes in the country whenever there’s change in the exchange value of the naira,” he said, urging the Central Bank of Nigeria (CBN) to pay more attention to the exchange rate.

    The Managing Director, Chief Buisness Officer, Optimus by Afrinvest, Mr Ayodeji Ebo, said banks must ensure enhanced risk management to survive the current economic challenges. Ebo also stressed the need for commercial banks to strengthen their models to boost financial inclusion through technology.

    Meanwhile, the 2023 edition of the Proshare Bank Strength Index (PBSI) showed that Access Bank, Guaranty Trust Company, United Bank for Africa and Zenith Bank retained their ranking as Tier 1 banks. The report said that Stanbic IBTC and Fidelity Bank dropped from the Tier 1 ranking to Tier 11. “This is according to the methodology deployed by the PBSI, which requires that banks/financial Holdcos over the 50th percentile are ranked as Tier 1, while those below the mark are categorised as Tier II and III, respectively.

    “Ecobank Transnational Incorporated joined the Tier 1 ranking for the 2023 PBSI from the Tier II ranking in 2021/2022. In the maiden edition of the “Tier 1 Banking Report” titled The Case for Redefining Tier 1 Banks, the PBSI focused on measures of asset quality, profitability, and liquidity. This has been broadened to cover efficiency ratios, risk management, and digital income to incorporate assets, gross earnings (in absolute terms and on logarithmic scales). Capital Adequacy Ratio, Loans Feposit Ratio, Cost to Income-Ratio, Cost of Risk, Net Interest Margin, Non-Performing Loans Ratio, Digital Income to Gross Earnings Ratio, and Independent Non-Executive Directors to Board Ratio. Dynamism would be a key feature for surviving business disruptions beyond 2023 Revised,” said the report. The report stated that Nigerian banks must find new ways of holding on to their customers and ensure the creation of uncontested markets, as seen in the rise of banking’s AI-supported fintech services.

    “A few banks may encounter difficulties, but many, especially Tier 1 banks, will continue to thrive,” said the report.

    The report assessed the full-year 2022 performance of the banks/financial Holdcos and incorporated the half-year 2023 results, considering the timing of the Tier 1 banking report release. It features six sections and highlights the following key areas: H1, 2023 Silicon Valley Bank crisis and impact on global banking, operations of Nigerian banks, revised 2021 PBSI and bank classifications. Also, the financial risk profile of Tier 1 and Tier 2 banks, the rise of tech foundries and digital income in the Nigerian banking industry and the recommendations for regulators.

  • Banks to beef up capital to mitigate forex shocks

    Banks to beef up capital to mitigate forex shocks

    More banks are expected to undertake capital raising to beef up their balance sheet as banks take proactive measures to mitigate short to medium-term risks occasioned by foreign exchange (forex) volatility.

    Experts said voluntary recapitalisation drive by banks is good for the industry and the economy as additional capital places the banks in stronger position to navigate adverse effects of policy changes.

    They, however, said there were no needs for changes in existing regulatory capital requirements for the industry, noting that the current regulatory framework allows banks to operate within a niche and envisioned growth plans.

    The Nation had reported that four banks had started capital raising process, with expectation that the first set of fund-raising banks could raise about N400 billion. Nigeria’s oldest financial services group, FBN Holdings Plc plans to raise N139 billion in new equity funds. Three other banks- Wema Bank, Fidelity Bank and Jaiz Bank are also seeking to raise more than N135 billion in separate offer proposals.

    This is the first time that many banks are having a cluster of offers since the 2005-2008 banking recapitalisation, which saw the largest group fundraising in the history of the capital market.

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    Former Governor of Central Bank of Nigeria (CBN) and current Governor of Anambra State, Prof. Chukwuma Soludo had raised new minimum capital base for banks alongside other changes, a move that triggered unprecedented fund raising by banks and reduced the number of banks to less than one third.    

