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  • Naira falls on oil-imports demand

    Naira falls on oil-imports demand

    The naira declined for a fifth day, reaching its lowest in more than five weeks on increased demand for dollars by oil importers and as the Central Bank of Nigeria (CBN) cut the amount of U.S. dollars sold at yesterday’s auction.

    The naira weakened by 0.1 per cent to N158.83 per dollar, the lowest on a closing basis since March 14, according to data compiled by Bloomberg.

    Nigeria relies on imports to cover 70 per cent of the fuel needs because of inadequate refining capacity. Those shipments into the country are a source of pressure on the naira, according to the CBN. The apex bank sold $246.5 million at an auction yesterday, compared with $266.2 million at the previous sale on April 17, it said in an e-mailed statement.

    The naira weakened “on huge dollar demand by oil importers,” Access Bank analysts led by Tony Monye and Michael Ndiomu, wrote in a note. The drop in the CBN’s supply also added pressure on the naira, Tunde Ladipo, Chief Executive Officer of Lagos-based Valuechain Investment Limited, said by phone.

    Borrowing costs on the nation’s local-currency debt due January, 2022, fell four basis points, or 0.4 per- centage point, to 11.44 percent, according to April 19 prices on the Lagos-based Financial Markets Dealers Association website.

    Yields on Nigeria’s $500 million of Eurobonds due January 2021 fell three basis points to 4.04 per cent yesterday.

    Ghana’s cedi retreated 0.3 percent to 1.9675 per dollar in Accra, the capital, the lowest on record.

  • CBN to stop polymer production of lower naira denominations

    CBN to stop polymer production of lower naira denominations

    The Central Bank of Nigeria (NAN) is to stop the printing of lower denominations of the naira in polymer because it fades, the he Deputy Governor, Operations, Mr Tunde Lemo, said.

    Lemo made the plan known in an interview with the News Agency of Nigeria (NAN) on Sunday at the ongoing Spring Meeting of the World Bank and International Monetary Fund in Washington DC.

    “By the middle of the year, we will start producing the lower denomination notes in paper not in polymer.

    “My plea is that Nigerians should be patient with us. It wasn’t the fault of the CBN, it is just because we have to go back to the drawing board.

    “We will correct that in the course of the year. Polymer certainly will be phased out. In fact, no new note is being printed in polymer now,’’ he said.

    Lemo said the apex bank had, while introducing polymer notes, conducted endurance test, which showed that it lasted longer than paper substrate.

    “ So, part of the project cure is to move away from polymer substrate to paper. Unfortunately, we had a push back because of the issues around the N5,000 note and coins.

    “The entire programme was put in abeyance, otherwise by now, we would have stopped producing polymer,’’ he added.

    He said CBN had awarded contract for the printing of the higher denomination notes to a foreign company because of the capacity issue around the mint.

    According to him, the apex bank will, from June, take delivery of the new notes.

    Commenting on the handling of the naira, Lemo said that it was unfortunate that the campaign against its mishandling was not successful.

    He, however, said that it was still a criminal act to abuse naira notes.

    “Unfortunately, CBN is not a law enforcement agency; we left that in the hands of the law enforcement institutions.

    “ I still go to parties and see people spraying money, stepping on money, I see touts distributing mints that should go to customers,’’ Lemo said.

    He said the apex bank had talked to the police to reduce the abuse of the naira, adding that the bank had no right to arrest people who sold naira notes on the street

  • Forex demand dropped in Q 4 2012, says CBN

    Forex demand dropped in Q 4 2012, says CBN

    Foreign exchange (forex) demand by authorised dealers consisting of the Wholesale Dutch Auction System (WDAS) and Bureau De Change (BDC) operators dropped to $4.29 billion between October and December, last year, the Central Bank of Nigeria (CBN) External Sector Development Report has said.

    The report said it recorded 34.2 per cent decline, when compared with the third quarter’s performance and 59.4 per cent when compared with the levels recorded in the corresponding quarter of 2011.

    The report showed that dollar continued to dominate external reserves as the currency constituted 84.3 per cent of the $43.83 billion reserves as at December 31, last year. The figure represents an increase of $3.15 billion compared with its level of $33.81 billion in third quarter.

