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Tag: cbn

  • ‘Oil price slump won’t weaken banks’ base’

    ‘Oil price slump won’t weaken banks’ base’

    The crash in oil price has implications for a mono-economy like Nigeria’s. Since oil is its major revenue earner, the country caught cold when the price fell. It has kept on dropping. But Oyewale Ariyibi, Head of finance at FBN Holding Plc, believes banks have nothing to fear about the falling oil price. In this interview with reporters, he argues that banks stand a chance in the face of the crashing price. Capital Market Editor Taofik Salako was there.

    IN what ways will the monetary policy of the Central Bank of Nigeria (CBN) and falling oil prices affect  banks’ profitability?

    I believe that one of the key objectives of the regulator is to engender financial stability in the system by ensuring that banks are adequately capitalised and well-resourced for the businesses that they undertake. From April 2013 and up till now, there have been a number of pronouncements that have impacted income generation capacity of banks. Some of these policies amongst others are increase in Cash Reserve Ratio (CRR) for both public and private sector deposits; mandatory payment of a minimum 30 per cent MPR rate on savings deposits; attaching a risk weight of 125 per cent to oil and gas exposure of banks with 20 per cent or more of its portfolio in oil and gas; progressive reduction in Commission on Turnover (COT) from 5/mille to 3/mille in 2013, 2/mille in 2014 1/mille in 2015 and zero in 2016. No doubt, these pronouncements have impacted earnings of banks, including FirstBank and, ultimately, the holding company. Let me illustrate the impact with just the CRR at 75 per cent for public sector deposits and 20 per cent for private sector deposits, FirstBank, has about N560 billion sterilised with the Central Bank yielding no interest or return whatsoever. Hitherto, such funds would have been invested at an average interest rate of 12 per cent per year, thus the opportunity cost is an annual lost income of N67 billion. The bank has complied with all these regulations and re-arranged its operating structure and created more efficient internal processes to ensure quality service delivery and minimise the impact of the regulatory pronouncements on earnings and the bottom line. Our financial results for the nine months ending September 30, 2014 showed that the group has made significant progress with a profit of N74 billion compared to N70 billion for the equivalent period of prior year.

    How do you see the changes in capital adequacy ratio?

    The CBN, as the regulatory authority in the Nigeria banking industry, has come up with operational guidelines and categorisation for banks in Nigeria. Large commercial banks-mostly Tier 1 banks, with international operations are required to have a minimum capital adequacy ratio (CAR) of 15 per cent while banks classified as systemically important banks (SIBs) are required to have an additional 100 basis points, that is, 16 per cent CAR with effect from April 2015. It is also pertinent to note that the banking industry will be adopting Basel II Capital Accord with effect from October 2015. The adoption of Basel II essentially means additional capital charge for market and operational risks. For us at FBN Holdings, FirstBank is the subsidiary under the CAR requirements and we are pleased with the efforts and actions put in place by the management of the bank to remain compliant both with the regulation and the SIB requirement taking effect from April 2015.

    Looking at the regulatory policies, which do you think should be reviewed in the next financial year?

    The regulators have made policy pronouncements based on their research and data gathering system. As I said earlier, the objective would be to ensure that there is stability in the system and we fully align with some of these policies. One area, I wish the CBN can take another look is the issue of CRR vis-a-vis liquidity ratio. The funds are sterilised in CBN for CRR purposes and these funds – N560 billion in the case of FirstBank, do not count for liquidity but the banks are not relieved of the burden of liquidity ratio for the underlining deposits. Hence banks make provision for liquidity ratio on deposits that are not available for their use and do not count for liquidity. It is either those deposits are excluded from computation of liquidity ratio or the sterilised funds are counted as part of a bank’s liquid assets.

    CBN said there is excess liquidity in the system and banks. What do you think necessitated such excess liquidity policies?