    President, Association of Capital Market Academics of Nigeria, Professor Uche Uwaleke, said recapitalisation for banks had become necessary in view of the plummeting value of the naira.

    “The unification of exchange rates and attendant naira devaluation eroded the dollar value of banks in Nigeria, especially those playing in the international scene. So, I expect many more to seek recapitalisation, which will have a positive impact on our stock market,” Uwaleke said.

    He, however, noted that as much as this is a welcome development for the banking industry, it should not be compelled by the CBN, urging that it should be voluntary and not regulatory-induced through another increase in the minimum capital requirement for banks.

    “Many of the banks have strong fundamentals and, to this extent, will remain the toast of investors. I have no doubt that given the financial performance of most banks, both institutional and retail investors will respond favourably to any public offering of shares by these banks,” Uwaleke said.

    Managing Director, Globalview Capital Limited, Mr. Aruna Kebira, said banks might be reading both the lips of the apex bank and the unfolding macroeconomic environment.

    “The continued devaluation of the naira is a pointer that the banks need to recapitalise to be able to withstand shocks that might come from exchange rate fluctuations, knowing fully that they are exposed to facilities and businesses dominated in foreign currency.

    “I think it has come to that point that Soludo envisioned in 2004 that sparked the recapitalisation of the banks. If the above scenario is envisioned by the CBN, then the recapitalisation would affect all the banks just the way it did in 2004,” Kebira, a senior capital market operator, said.

    He also alluded to the positive investors’ perception and the generally positive market situation as motivations for self-induced recapitalisation.

    “Whether we like it or not, banks make up the list of the most profitable companies listed on the stock market. With such unprecedented interim dividends and the sterling performances they recorded in their first half 2023, banks would not find it difficult raising capital from the market,” Kebira said.

    Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe said banks with less tier 1 capital are already facing some medium-term uncertainties and risks, coming from the high-interest rate environment that the economy is struggling with and the devaluation of the naira that have led to a lot of companies having to book significant losses.

    According to him, while banks generally may easily refer to their business expansion plans, the banks might also be hedging against medium-term risks and the unfolding dynamics in the operating environment.

    “It’s very likely that in medium term, banks could see some significant jump in their non-performing loans (NPLs), so it will be wise for any bank to try and build up their tier 1 capital now in order to hedge the medium-term risks. A lot of the companies booking revaluation losses are owing banks, higher tier 1 capital will mitigate any possible increase in NPL, which may occurred due to forex changes and other macroeconomic risks,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS) said.

    He also noted that the current market situation favours banks citing the remarkable improvement in share prices in recent period, the improvement in general appetite for equities and attractive financial results by banks.

    FBN Holdings plans to float a rights issue of 8.974 billion ordinary shares of 50 kobo each at offer price of N15.50 per share. The rights issue will be pre-allotted to shareholders on the register of the company as at close of business on October 09, 2023, on the basis of one new ordinary share of 50 kobo each for every four ordinary shares of 50 kobo each held.

    Nigeria’s premier and largest non-interest bank, Jaiz Bank is undertaking a rights issue of about 5.41 billion ordinary shares of 50 kobo each at offer price of N1 per share, representing initial offer size of N5.4 billion. The rights issue will be pre-allotted on the basis of 87 new ordinary shares for every 250 ordinary shares held as at the close of business on Friday, October 6, 2023.

    Also, Nigeria’s oldest surviving indigenous bank, Wema Bank Plc, is completing arrangements for a rights issue of about N40 billion. Wema Bank will issue 8.572 billion ordinary shares of 50 kobo each at N4.66 per share to all shareholders on its register as at close of business on Thursday, September 28, 2023. The rights will be pre-allotted on the basis of two new ordinary shares for every three shares held as at the September 28, 2023.

    Fidelity Bank Plc had launched a hybrid capital raising plan aimed at sourcing some N90 billion in new equity funds from existing and new shareholders. The bank plans to issue 13.2 billion ordinary shares of 50 kobo each to new and existing investors to boost its capital base.

