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Tag: Banks

  • Revenue audit: Customs bans banks for remittances default

    Revenue audit: Customs bans banks for remittances default

    Nigeria Customs Service (NCS) has deactivated some revenue-collecting banks from the service of the organisation following audit report that showed the banks were holding back government revenues.

    The NCS yesterday stated that the Acting Comptroller General, Bashir  Adeniyi took the decision because the selected authorized dealer banks failed to meet the Service-Level Agreements (SLAs) related to Customs’ duty and statutory charge remittances.

    The NCS, however, did not name the banks, although it cautioned stakeholders against using the deactivated banks.  

    According to the NCS, the decision follows a thorough audit and due process, aligning with the NCS’s commitment to upholding transparency, accountability, and efficiency in revenue collection.

    The Service explained that the primary objective of the audit and the subsequent decision were to  ensure accurate and timely remittance of Customs duties and other essential funds for national development.

    In the statement signed by the National Public Relations Officer and Chief Superintendent of Customs, Abudullahi Maiwada, the NCS noted that  despite the deactivation of these banks, the Comptroller General has implemented measures to minimize disruptions for importers and stakeholders within the trading ecosystem.

    The NCS assured the trading community that all pending assessments will undergo clearance processes in line with international best practices.

    Read Also: Nigeria, Australia to partner on foreign training for local miners, says Alake

    The statement added that importers who previously relied on the deactivated banks for duty payments are advised to utilize other authorized dealer banks that comply with NCS regulations. Stakeholders encountering challenges with a particular bank are encouraged to use alternatives that function appropriately.

    NCS said the deactivated banks will have the opportunity to be reactivated once they meet all regulatory requirements and settle outstanding remittances.

    According to the Service, collaborative efforts with financial regulators and stakeholders are underway to ensure the efficiency and integrity of the Customs Duty Collection system.

     The NCS placed a priority on trade facilitation, putting stakeholders and Nigerian citizens first, even in the face of non-compliance by some Authorized Dealer Banks.

    The statement further said this action underscores the NCS’s commitment to maintaining a fair and transparent customs revenue collection process.

  • Reaching unbanked population with Payment Service Banks 

    Reaching unbanked population with Payment Service Banks 

    With nearly half of the world’s unbanked population living in developing countries, a banking plan that reaches the grassroots is apt for such setups. Payment Service Banks (PSBs) has remained the easiest route to grassroots empowerment and poverty reduction. In Nigeria, where the Central Bank pegged minimum capital requirement for PSBs at N5 billion, access to financial services to the grassroots has been deepened by the operators, writes Assistant Business Editor, COLLINS NWEZE. 

    For advanced economies, there is already a seamless setup the supports compulsory bank account ownership for their citizens. 

    Research shows that nearly half of the world’s unbanked population live in developing countries. 

    Though China and India have relatively high bank account ownership, they have some of the largest numbers of the unbanked population globally due to their population size. 

    China has the largest number of unbanked people at 225 million adults followed by India’s 190 million. Pakistan has an unbanked population of 100 million and Indonesia has 95 million unbanked persons.

    These four countries together with Nigeria, Mexico and Bangladesh are home to nearly half the world’s unbanked population.

    The grassroots population is the biggest target in banks, governments and multilateral institutions drives to bring financial services closer to the people.

    Hence, the benefits of improved access to financial services  to the population and economy cannot be underestimated.

    Read Also: NEITI charges banks, others on financial disclosures

    Payment Service Banks (PSBs) are also at the centre of proving financial services to the grassroots.

    That explains while the CBN approved the sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers using the PSBs.

    The supervisory framework for Payment Service Banks released by the CBN authorized the PSBs to accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria.

    The framework says the operators are expected to leverage on technology to provide services that would be easily accessed by the unbanked population and those who are in hard-to- reach areas of the country. 

    The framework focuses on corporate governance, risks management of the PSBs, and safety of funds to the consumers of the Payment Service Banks’ products. 

    This Framework also aims to ensure that sound risk management practices are embedded in the operations of the PSBs. 

    The PSBs are required to comply with relevant extant regulations and CBN’s prudential guidelines and circulars which are issued periodically.  The CBN said PSBs are to operate mostly in the rural areas and unbanked locations targeting financially excluded persons, with not less than 25 per cent financial service touch points in such rural areas as defined by the CBN from time to time.

    They are to  enter into direct partnership with card scheme operators. Such cards shall not be eligible for foreign currency transactions; they can also deploy ATMs in some of these areas; deploy Point of Sale devices and be at liberty to operate through banking agents.

    The PSBs have also been authorised to roll out agent networks with the prior approval of the CBN; use other channels including electronic platforms to reach-out to its customers and establish coordinating centres in clusters of outlets to superintend and control the activities of the various financial service touch points and banking agents. 

    The CBN also authorised the PSBs to accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria; sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers.

    The CBN said the PSBs cam also issue debit and pre-paid cards on its name; operate electronic wallet; render financial advisory services; and invest in Federal Government of Nigeria  and CBN securities.