    This does not really apply to our group. The bank has constantly extended credit to the productive sectors and, especially small and medium enterprises (SMEs), which explains why FirstBank has the largest loan portfolio in the banking industry.

    There are fears that non-performing loans (NPLs) will spike next year as a result of potential downward trend in government spending. How do you mitigate this risk?

    You know before the bank extends facilities, there are risk acceptance criteria and credit assessment mechanisms that give some level of comfort that the obligor has the capacity and capability to repay the loan from the cash flow point of view. If the fundamentals of the obligors’ businesses do not change, loans do not go bad; however, temporary macroeconomic challenges might impact margins and profitability. On our own, we have very competent and experienced personnel at the bank who are daily monitoring the bank’s portfolio and the obligors to ensure that the loan covenants are adhered.Generally, given the more robust risk framework and proactive approach of the apex bank, we do not expect oil and gas related non-performing loans to become somehow significant or require the kind of bailouts that the industry witnessed in 2009.

    How do you intend to drive down cost and increase the bottomline and profit next year given  changing regulatory headwinds?

    We appreciate the strength in financial size, and the size of the institution has been a major asset to us. At present, we have about 800 branches and service points across the enterprise, and there are attendant operational costs associated with this size. For example, for each branch, you need to have a transformer and a generator with the attendant costs of maintenance. With the benefit of experience, the bank can safely estimate how much it will cost per year to operate different types of branches and quick service points. Hence, a template can be developed and deployed as benchmark across different branches and quick service points. In addition, with current advances in technology and the deployment of online banking, mobile banking, over 2,200 Automated Teller Machines (ATMs) and other platforms, the customers can transact their businesses from the comfort of their homes and offices without necessarily going to the physical bank locations. With this, we can begin to record savings in this area going forward. The group’s target is that by the end of 2016 which is the end of the current three-year strategic planning cycle, we would have shaved off about 500 basis points in cost-income ratio compared to 2013. This is a stress target and all hands are on deck towards achieving this.

    FBN Holdings  recently acquired Kakawa Discount House Limited. Are you eyeing further acquisition in Africa?

    The acquisitions that you have seen are in line with the group’s strategic plan for growth and earnings diversification. If I can take you back a little bit, you will recall that one of the key reasons for adopting the financial holding company structure is to extract synergies and optimise cross selling opportunities across our subsidiaries, hence the inherent value in the group will be harnessed with the financial holding company structure such that the holding company will focus on co-ordination and consolidation and allow each operating company, that is, subsidiary business to focus on the strategic core of its mandate. The group is structured along four strategic businesses namely: commercial banking group, investment banking and asset management, insurance and other financial services. The commercial banking is focused strictly on commercial banking and related businesses, investment banking and asset management focuses on asset management, corporate finance, and capital market operations, including issuing house and security dealing, advisory services etc., while the insurance group focuses on risk underwriting.

    Prior to this time, the group held 46 per cent of the shares of Kakawa Discount House Limited and was an associated business. Kakawa offers a unique proposition to the group. It comes with a rich and unique blend of a fixed income origination and distribution capacity which can be integrated into our investment banking and asset management group and with this, we are not only reaching out to places we have not reached before but we are also able to deepen existing relationship, improve and increase the type of product offerings available to our customers. This makes Kakawa a perfect fit in the FBN Holdings structure. In view of this, the group decided to acquire the 54 per cent shares hitherto held by non-members of FBN group thus FBN Holdings Plc has become the beneficial owner of 100 percent shares of Kakawa Discount House Limited. Previously, the commercial banking group through FirstBank had completed the acquisition of ICB West Africa operations in Ghana, Gambia, Guinea, Sierra Leone and Senegal. Additionally, FBN Insurance Limited acquired Oasis Insurance Plc. thereby affording the company the opportunity to underwrite general insurance business in addition to its Life business license. FBN Holdings Plc has not raised fresh equity in recent time, and the acquisitions were through internally generated funds. We monitor the group performance periodically and regularly with the objective of ensuring that we sweat the equity for efficiency. Our strategy generally is to enrich our subsidiaries’ footprints across Africa and in selected countries across the continents. We give higher priorities to markets that offer higher potential returns on investments and shorter payback period.