    Under the plan, the bank is seeking to float a public offer of 10 billion shares and a rights issue of 3.2 billion shares. The rights issue will be allotted on the basis of one new share for every 10 shares held.

  • Banks in N400b recapitalisation drive at stock market

    Banks in N400b recapitalisation drive at stock market

    • FBN Holdings, Fidelity, Jaiz, Wema jostle for investors’ funds

    The Nigerian banking industry appears set for a new race for recapitalisation. Some banks are repositioning ahead of emerging changes in national and global financial structures.

    The first set of fund-raising banks are expecting to raise not less than N400 billion from the capital market.

    This is the first time that many banks are having a cluster of offers since the 2005-2008 banking recapitalisation, which saw the largest group fundraising in the history of the capital market.

    Finance experts were unanimous that the banks are being proactive by beefing up their primary equity capital base, otherwise known as Tier 1 capital, in order to forestall any possible negative backlash from recent policy changes and emerging challenges in the operating environment.

    They said that banks might also be taking advantage of favourable capital market situation to foster their strategic growth plans, with most banks racing to invest in technology and digital start-ups, as Nigerian public becomes increasingly attracted to digitized systems.

    The experts said while there were no immediate strong indication that the Central Bank of Nigeria (CBN) may order a general recapitalisation like the ‘Chukwuma Soludo era’, recent circulars from the apex bank suggest the need for banks to solidify their capital bases.

    One-time CBN Governor (now Anambra State Governor) Prof Chukwuma Soludo, had raised new minimum capital base for banks alongside other changes, a move that triggered unprecedented fund raising by banks and reduced the number of banks to less than one third.

    Nigeria’s oldest financial services group, FBN Holdings Plc, yesterday submitted request for approval to raise N139 billion in new equity funds.

    FBN Holdings is the holding company for First Bank of Nigeria (FBN) and its former subsidiaries.

    Three other banks – Wema, Fidelity and Jaiz – are also seeking approval to raise more than N135 billion in separate offer proposals.

    The structure of most of the offers include provisions for oversubscription, which allow the banks to allot additional shares and raise funds beyond the initial offer sizes.

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    Market analysts projected that the first set of fund-raising banks could raise more than N400 billion, from existing shareholders and new investors.

    FBN Holdings plans to float a rights issue of 8.974 billion ordinary shares of 50 kobo each and at offer price of N15.50 per share.

    The rights issue will be pre-allotted to shareholders on the register of the company as at close of business yesterday, on the basis of one new ordinary share of 50 kobo each for every four ordinary shares of 50 kobo each held.

    Nigeria’s premier and largest non-interest bank, Jaiz Bank is undertaking a rights issue of about 5.41 billion ordinary shares of 50 kobo each at offer price of N1 per share, representing initial offer size of N5.4 billion. The rights issue will be pre-allotted on the basis of 87 new ordinary shares for every 250 ordinary shares held as at the close of business on October 6.

    Also, Nigeria’s oldest surviving indigenous bank, Wema Bank Plc, is completing arrangements for a rights issue of about N40 billion. Wema Bank will issue 8.572 billion ordinary shares of 50 kobo each at N4.66 per share to all shareholders on its register as at close of business on Thursday, September 28, 2023.

    The rights will be pre-allotted on the basis of two new ordinary shares for every three shares held as at September 28.

    Fidelity Bank Plc had launched a hybrid capital raising plan aimed at sourcing some N90 billion in new equity funds from existing and new shareholders. The bank plans to issue 13.2 billion ordinary shares of 50 kobo each to new and existing investors to boost its capital base.

    Under the plan, the bank is seeking to float a public offer of 10 billion shares and a rights issue of 3.2 billion shares. The rights issue will be allotted on the basis of one new share for every 10 shares held.

    Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said while banks generally may easily refer to their business expansion plans, the banks might also be hedging against medium-term risks and the unfolding dynamics in the operating environment.