    CBN said the PSBs were licensed to enhance access to financial services for low income earners and use technology to reach Nigerians in remote places where commercial banks find it difficult to operate.

    According to the CBN guidelines, the PSBs are to offer smaller-scale banking operations and the absence of credit risk and foreign exchange operations.

    In addition to operating current and savings accounts they can also offer payments and remittance services, issue debit and prepaid cards, deploy Automated Teller Machines (ATMs) and other technology-enabled banking services to the people, majority of whom cannot be reached by the conventional banks.

    The PSBs are to facilitate high volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion.

    With N5 billion minimum capital requirement, the apex bank also  authorised PSBs to sell foreign currencies (forex) realised from inbound cross-border personal (remittances) to licenced foreign exchange dealers.

  • Banks seek more investments in FinTech, human capital

    Commercial banks have been advised to make more investments in financial technology (FinTech) and the relevant specialised human capital for the growth of the financial system.

    Chartered Institute of Bankers of Nigeria (CIBN), President, Uche Olowu who gave the advice at the institute’s investiture in Lagos,  said  investment in specialised human capital is, particularly, significant given the domination of technological solutions, which are taking over human jobs.

    According to a report by the McKinsey Global Institute, 60 per cent of all occupations have at least 30 per cent of activities that are technically automated. Furthermore, the report states that roughly one-fifth of the global workforce will be impacted by the adoption of Artificial Intelligence (AI) and automation and by 2030, it is estimated that robots will replace 800 million workers across the world. The World Economic Forum, further projects that by 2055, nearly half of all work in all occupations would be automated.

    Additionally, the PricewaterhouseCoopers (PwC) states that the effects of automation would not only alter the jobs available to humans but also the perceived value of these jobs.

    “It is also pertinent to mention that the increasing competition in the digitised banking environment would no longer be between banks but with non-banking institutions,’’ he said.

    FinTech and big tech firms such as Google, Amazon, Facebook and Apple are now capturing more of the banking value chain.  Furthermore, payment service banking is set to further disrupt the banking industry. For example, as at July 2019, telecoms such as MTN and Airtel Nigeria had been granted licenses by the Central Bank of Nigeria. PwC suggests that from 2025 to 2035, a market economy would readily exist without traditional banks,” he said.

    Olowu said that any bank staff who wishes to survive and thrive within the industry over the next 10 to 20 years must adapt and become relevant to the future of banking.

    “Indeed professionals and would-be banking professionals must reposition themselves for relevance in the changing environment. Such statistics as stated above confirm that in the future workplace, we may not be competing for jobs with other humans but with robots,” he said.

    Continuing, he said that in the age of digitisation it is important to stay relevant regardless of the cadre of employment you fall under. “Banking professionals must consistently keep in touch with current trends in their field of expertise and the impact such trends would have on your job role. Aspiring bankers are also expected to gain a full understanding of the emerging technical skills sought after in the industry. Constantly keeping tabs on trends and required skills would increase your value professionally and in turn your relevance,” he added.

    The Guest Speaker and Managing Director/CEO, Ecobank Nigeria, Patrick Akinwuntan, said that financial institutions are faced with growing technological changes and have had to respond through the adoption of and adaptation to potentially disruptive technologies in their business models and in their broad corporate strategies. This is all in a bid to remain relevant, increase convenience and productivity and make banking simple for individuals and businesses alike.

    He said the banking sector has undergone some changes,  will undergo added disruption. “Yesterday, we had nothing like the digital apps in use today, tomorrow we are certain of further disruption underlined by artificial intelligence, machine learning, robotics, big data analytics among others,” he said.

    “To reposition in a competitive environment, you must evaluate and understand the trends that would impact the industry now and into the future. Are these trends positive or otherwise? Are the impacting trends long or short term? Are they irreversible or not? Additionally, one must also be clear on what is relevant to the market, be clear on market outcomes and constantly evaluate these outcomes. We note that repositioning decisions hold positive or negative outcomes with regards to personal and vocational value,” he said.

  • AMCON boss: Banks responsible for N1.79tn non-performing loans

    Deposit money banks (DMBs) in the country are largely responsible for the huge portfolio of over N1.79trillion non-performing loans, the Managing Director of the Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru has said.

    He spoke at the maiden edition of the National Credit Managers Conference organised by the Institute of Credit Administration (ICA) in Lagos at the weekend.

    Citing statistics from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) Kuru said the gross loans as at the end of 2018 stood at N15.35trillion, out of which N1.79 trillion were non-performing.

    According to him, AMCON’s portfolio of debt shows that only 350 companies are responsible for 80% of the N5.4trillion debt. A majority of these are politically exposed persons who deal in close proximity to power. The prominent nature of these high net worth debtors has seen them develop a recalcitrant stance to their liability, he lamented.

    “A critical examination of our credit approval process reveals that there has been a lot of lending rascality on the part of creditors. We can deduce that some facilities were given ab initio without the intention of ever being repaid,” he said.

    The collective irresponsible actions of these individuals and organisations as well as the lenders who extended the facilities to them have severely hurt the economy, he stressed.