    With our diversified business and revenue base, we are confident that we have laid strong foundation for the future towards improving the well-being of our stakeholders. For now we do not have any immediate plans of further acquisitions, but to focus on integration and getting the benefit from the investments.

    FirstBank is the largest bank in Nigeria, but considering the market capitalisation figures, do you think the bank is still leading ?

    In 2012, the FBN group re-structured its businesses to adopt the financial holding company structure. First Bank of Nigeria Limited today is the largest subsidiary of FBN Holdings Plc. So, the quoted company, which listed on the Nigerian Stock Exchange is FBN Holdings Plc. The groups’ financial results as at third quarter ended September 2014 showed total assets of N4.19 trillion, deposit liabilities of N2.91 trillion and net loans and advances to customers of N2.03 trillion. With these, FBN Holdings Plc is the largest financial institution in Nigeria and the 13th largest in the whole of Africa by total assets. Considering the size of this institution, number of branches, number of customer accounts, and the employees, FBN Holdings is still the largest financial institution in Nigeria. Also, in terms of our contribution to economic development; you will observe that the bank supports the highest number of productive sectors in terms of loans and advances.

    Do you think there is disconnect between returns and investors’ valuation of FBN Holdings, especially in the light of the share price trend at the stock market?

    First, the market is bearish. Secondly, Pension Fund Administrators (PFAs), which constitute large institutional investors in Nigeria, were barred from further investing in the shares of financial holding companies (Holdcos). This is because holdcos were categorised as new companies in line with section 73 of the Pension Reform Act of 2004. This section of the old law debars PFAs from investing in new companies that has not made profit or declared dividend in the last five years. Whereas, FBN Holdings Plc, in substance over the form, is essentially a continuation of FBN Plc. A quick look at our five-year dividend history from 2010 to 2014, showed that the group had declared and paid 10 kobo, 60 kobo, 80 kobo, 100 kobo, and 110kobo yielding a cumulative annual growth rate (CAGR) of 62 per cent. Investing in FBN Holdings Plc is like a fixed income security with en equity upside. The dividend CAGR is very commendable in view of the very challenging macroeconomic environment under which we have operated in the past five years.

    With the promulgation of the new Pension Reform Amendment Act of 2014, the section has been amended and coupled with the release of the guidelines for the operations of a financial holding companies in Nigeria, we await the release of the necessary circular from the National Pension Commission (PENCOM) that will enable PFAs to resume investing in the shares of financial holding companies. We are confident that once this circular is released, the shares of FBN Holdings Plc. will gravitate towards its full intrinsic value.

    With the new regulatory pronouncement stipulating an interest rate of 3.6 per cent to be paid on all savings accounts, does this pose a challenge to FirstBank’s profitability?

    It is not difficult to pay interest on deposits. Even before the pronouncement, FirstBank was paying interest on its savings and the bank encourages people to save. When the rate is indexed against MPR, this has increased interest expense and cost of funds slightly, but the bank has managed this appropriately with careful and profitable deployment of the funds. No doubt, regulatory risks in recent period have had negative impacts on the profitability of some of our subsidiaries, but given strong measures we have taken, we have been able to weather the storm. FBN Holdings has built robust structures to respond to potential regulatory policies, guidelines, and measures in the context of emerging macroeconomic outlook.

    You have made acquisitions and also made divestments too. Are there plans to further divest from underperforming assets?

    FBN Holdings Plc is like an investment management company. The company has expectations and usually set target returns for its operating companies in line with the group’s aspirations and strategic plan. Usually, we consider both the short and long term profitability of any business before taking any decision. Review of performance is a continuous process and the decision to invest or divest rests squarely with the board of directors.

    What are your projections on the impact of regulatory tightening policies on the bottom-line?

    The market is bearish, but those companies with strong fundamentals will bounce back as investors and analysts take a longer view of the economy from first half of 2015.  Our investment banking and asset management business is fully diversified to mitigate the impact of the bearish market.

  • CBN justifies naira devaluation

    CBN justifies naira devaluation

    The Central Bank of Nigeria (CBN) has said the post-devaluation band for the naira is “appropriately priced”, but black marketers on the street are trading it at between three and five per cent below its floor in the run-up to Christmas.

    Reuters reports that despite an eight per cent devaluation of the target band and efforts last week to crack down on currency speculation by squeezing liquidity, the naira remains at record lows. But while the CBN and the interbank markets argue over the naira’s fair value, it’s harder to argue with the price on the streets where many dollars are bought and sold.

    The naira was devalued and its target trading band widened to N160 to N176 against the dollar, but few analysts believe that can hold, given a steady decline in reserves.

    Several street changers, mostly Muslim northerners from the Hausa and Fulani ethnic groups, told Reuters they were trading a dollar for between N180 and N182 on Christmas eve.

    Last week, when the naira hit a record low, they were trading at 190 to the dollar, some 6.5 per cent below the lower end of the bank’s target band.

    “The naira’s come back a bit because people are wanting more of it now ahead of Christmas,” said Ibrahim Sanni, standing by a palm-lined Lagos hotel adorned with Christmas decorations. “Last week we bought at 190, lower than ever.”

    But he added that trading has been very slow since the end of November, when the central bank devalued the currency. The naira has been hit hard in recent months by a steep fall in the price of Nigeria’s main export, oil.

    The CBN also introduced new policies last week banning banks from holding their own funds in dollars and decreeing that dollars bought from the interbank market could be held only for up to 48 hours. Trading has almost ground to a halt since the measures were introduced.

    The rise in the dollar in heavily import-dependent Nigeria has caused pain ahead of the Christmas shopping season, with small-scale retailers saying sales were badly hit. “Even in Christmas week, they aren’t buying,” said Bola Maja, 40, who runs a clothes shop in Lagos.

  • Agent banking: Banks, agents get 72 hours to resolve complaints

    Agent banking: Banks, agents get 72 hours to resolve complaints

    Banks and agents have 72 hours to resolve customer-related issues in agent banking, according to a Central Bank of Nigeria (CBN) guidelines.

    CBN said financial institutions will be responsible for setting up dispute resolution mechanisms for their agents to facilitate resolution of customers’ complaints.

    It pegged the minimum shareholder fund for Super Agents in Agent Banking at N50 million.

    In a circular to Deposit Money Banks, Mobile Money Operators (MMOs) and switches, signed by its Director of Banking & Payments Department, ‘Dipo Fatokun, CBN insisted that to be licensed, a Super Agent must be a company with an existing business operational for at least 12 months and registered with the Corporate Affairs Commission (CAC).

    It said the agent must also have a minimum shareholders’ fund unimpaired by losses of N50 million and obtain a reference letter from a financial institution as part of its documentation for licence request.

    The Super Agent must also have a minimum of 50 agents, while applications for such position shall be accompanied with board approval, certificate of incorporation, shareholding structure of the consortium and feasibility study for the agent network, among other conditions.

    “The Nigeria Interbank Settlement Scheme (NIBSS) shall provide the switching infrastructure at all agent locations. The super-agents’ platform shall be for the management and monitoring of the activities of their agents only and shall not hold electronic money value, whereas, the financial institutions shall provide and operate the Mobile Money platform and hold electronic money value,” the circular said.

    It said all MMOs operators platforms must be up to date (inclusive of mandatory integration to NIBSS), tested and active to ensure interoperability between MMOs. Also, all licensed MMOs shall ensure that their platforms are upgraded as needed, tested and active within 30 days from the release of this document.