    “Many Nigerian CEOs and board members have mostly failed to undertake stringent investigations to determine the negligence that contributed to the collapse of the financial institutions they manage. Over the years, this weak system of oversight as well as the frail regulatory framework of operations has led to massive losses for investors, depositors and workers.”

    Regrettably, he said, the nation’s financial system is the enabler of corruption as it serves as the funnel with which funds are misappropriated, siphoned and outrightly vanish.

    While cautioning that banks should fight against impaired and arranged credits so that operators are held responsible for booking credits contrary to their credit policy, the AMCON boss, who was represented by Mrs. Iyatum Adode-Kobiti, Group Head, Corporate Services said it is high time banking and financial services operations begin to subscribe to the ideals and ideas of transparency and accountability in the discharge of their duties in the interest of depositors and the economic well-being of the rest of the country.

    Speaking earlier, the Deputy President in Council of ICA, Andy Ojei, said credit professionals in the country have the added responsibility of managing credit for economic growth purposefully and to entrench professionalism in the cause of managing credit.

  • ‘Banks should not invest in public assets’

    Credit bureaux operators are taking steps to ensure that more borrowers and bank customers are acquainted with their credit status as part of their commitment to the Central Bank of Nigeria’s (CBN’s) move to ensure that the real sector has more access to loans. CRC Credit Bureau Limited Managing Director/CEO, Tunde Popoola, speaks on these issues, among others, in this interview with COLLINS NWEZE..

    You are aware of the Central Bank of Nigeria’s planned restriction on banks from investing in government securities. We also found out that Nigeria has issued a 30-year-bond. How will this reflect on the industry?

    This is a very good development, the reasons are many and that is why when government came up with the 30-year-bond, for the first time, it was oversubscribed. Government wanted to raise N20billion, and they ended up raising N80billion for the 30-year-bond.

    So, that gives the government opportunity to have long-term funding for infrastructure. They can do rail and roads because these are infrastructure that you need long-term funding for without necessarily waiting for tax to do that. Secondly, it frees the banks from being crowded with requests for 30 -day or 60-day treasury bills.

    Nigerian banks do not have long-term funds like that. So, it is difficult for them to put their own funds in a 30-year-bond. The funds that take care of that are pension funds, asset management companies and some institutions established to provide long-term funding. So, if the government continues to go in that way, giving money to government as loans may no longer be attractive. They need to look inwards and develop products for private sector to borrow.

    That will raise the violability of loans to the private sector. There is no outlet for them to dump money on government and have risk-free assets in tier books. They do not need to create risky assets for the private sector, which is going to be in form of loans for these sectors you are talking about.

    The last two to three years, T-Bills rate was over the roof. The banks are there to create money for the shareholders. But with this kind of decision by the government, I think they should go more in that direction, and aggressively address the infrastructural challenge that we have.

    Commercial banks are supposed to be lending short and not investing in government assets.

    What is your view on the CBN’s  new policy plan?

    The Central Bank Governor is development-oriented. He is much more committed to how to get commercial banks lend to the private sector.

    On its own, the CBN is taking on the role of the lender directly by having many intervention funds for cotton, agriculture, etc. And that’s the direction the governor wants the banks to go. If the banks are not going there, he needs to give them incentives that will motivate them to those sectors of the economy. He should discourage them through policies from lending to government. If it becomes unattractive to lend to government, then you have to find your way to lend to the private sector, which is your focus.

    How are people informed about your operations?

    We are enlightening people on the need for them to have their own credit report, whether as individuals or corporates. We want to encourage people to have that, and not when they need credit before they seek for the credit report.

    We also have brought down the price, with which they get the report. Before now, it was N5,250 and now it is N2,499 to get your credit report. Beyond that, we have other credit monitoring products. We have also made it easy for banks to track the performance of loans they are giving out through our portfolio products.

    There are products for customer identification, that is the Know Your Customer, and product that enables you to do cheque verification among others.

    What role do you think data can play in lending more to the economy?

    Banks are relying on data supplied by credit bureau operators to decide who gets a loan and at what rate.

    Operators had deployed data mining tools and products that would enable them profile bank customers or help banks profile customers to determine if they can borrow.

    Historically, banks can look at your transactions and collect information from credit bureau operators, which they can put together and look for other additional information. They may have to generate information that will enable them know whether you are credible to have loans, and what kind of loans, and how much you will be able to cope with, based on the data that they have. Then, of course, based on the credit score they are already familiar with, determines the rate at which the customer can access such loans.

    Should banks send emails to customers asking them to come and borow?

    Email notification from banks to customers on availability of loans were products of well-thought out research and data mining on customers’ accounts. They are not  mistakingly sent emails. You will discover that the amount they tell you that you can have access to will be different from what they give someone else. And so, because their risk profiles are different, they have been able to do that effectively, leveraging availability of data. I advise customers that have received such emails to approach the bank for the loans, but that is if you need the money.

    There was the need to campaign more for people to know that they can access loans. Many banks are doing a lot to get customers to borrow. If a bank is not lending, such a bank is also putting its assets at risk. We supply a lot of information to them because they approach us to get information on several thousands of their customers from time to time.There are even banks that are lending to people that are not directly their customers, leveraging data.

    It is easy to get loans nowadays if you really have the need for it and if you order your priorities in a way you know you will be able to payback the loans. The danger is that you do not take loans, when you do not need  them. We will keep campaigning on that. That is the risk with the rising campaign that people should come and take loans. People should be encouraged to take loans only when they need the such loans.

    People need loans to acquire assets to boost their businesses. Secondly, people need loans to get consumer items that will improve the quality of their lives. A typical family needs a refrigerator in the house. That’s like a consumer loan, but it has an impact on the well-being and health of that family. But you do not need to take a loan to buy consumable items because that is consumption.

    If I have the opportunity to take a loan as a fashion designer to buy additional sewing machine, that will enhance my ability to deliver on the sewing jobs and meet customers’ needs. It can even be to buy a new equipment that will enable me do better designs. These are the loans that can propel people to do more in their lives. The good thing is that since we now have collateral registry,  you can use the same assets to get an additional loan.

    How can you reconcile 60 per cent financial inclusion and 10 per cent credit penetration rates in the country?

    If you have the opportunity to have an account, then that puts you in a position to qualify to borrow. Now having an account can be through the payment service banks, fintech, commercial bank, microfinance bank etc, once we got that significantly, we can have 80per cent coverage.

    Then you will begin to ask:s how do we give access to credit to this kind of people? Ass I said, a lot of FinTech are now beginning to give access to credit, even to non-bank account holders.

    Imagine if all the people doing nano loans are all recognised? Things are really coming up, but we need a gestation period of two to three years and review to see what has happened.

    Why is credit penetration still low? Does it have to do with rising non-performing loans in the industry or hight interest rate?

    It is important for you to borrow only when there is need for you. I think that is one important education campaign we need to always emphasise on.

    That’s one of the social responsibility programmes that CRC Credit Bureau has taken up. You borrow to consume and then you will be unable to pay because you have already consumed whatever it is, then you are in problem.

    People should borrow for earning assets so that they can become very important economic agents. When you talk of non-performing loans and all that, it is a major issue and it is multi-dimensional. I think the major thing is that if the rate is high, clearly only few people will want to take the loans, and when they do take them, if anything happens to the cash-flow, then the loan ballots and before you know what is happening, they may not be able to repay such loans.

    Second one, which is very close to why they may not be able to repay the loans, is the state of the economy.

    Yes, we are out of recession, but not all sectors of the economy are doing well.

    What sector do you think is driving the growth we see in the economy?

    Do you know that the propellers of the growth that we are seeing, are around agriculture services? Manufacturing is still struggling and so are some of other sectors. So, people are still finding it difficult in this economy to perform and get profit from their transactions.  The third issue has to do with the banks. Some of them still do credit concentration in few sectors, around individuals or companies as the case may be.

    What is causing the non-performing loans is not the consumer loans or loans to SMEs. When one customer with N50billion loan defaults, that creates a significant impact on the balance sheet of the bank on the rate of non-performing loans, than when 1,000 or 3,000 consumer loans of N100,000 or N200,000 default. That will still be insignificant. That is the reason we keep saying that banks need to open up themselves to loans to SMEs. By that, you will diversify your risk.

    We know the cost of underwriting will be high, even the cost of such loans will be high, but that will be on the short run. In the long run, your system will adjust. All over the world, except in sub-Saharan Africa, consumer loans and mortgage loans are the products that give financial institutions the chunk of revenue that they have and enable them to declare good profits.

    That business model still needs to change for some banks. Some banks have started learning the ropes. Until that is done, we cannot say the issue of non-performing loans will be a thing of the past.

    Big companies in oil and gas are still susceptible to price volatility and will keep on impacting the level of non-performing loans.

    We have over 40 million Micro Small and Medium Enterprises (MSMEs) in the country. If those MSMEs employ only themselves, that’s 40 million jobs. When you look at even the small ones, they imply an average of two, three and four people. And so, we need to catalyse that sector of the economy.

    People can start their business on their own, in one two to three years they can employ more people. How many big companies do we have in this country? How many big companies employ up to 100 people in Nigeria?  So, you have to find ways to stimulate SMEs, which is the engine of growth. These companies have their own impact and help stimulate the economy. They need each other. MSMEs are the fillers. MTN, for instance, needs distributors, they need people to rent masts, they need people to manage masts, and this will be done by the SMEs. They even need the IT people that will write quotes, and develop new products. How many people will MTN on their own employ? But you know there are so many things that will come up that the SMEs will take over. That’s the linkage. That’s while both of them are very important to the economy.

    Do you think the banks can fund both sectors effectively? Where do you think the banks should go first, is it where the risk is lower or where the profit is higher?

    They have to balance the equation. When you take on big transactions, you have high risks that you are running because non-performing loans from one of those transactions can put you in trouble and cause problem of capital adequacy for you.

    But when you lend to thousands of SMEs, you are de-risking your portfolio because all of them cannot go bad at the same time. All those sectors you have left cannot be bad at the same time. So, it is a model to de-risk by also lending to consumers and lending to SMEs.