    For over-the-counter (OTC) transactions, it said the period for holding funds not withdrawn by a receiving customer shall be 30 days. Thereafter, the fund shall be reversed to the sender even as notifications sent to the receiving customer shall indicate the expiry date for the transaction.

  • Nigerians to pay more for electricity

    Nigerians to pay more for electricity

    •Govt unfolds new tariff today 

    INDUSTRIAL and commercial consumers are to pay more for every unit of electricity they use. The Nigerian Electricity Regulatory Commission (NERC) will unveil a new tariff regime today, it was learnt yesterday.

    The new regime will be extended to residential consumers in six months, the NERC said.

    According to its chairman, Dr. Sam Amadi, the new tariff, “is already well known to both the Central Bank of Nigeria (CBN) and the transaction advisers as well as the participants from the deposit money banks.”

    Amadi broke the news yesterday in Abuja at the signing of a Memorandum of Understanding (MoU) between the CBN and all the Deposit Money Banks (DMBs) for the N213 billion legacy debt funding for the power sector.

    He, however, assured Nigerians that the Commission will “ensure that the tariff is cost-reflective, it will not constitute a burden on consumers immediately and so for avoidance of doubt with this facility, there will be no increase in electricity tariff for residential consumers for six months until we begin to see improvement.”

    Essentially, the tariff, Amadi explained “is guaranteed to come into effect tomorrow (today) and it allows for full recovery and ensures that there is no risk that is not fully covered in this transaction.”

    He said that NERC expected more gas inflow to the power stations with the injection of N213 billion.

    He said: “This facility and other interventions in the next two, three, four months will bring about increase in capacity, there will be more reliability and the metering plan that is ongoing will ensure that consumers will be much more comfortable as they will witness increase in power supply.”

    The objective of the N213 billion legacy debt facility was to make the power sector viable and reliable.

    Amadi restated the Commission’s commitment to cost recovery by both the CBN and the designated banks in providing the fund and for other investors, who may want to invest either in upstream and downstream of the power sector.

    The funding facility, Amadi stated “is about viability and with just 4,000 megawatts worth over N500 billion market, we expect that this facility will deepen the market and ensure not just a good business for the banks but also provide reliable power supply to Nigerian homes.”

    CBN Governor Mr. Godwin Emefiele said they were “taking this bold step at this stage to now help the banks, who are themselves going to act as channels through which these funds would be paid to the discos and the GENCOS and the gas suppliers to come in to also sign their Memorandum of Understanding at the Central Bank of Nigeria with the NERC and CBN.”

    Nigerian banks, he said, are predominantly the creditors in the books which further demonstrates the commitment of the banks to continue to support the growth of the power sector.

    Emefiele stated that the N213 billion power sector intervention fund will ensure that “the least legacy debts that we have are cleared so that the market can be seen to be viable, and electricity can be begin to be generated and distribution improved upon for the good of our people.”

    He said that gas tariff was subsequently reviewed to $2.50 whereas transportation was improved to 80 cents, increasing the gas tariff to about $2.80 cents.

    Emefiele said the International Oil Companies (IOCs) the gas suppliers, have been assured that the present gas price will be commercially viable.

    “Not only that, it will encourage them to improve on the gas production and supply but will indeed also encourage new investors to come into the market and then we can see a boost in the gas production industry in Nigeria,” the CBN chief said.

  • Capital Express’ gross premium hits N3.4b

    Capital Express’ gross premium hits N3.4b

    Capital Express Assurance Limited has achieved a gross written premium of N3.42 billion for the year ended 31 December 2013 against N2.8 billion recorded in 2012, a growth rate of 22 per cent in generated premium.

    The company’s net premium income on the other hand, dipped by 11 per cent from N2.79 billion in 2012 to N2.49b in 2013.

    However, underwriting profit recorded a 114 per cent growth from N344 million in 2012 to N735 million last year.