    Basically, when you look at migration, for commercial banks, that’s where they are all going. All of them have SMEs desk. The impact, you may not see immediately, but it will become manifest in the medium term.

    How do you see the credit bureau industry in Nigeria, compared with their counterparts in other developed economies?

    Credit bureaux performance is a product of the environment where they operate. So, because you are servicing an economy, by being in an economy, the economy dictates the kind of products and services you have. If we are talking about the Nigerian economy, the type of loan products that we have are still very elementary ones-overdraft, term loans and consumer loans.

    Those are still what we have. And so, credit bureaux will develop products that will enable you get information to lend in that regard. If you are talking of sophisticated economies, where you have mortgages, and other sophisticated products. Those credit bureaux will develop products that will serve the market.

    All we need to do is what we are already doing. We want banks to lend to SMEs and so we have come up with products – credit reporting and credit scores.

    Why are we here is to provide information to customers. How can we help them monitor the loans they have granted? Also, how can we help them monitor what is going on? Even individual borrowers, will have a credit check on themselves. These are focus areas for CRC. We have developed about 13 products to provide these services.

  • Banks to partner credit bureaux on CBN’s loan policy

    Banks will be collaborating with credit bureau operators  to achieve the Central Bank of Nigeria’s (CBN’s) 60 per cent Loan to Deposit Ratio (LDR) policy, The Nation has learnt.

    The CBN’s directive, expected to lead to more than N1.4 trillion in loans to customers, is in line with the apex bank’s commitment to  boost economic growth through improved lending.

    CRC Credit Bureau Managing Director/CEO, Tunde Popoola, who confirmed the development, said lenders were relying on data supplied by credit bureau operators to decide who gets a loan and at what rate.

    Many customers have been receiving emails from their banks, asking them to take loans based on data supplied to them on such customers’ by credit bureaux.

    Popoola said operators had deployed data mining tools and products that would enable them profile bank customers or help banks profile customers to determine if they could borrow.

    Already, GTBank is using emails to encourage its customers that it would take only two minutes for them to get loan requests approved without collateral, and that there would be no hidden charges and are at single digit monthly lending rate.

    The loan application could be done online. Other lenders are also advising customers to take loans.

    Popoola said: “Historically, banks can look at your transactions and collect information from credit bureau operators, which they can put together and look for other additional information. They may have to generate information that will enable them to know whether you are credible to have loans, and what kind of loans, and how much you will be able to cope with based on the data that they have. Then of course, based on the credit score they are already familiar with, determine the rate at which the customer can access such loans.”

    He said emails notification from banks to customers on availability of loans were products of well-thought out research and data mining on customers’ accounts. “They are not  mistakingly sent emails. You will discover that the amount they tell you that you can have access to, will be different from what they give someone else. And so, because their risk profiles are different, they have been able to do that effectively, leveraging availability of data. I advise customers that have received such emails to approach the bank for the loans, but that is if you need the money,” he said.

    Popoola said there was need to campaign more for people to know they can access loans. “Many banks are doing a lot to get customers to borrow. If a bank is not lending, such bank is also putting its assets at risk. We supply a lot of information to them because they approach us to get information on several thousands of their customers from time to time.There are even banks that are lending to people that are not directly their customers, leveraging data,” he said.

    Continuing, he said: “It is easy to get loans nowadays if you really have need for it and if you order your priorities in a way you know you will be able to payback the loans. The danger is that you do not take loans, when you do not need  such loans. We will keep campaigning on that. That is the risk with the rising campaign that people should come and take loans. People should be encouraged to take loans, only when they need the such loans.”

    Popoola said people need loans to acquire assets to boost their businesses. “Secondly, people need loans to get consumer items that will improve the quality of their lives. A typical family needs a refrigerator in the house.That’s like a consumer loan, but it has an impact on the well-being and health of that family. But you do not need to take a loan to buy consumable items because that is consumption,” he said.

    He added: “If I have the opportunity to take a loan, as a fashion designer to buy additional sewing machine, that will enhance my ability to deliver on the sewing jobs and meet customers’ needs. It can even be to buy a new equipment that will enable me do better designs. These are the loans that can propel people to do more in their lives. The good thing is that since we now have collateral registry,  you can use the same assets to get an additional loan.’’

     

  • Dealers seek better risk management for banks

    Banks and other financial institutions need better risk management structure to deepen banking penetration and security, financial market dealers have said.

    In a communique at the end of the seminar organised by Financial Markets Dealers Association (FMDA) Bonds Workgroup in Lagos, the group said risk management needs more attention, and that the futures market should be deployed to deepen risk management.

    “Futures market in Nigeria will further support the Government on achieving the targets set out in the Economic Recovery and Growth Plan (ERGP). Improve risk management tools to better serve the opening-up of the financial services sector towards global competitiveness – effectively deployed, will mitigate the risks to which market operators including governments are exposed to,” it said.

    Speaking on the theme: The Nigerian futures market – A tool for risk management, Debt Management Office (DMO) Director-General Patience Oniha said the debt office remains committed to the development of the financial market. She said by issuing the 30-year bond, the debt office has showed confidence in the economy.

    “While one of our primary responsibilities is to raise money for government, we realised that the government alone cannot develop the economy. It in attempt to develop the market and support the private sector the DMO is committed to it. In introducing the 30-year bond, obviously, we monitored developments in the market and the demands of investors, the trends in inflation and monetary policy indicators of which direction the economy is going,” she said.

    Continuing, she added: “And I think that the important thing for the 30-year bond is that it is not only government raising 30-year money, but creating a 30-year benchmark that supports the economy.The private sector can raise money because there is now a reference point for private sect or to raise a 30-year bond.”

    Also, FMDQ OTC Securities Exchange Managing Director/CEO, Bola Onadele, said the operators were doing their best to deepen the derivatives and futures market.

    Speaking on the theme: Futures as a an asset & liability management tool, he added: “We are looking at futures as a tool for asset/liability management. Of course, you know banks have to focus on managing their assets and liabilities. And there are six elements in that. Managing the balance, managing the funds transfer, managing the capital, institutions, compliance, law and regulations. All those things come under the purview of asset and liability management. But, the one that is most visible that people talk about is the mismatch that come in interest rate. The banks can borrow short-term and lend long term. Nigeria has just issued 30-year bond, and pension funds and banks bought 30-year bonds.

    “They did not use 30-year money to buy 30-year assets so that  they do not mismatch it.’’

    He added: ‘’But what is important, which you see in other climes, are risk management tools. When you have taken such position, how do you hedge the exposure you have? And this exposure come as interest rate risk, foreign exchange rate risk, which you know the CBN promoted the Forex Futures. So, what we are dealing on here are other types of futures or commodities.

    Onadele said in the past, 2017 and last year, the banks had loans towards margin lending for equities.

    “So, the risk factors, interest rate risk, foreign exchange risks, equity price risk and commodity price risk are called risk factors and banks have to deal with them in managing their balance sheets and financial positions, which are highly dynamic everyday.

    ‘’The CBN made a statement, trying to put caps on what a bank can hold on government securities. If they do that, which is because the CBN wants money to go to the real sector, but if they do that, the demand for government securities will go down, what happens is that immediately demand goes down, price will go down, yield will go up, meaning that government will borrow much higher,” he said.

  • Banks seeking $600m to build 1,500Mw Okija plant

    A consortium of foreign lenders is ready to invest  $600 million in the construction of a 1,500 megawatts (Mw) power plant in Okija, Anambra State, the Chief Executive Officer, Century Power Generation Limited, Dr Chukwueloka Umeh, has said.

    The banks are to provide the funds, once the firm is ready with the predocumentation required for the construction of the plant.

    Umeh, who spoke on the phone in Lagos, said local lenders had agreed to be part of the deal. He, however, refused to mention the names of the banks.

    Century Power Generation is the utility arm of Nestoil Group, a conglomerate with interest in power generation and provision of gas pipelines, among others.

    Umeh said: “A consortium of international banks, in conjunction with some Nigerian banks, has agreed to provide the funding, which is between $600 million and $650million in 2020.  Bigger banks in Nigeria are also going to provide funds.

    “The fund required for the Okija power plant is similar to the ones provided for the Azura Power Plant in Edo State. The size of the plant is huge, as it would assist in providing electricity for millions of people in the Eastern part of the country.”

    According to him, financial institutions expected Nestoil Group or its subsidiary, Century Power Generation Limited to submit documents, such as Power Purchase Agreements (PPAs), that are necessary for the construction of the project.

    “We have been on the issue for some time. We are working to provide the documents for the release of the funds in 2020. By this, we are wrapping up the process of providing the power plant soon. Already, the company has resolved issues  on the allocation of the land for the plant. What needs to be done is movement of machinery to the site of the plant, immediately the funds are ready,” he said.

    In 2013, the Federal Government opened the window for private participation in the power sector through privatisation of the sector.

  • Wigwe: AI, analytics imperative for banks, fintechs’ competitiveness

    Leveraging technology, such as artificial intelligence (AI) and utilising data analytics, is imperative if banks and financial technology (fintechs) are to remain competitive, the Group Managing Director/Chief Executive Officer, Access Bank, Mr Herbert O. Wigwe, said at the weekend.

    Speaking on The future of Intelligent Bank at AFF Disrupt 2019 held at Landmark Event Centre, Victoria Island, Lagos, he said, the world is witnessing the Fourth Industrial Revolution which uses the Internet of Things (IoT) and Cloud Technology to automate processes.

    This, he said, has enabled financial service providers to increase their digital offerings for customers so they can conduct banking transactions on mobile phones, the internet, and at the automated teller machine (ATM).

    The only waiting time today is how fast the internet connection is, Wigwe said, adding that 5G is already around the corner.

    He said: “With the prolific opportunities digital banking brings, banks are now competing on the nature of innovation that can provide solutions, handle and predict customer behaviour in an incredible fast manner. Even though banking has come this far, the future holds a lot more than what the past has ever held. Today, becoming an Intelligent bank is not an option, it’s a necessity; technology is redefining the way banks operate.