    In spite of the harsh operating space, loss for the year was significantly brought down from N517 million in 2012 to N109 million last year.

    Its Chairman, Otunba Babatunde Adenuga who spoke during  the 13th Annual General Meeting (AGM) of the firm in Lagos, said the growth prospects of the firm in the coming year remain modest due to the high uncertainties surrounding commodity prices, rising cost- push factors, increased volatilities in the foreign exchange market, and tight monetary policy stance.

    He also said this notwithstanding, assessments within the Central Bank of Nigeria (CBN) suggests that the  economy is projected to remain strong, driven largely by increased growth in agriculture, trade and services, while activities in the oil sector are projected to recover this year.

    He added that the company will position itself to take advantage of any business opportunity available in the economy to ensure an improved performance in the years ahead.

    On the insurance industry, the chairnan said it has been characterised by certain weaknesses over the years. He said if the weaknesses are addressed, it will position the sector to realise most of its potentials as well as attract sufficient businesses both locally and internationally.

    He said: “The industry has started to witness a lot of emerging opportunities on the back of current government legislation which has supported the prospects of growth in the industry. This legislation has triggered strategic mergers and acquisitions, interests from foreign investors as well as increases in competition and standard among players in the industry.”

     

     

     

  • CBN raises N195b in T-Bills as yields rise

    CBN raises N195b in T-Bills as yields rise

    The Central Bank of Nigeria (CBN) at the weekend raised N195.56 billion worth of treasury bills with maturities ranging between three months and one year. The yields for the instrument also rose last week.

    The CBN sold N33.87 billion in three-month treasury bills at 11 per cent, compared with 9.99 per cent at the November 19 auction. A total of N51.30 billion worth of the six- month bill was sold at 13.84 per cent, against 10.8 per cent previously.

    In the one year tenor bill, the bank sold N110.39 billion worth at 15.99 per cent, compared with 12.48 per cent at the last auction.

    The investors in government securities are mainly pension funds and commercial banks which control more than 60 per cent of the market, followed by insurance funds and a few micro-finance institutions.

    Meanwhile, the naira depreciated 3.5 per cent against the dollar in the Inter-bank and has lost 16.7 per cent of its value year-to-date on December 17. Strong dollar demand, driven by importers, repatriation of profits, and speculation (given the uncertainty of the managed exchange rate regime) continue to undermine the naira.

    The currency closed at N187.10 to the dollar, even as the twice-weekly CBN’s Retail Dutch Auction System (RDAS) continues to be influenced by the new CBN’s mid-point of N168 plus or minus five per cent.

    The CBN sold $200.0 on 17 December at N168.00, just as the naira continues to remain under pressure due to falling oil prices, lower foreign exchange reserves, and robust import demand.

    Currencies analyst at Ecobank Nigeria, Olakunle Ezun, said the outlook for the naira is significantly at risk from further oil price weakening, along with election-related spending pushing liquidity above target.

    “If CBN can manage liquidity successfully until February 2015 election, and also bridge the supply gap, interbank naira will continue to trade between N179 to N180. Otherwise, it might trade between N185 to N187,” he said.

  • CBN to issue new N100 banknote on Friday

    CBN to issue new N100 banknote on Friday

    THE commemorative N100 banknote unveiled recently by the President Goodluck Jonathan is to be officially issued into circulation by the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, on Friday.

    The ceremony billed for the Abuja Branch of the CBN will be immediately followed by a simultaneous issuance of the currency across the branches of the bank.

    The commemorative note, which is embedded with features to assist the visually impaired recognise genuine notes, also has other security features easily identifiable through look, feel and tilt of the currency note.

    It will be recalled that the CBN Governor, at the unveiling of the new banknote, explained that the new note was designed with enhanced security to offer robust resistance against counterfeiting.

    Authentication features of the note include window micro-optics, showing the national flag and numeral 100, indicating the value of the denomination and the attainment of the centenary period.