    “AI, Big Data, Cloud Computing, Virtual Reality, Cryptocurrency all bring enormous opportunities for banks to significantly improve the way customers access and manage finances.

    “Thanks to automation technology, banks and fintech’s are able to grant credit in seconds! AI reviews legal documents. A manual review of 12,000 documents use to take 360,000 hours, but today, this can be done in seconds using AI.

    “Blockchain can be used to execute smart contracts, eliminating manual costs of transactions;  Robotics technology is used to serve customers in banks. Only one decade ago, we could not have imagined such advances. And there is so much that can be done with data.

    “Big Data Analytics helps an intelligent bank understand its customers. This data categorises customers and analyses their behaviour and needs. Such understanding improves product development and enables effective cross and up-selling. Cloud Technology has also been a game-changer for banks. It reduces server and infrastructure costs, which is most appreciated in a country like Nigeria, where power generation is expensive, and its availability is not usually guaranteed. Cloud technology enables the delivery of work from any location … where programmers can be based in multiple countries yet be working on the same project.”

    According to him, intelligent banks are able to consider the impact of having an active online presence and social media for their business.

    Banks can target social media for specific advertising ensuring they provide the right product and content to the right customer instead of marketing all products to all customers.

    “In this sense, banking has become much more tailored and personal. Intelligent Banks partner with critical stakeholders to expand the frontiers of their business. For example, the opportunities that exist from partnering with Fintech’s are enormous.  Imagine instant cross-country payments between businesses that do not necessarily have a presence in those countries. Imagine third parties connecting to APIs to open accounts and making instant international payments. And partnering with Fintechs offers banks an opportunity to earn revenue from transaction sharing.

    “At Access Bank, we are acutely aware that AI is the new cool in banking offering ongoing opportunities to enhance convenience for our customers. We are in constant pursuit of being the best possible Intelligent Bank. Our applications of intelligent banking range from the review of legal documents, to conversing digitally with our customers. Our TAMADA system presents a single chatbot experience for all our customers.”

  • ‘Banks should not joke with cybersecurity’

    The banking sector is bracing for another phase that will lead to the emergence of mega banks, which will enable the industry take on huge project financing. But much as this may be the trend, the impact of digitalisation and the fear of cybercrime remain an issue. In an interview with select Business Editors, the Managing Director/CEO, Fidelity Bank Plc, Mr. Nnamdi Okonkwo, spoke of the lender’s plan to launch itself into the prestigious Tier 1 category. He spoke on other initiatives of the bank, which will make the Tier 1 dream a reality, Group Business Editor, SIMEON EBULU, was there.

    How are you implementing your bank’s strategic growth plan?

    Two years ago, we set out at Fidelity Bank, to drive a five-year strategic plan, beginning from last year that would see us migrating to a Tier 1 bank in the country by 2022. We want to break into the league of Tier 1 banks and grow organically, keeping in mind that the other banks are also growing. This is my sixth year as Chief Executive of the bank and by God’s grace, we are driving the plan and the numbers show that we are making steady progress, year-on-year, in terms of balance sheet size, deposit and profitability. As we are doing this, we are keeping our eyes on the safety of the bank. We have thus kept our eyes on the bank’s capital adequacy, liquidity ratios, risk management framework, governance and compliance practices e.t.c. For instance, as a result of our prudence in building up capital, we were able to cushion the impact of the implementation of International Financial Reporting Standard (IFRS) 9, so we took the charge outright.

    In specific terms, which areas do you think you have excelled?

    On deposits, we grew by 26 percent last year. In fact, in one year, we grew deposits by about N200 billion, which means that our market share, is increasing. Two years ago, our desire was to make sure that low-cost deposit constitutes a larger percentage of the total deposit. Today, we have largely achieved that as low-cost deposits now constitute about 82 per cent of total deposits. In the area of governance, you would have noticed how our Board has been strengthened. We brought on board some seasoned professionals. For instance, the Chairman of the Board is a former Chief Executive of a bank and a former Deputy Governor of the Central Bank of Nigeria (CBN) for 10 years. We also have with us the former Managing Director of Guinness Nigeria and another former MD of a bank. As a deliberate strategy, each time a Director retires, we replace with yet another very experienced one. We also ensure diversity. We are also very serious about succession.Therefore, we plan ahead, As you may aware, we recently appointed three Executive Directors at a go, subject to CBN’s approval.

    What role is digitalisation playing in your operations?

    We are driving our retail banking with digitilisation.About 81.5 per cent of our transactions are now done through digital channels. That is why you will see us building just one or two new branches in a year. In the past, we used to do like between 15 and 20 branches. I can’t remember the last time I went to commission a new branch or even wrote a cheque. Digitalisation has made things more efficient. We have also taken into cognisance, customers who may not have data to do their transactions, so we introduced our USSD *770#, which does not require you to have smartphone or data to carry out some banking transactions. These categories of customers do not need android phones to operate their accounts, just basic phones. This has made our cost-to-income ratio to improve significantly. Ultimately, our cost-to-income ratio is likely to drop by about 50 percent by 2022. Digitalisation will play a key role in achieving this.

    Are you not worried about the challenges associated with digitalisation, especially fraud?

    It comes with a lot of risks. Any bank that does not pay attention to cyber risks is living dangerously and I doubt if any bank will even try that. Statistics has also shown us that even in some of the areas of the north with security challenges, we have very high adoption of electronic banking, because people are sending and receiving money using their phones. A challenge actually leads to innovation and opportunity.

    You were a leading investment bank before the consolidation in the industry. Are you de-emphasising corporate banking for retail banking?

    We have just appointed a new Executive Director, Corporate Banking and that should tell you how seriously we take Corporate Banking. Fidelity Bank used to be Fidelity Union Merchant Bank and that was why most multinational companies in the country have continued to bank with us. Supporting business in this niche segment comes with a huge cost. Therefore, building up low cost deposits from the lower end of the market helps support lending to the corporate segment at rates lower than higher risk segments. We have grown our savings deposit account base from N75 billion when I became CEO on January 1, 2014, to N226 billion at present.

    What is your take on cyber security in the entire industry and what is your bank doing to tackle it?

    The entire industry is as strong as a bank with the weakest security measures. Therefore, no bank should toy with cyber security measures because there is a contagion effect. If fraudsters can penetrate one bank, what it means is that they can also affect other banks. At the Bankers Committee, we have discussed this several times. Therefore, even at regulatory level, there are certain measures you are compelled to take. For instance, building a Security Operations Centre and appointing people with certain qualifications and executive level personnel as heads of IT Security.

    What plans do you have to grow the bank?

    Our five-year plan was crafted to be based on organic growth, based on the projections we made. We also decided that we will not expand outside Nigeria until after 2022. So, our plans are based on organic growth. We also left a window that allows us to take advantage of emergent opportunities though. When these happen, we will sit down and look at them and go back to our Board to see if we need to alter anything to take advantage of such opportunities or to continue with on the organic growth path.

    Fidelity Bank recorded about 28 per cent growth in deposit base in 2018. What was responsible for this?

    The deposits came from a combination of growth in savings; growth in current and domiciliary accounts. We have a new product where you can transfer foreign exchange with your mobile phone up to the regulatory limit. It means that we have also seen growth in our domiciliary accounts because people built up funds, so that when they want to transfer, they can easily use it. We also have corporates that are in foreign currencies earning businesses. The increase in oil prices also impacted on our deposit growth as it favoured our oil and gas upstream customers.

    What are you doing to sustain loans and advances above 10 per cent?

    The environment is so challenging that growing loans double digit as we have done have prompted some people to ask us: How come we grew double digit. In 2018, we took advantage of opportunities in some sectors to grow loans. For this year we are guiding for between 7.5 and nine percent. Still talking about last year, a lot of those were to the real sector of the economy which encourages growth and creates employment.

    What is your take on payment service banks?

    You know it has been a prolonged push by the telcos to come into the banking space. We don’t have a problem with that. Let them be subjected to the same regulatory conditions that we have, because you are talking about depositors’ money. So, once all of us are subject to regulatory control, we will all do banking together. I think the sky is big enough and as banks, we are not sleeping. That is why you see some of us deepening our digital platforms.

    The stock market is still experiencing heavy foreign capital outflows post-election. What is your opinion on this?

    We just got back from London on a no-deal roadshow and the outlook on Nigeria is quite positive. Indeed, based on some of the sentiments, we were being advised to raise Eurobonds because they want to increase their emerging markets investments, especially the fixed income managers. The flows, you know European Central Bank raised rates. With the increase in rates, capital will always follow where margins have just popped up.  People generally move money to those areas just the same way when we had our treasury bills going for about 20 percent, everybody rushed in. So, that is the constant dynamics of inflows and outflows.

    What measures have you put in place to ensure that your bank is not threatened as you grow to become a Tier 1 Bank?

    We are keeping our eyes on our capital, on risk management, on governance and sustained profitability. This explains why, for instance we had enough buffers to absorb the impact of implementation of IFRS9.

    Do you plan to raise Eurobond to support capital?

    We do not plan an immediate increase in Eurobond. We are not doing any Eurobond this year, but we may consider local bond issue if necessary as part of Tier 11 capital but no size yet.

    How is Fidelity Bank leveraging Fintech to grow its franchise?

    Under our five-year plan, which was crafted in 2017 and commenced on January 1, 2018, we got one of the big four consulting firms to do a full global analysis of Fintechs and how we can collaborate with them. Part of our engagement strategy is partnership. This partnership has been on several fronts, including the deployment of a solution for a major customer of ours; an airline. We are bankers to an airline that controls about 40 percent of the industry. Initially, they had challenges with ticketing on the electronic system they were using, and they came to us. Through collaborating with Fintech,we migrated their entire transactions to the cloud. This has worked so efficiently in the last one and half years without fail. Aside from partnering Fintechs, we then decided that there was need for us to develop our internal capacities as well. We decided to build a digital lab as part of the outcomes of the strategic studies we had done with the consulting firm in the last six years. Today, we have several millennials that are IT savvy, working at solving problems with innovative solutions, under flexible hours and work environment, at our digital lab.