    The new design retains the portrait of Chief Obafemi Awolowo both in the ink, which is the inter-glow level, as a portrait and also in a paper as a shadow image.

    In addition, there is a spark feature of a rolling manila bar, which was the instrument of transaction during the slave trade era.

    At the back side of the currency is the introduced Quick Response Code (QRC), a digital communication feature that highlights and sources all the information about the centenary.

    With the QRC application, the barcode on the banknote can be scanned by users to read a brief history of Nigeria.

    According to the bank, the commemorative note will circulate alongside the existing N 100 note.

  • CBN pegs shareholders’ fund for ‘Super Agents’ at N50m

    CBN pegs shareholders’ fund for ‘Super Agents’ at N50m

    The Central Bank of Nigeria (CBN) has pegged the minimum shareholders’ fund for Super Agents in Agent Banking at N50 million, a guideline released at the weekend stipulated.

    In a circular to deposit money banks, mobile money operators (MMOs) and switches, signed by CBN Director, Banking & Payments Department, ‘Dipo Fatokun, said to be licensed, a Super Agent must be a company with an existing business, operational for at least 12 months and registered with the Corporate Affairs Commission (CAC).

    He explained that the agent must also have a minimum shareholders’ fund unimpaired by losses of N50 million and obtain a reference letter from a financial institution as part of its documentation for licence request.

    The Super Agent, the CBN directive further said, must also have a minimum of 50 agents even as applications for such position shall be accompanied with board approval, certificate of incorporation, shareholding structure of the consortium, feasibility study for the agent network, among other conditions.

    “The Nigeria Interbank Settlement Scheme (NIBSS) shall provide the switching infrastructure to enable inter-scheme CICO at all agent locations. The super-agents’ platform shall be for the management and monitoring of the activities of their agents only and shall not hold electronic money value, whereas, the financial institutions shall provide and operate the Mobile Money platform and hold electronic money value,” he clarified.

    Explaining further, he said all MMOs operators’ platforms must be up to date (inclusive of mandatory integration to NIBSS), tested and active to ensure interoperability between MMOs. Also, all licensed MMOs shall ensure that their platforms are upgraded as needed, tested and active within 30 days from the release of this document.

    For over-the-counter (OTC) transactions, it said the period for holding funds not withdrawn by a receiving customer shall be 30 days. Thereafter, the fund shall be reversed to the sender even as notifications sent to the receiving customer shall indicate the expiry date for the transaction.

    Financial institutions, he said, shall be responsible for setting up dispute resolution mechanism for their agents to facilitate resolution of customers’ complaints. The financial institutions, he said, shall treat and resolve any customer related issues within 72 hours even as a Super-Agent shall facilitate the resolution of customer related issues.

  • Banks deposit N368b with CBN to meet policy demand

    Banks deposit N368b with CBN to meet policy demand

    BANKS have deposited N368 billion with the Central Bank of Nigeria (CBN) in fulfilment of the requirement of the 20 per cent cash reserve ratio (CRR).

    The CBN raised the CRR on private sector deposits from 15 to 20 per cent last week.

    CRR is a portion of banks’ deposits kept with the CBN to enable it effectively manage liquidity.

    The deposit brings total sterilised private sector funds to N1.47 trillion, which is 9.72 per cent of total banking deposits and 8.87 per cent of money supply. The total private sector deposits now stand at N7.38 trillion.

    A consultancy firm, Financial Derivactives Company (FDC) Limited, said the additional CRR was expected to push up interbank rates by about 200 basis points in the short term.

    Its Managing Director, Bismarck Rewane, said: “Borrowing costs will rise and banking sector profitability is set to take a hit as net interest margins diminish further.”

    A comparison of core regulations across key banking systems in sub-Saharan Africa revealed that the  banks operate under some of the toughest regulations which have led to decline in earnings.

    Report from Renaissance Capital (RenCap,) an  investment and research firm, said Nigeria’s blended CRR, at 31 per cent, is almost three times that of Ghana, at 11 per cent, and six times those of Kenya and Rwanda, at 5.25 per cent and five per cent, respectively.

    The minimum Capital Adequacy Ratio (CAR) is 15 per cent for international banks (10 per cent for local banks), compared with 10 per cent in Ghana, 14.5 per cent in Kenya, and 15 per cent in Rwanda.

    “We expect the SIB rules in Nigeria to indicate a minimum CAR of 15 per cent for SIBs, with tier 2 capital capped at 25 per cent of total qualifying capital. Above the 15 per cent, SIBs will be required to maintain a one per cent capital buffer that comprises entirely of tier 1 capital, which will raise the minimum CAR for SIBs to 16 per cent. The first set of identified SIBs include: FirstBank, Zenith, UBA, GTBank, Access, Ecobank Nigeria, Diamond and Skye Bank,” it said.

    The minimum capital requirement is $150 million for local banks and $310 million for international banks in Nigeria, compared with $15 million in Ghana and $11 million in Kenya. Basically, the lower end of the absolute minimum capital requirement for commercial banks in Nigeria is 10 times  more than the minimum for the next closest country, Ghana.

    According to RenCap, other regulatory constraints the Nigerian banks face include AMCON-introduced levy following its acquisition of non-performing loans from the banks.

    Last year, a reduction in commission on turnover was announced. This is a fee charged to retail banking clients on transactions, and the measure is very much oriented towards consumer protection.

    The permissible fee was initially reduced to 0.3 per cent of total monthly debit transactions, from the previous 0.5 per cent, with a timeline of reducing the cap further to 0.2 per cent in the year and 0.1 per cent in 2015, before finally abolishing it in 2016. The lower commission on turnover has had a negative impact on non-interest revenue across the sector.

  • Miners seek inclusion in N220b CBN’s SMEs fund

    Miners seek inclusion in N220b CBN’s SMEs fund

    • Urge govt to develop minerals as oil prices drop

    The Miners Association of Nigeria yesterday called on the Federal Government to  capture the Artsinal and Small Scale Miners (ASMs) as part of the beneficiaries of the Central Bank of Nigeria (CBN’s) intervention fund for the Small and Medium Enterprises ( SMEs).

    Its President, Alhaji Sani Shehu, who spoke  with The Nation on the economic implications of the declining oil prices, urged the government to “use oil money to develop other options such as the solid minerals”.

    He urged the government to fund the Solid Minerals Development Fund to perform its statutory functions effectively.

    The group said the government should strengthen the Ministry of Mines and Steel Development with a review of its  yearly budget.

    Shehu regretted that “every year, the budget is being reduced. The ministry should be strengthened to face the impact of falling oil prices”.

    The miners  chief urged the government to draw a work plan for the provision of infrastructure that connects minefields with railway facility for easy haulage linkage with the mines, sea ports and industrial areas.

    He said for the government to demonstrate its seriousness about the development of the mineral sector, the presidency should capture it in its Transformation Agenda as it is in the case of agriculture, textile, automobile, and entertainment industries.

    According to him, whenever a government promotes a sector, the sector becomes better.

    Shehu asked government to encourage financial institutions and development banks to lend to miners at single digit interest rate, stressing that it should also continue the gathering of geological data to include reserve estimate in the mines sector.

    He said:“Following the volatility in the prices of oil, government should draw strategies for the promotion of the development of solid minerals because it has the potential to create massive jobs for Nigerians and provide huge Foreign Direct Investment (FDI).”

    Shehu requested the government to encourage foreign investors and partners to enhance transfer of technology and FDI into the mining sector.

    He urged the government to take diversification of the economy from oil to mining serious, noting that the United States (U.S) that was the prime importer of Nigerian crude was last week about the largest producer of the shale oil.