    Other currencies in the basket included Euro (5.9 per cent), Chinese Yuan (1.9 per cent), GB Pounds (1.9 per cent) and SDR (5.9 per cent). A review of the management of external reserves revealed that the portfolio was composed of fixed deposits (48.6 per cent), funds under Asset Management (20.1 per cent), Joint Venture Company cash call (0.1 per cent) and current account (6.3 per cent) as well as Sovereign Wealth Fund (SWF) (2.3 per cent).

    This development, the report said, was traced to the increased supply of foreign exchange through the autonomous sources to the interbank foreign exchange market.

    Equally, a total of $10.22 billion was utilised in fourth quarter consisting of $6.41 billion and $3.80 billion for visible and invisible trade. This represented 62.8 and 37.2 per cent. Further analysis showed that foreign exchange utilised for visible transactions has remained dominant over the last two quarters of 2012.

    Analysis of foreign exchange utilisation by sectors revealed that $6.42 billion or 62.8 per cent was spent on the importation of visible goods into the country. The importation of industrial, oil, food and manufactured products utilised 28.3, 27.3, 19.2 and 18.0 per cent of the total, respectively services. It comprised, financial ($2.97 billion or 78.1 per cent), business ($0.23 billion or 6.1 per cent), transportation ($0.29 billion or 7.7 per cent) while “others” accounted for the balance.

    “Foreign exchange utilisation of 19.2 per cent for food importation was high and suggests the need for adequate funding of the agricultural sector and the vigorous pursuit of the financial inclusion programme,” it said.

    Also, the average WDAS rate appreciated marginally by 0.04 per cent in during the fourth quarter as the naira exchanged for N157.32 to a dollar as against N157.39 to a dollar in third quarter of 2012. Similarly, the naira appreciated, by 1.63 per cent, at the BDC segment of the market, as it exchanged for N159.19 to a dollar in the review period as against N161.79 to a dollar in third quarter 2012. This made the BDC premium to contract by 1.61 percentage point to 1.19 per cent.

     

  • ‘CBN’s reserve policy won’t affect banks’ cash flow’

    ‘CBN’s reserve policy won’t affect banks’ cash flow’

    The Central Bank of Nigeria’s (CBN’s) decision to leave the Cash Reserve Requirement (CRR) at 12 per cent will not affect the liquidity of banks, analysts have said. They said the CBN’s decision was borne out of the need to ensure a well-regulated macro economy, and not to hinder the liquidity status of banks.

    The Chief Executive Officer, Dunn Loren Merrifield, Mr Sonnie Ayeye, said the measure was aimed at creating a buffer for banks to enable them to access funds when they do not have enough money for operations.

    Ayeye said the CRR was one way of strengthening the liquidity position of banks, adding that the regulators know what best suits the banking operators.

    He said: “Banks have three major sources of raising funds. They collect deposits, raise funds from the capital market though public offers/right issues, inter-bank market, and approach CBN for money when they are in need. This has enabled them to play better than other operators in the industry. Now that CBN is keeping CRR at 12 per cent, it’s telling the banks that they have more money to fall back on when they are in crisis. The issue cannot affect banks because they have already raised their liquidity to a level whereby they can sustain themselves taking from their reserves with the apex bank.”

    Ayeye said it would be wrong to conclude that CBN wants to create illiquidity among banks by not reviewing its cash reserve requirement downward.

    According to him, the reforms policy was to implemented to fast-track the growth of banks, make them competitive and lend to the economy.

    “The banks are playing well locally and internationally. They have established offshore branches as well getting listed in foreign markets. This is a plus to the nation’s banking industry. How can CBN destroy what its has built? He asked

    A Senior lecturer at Lagos Business School, Dr Austine Nweze, said the various initiatives of CBN have paid off, giving the provision of a single digit inflation of nine per cent. He said CBN has kept CRR at 12 per cent to deepen the reserves of banks and further make functional.

    He urged banks to lend more to the economy, arguing that economy growth is not moving at a pace it supposed to be.

    “The economy position can only be galvanised when operators have enough money to operate with,” he said.

    Analysts from FBN Capital Limited said the maintenance of CRR at 12 per cent, among other decisions taken by the CBN, was widely anticipated in line with its monetary tightening stance.

     

  • CBN recovers N8.6b for bank customers

    CBN recovers N8.6b for bank customers

    The Central Bank of Nigeria (CBN) has recovered N8.6 billion for cheated bank customers as at the end of this year’s first quarter.

    Speaking to journalists on the activities of the CBN’s Consumer Protection Department in Abuja yesterday, the Director of Consumer Protection, Hajia Umma Dutse, said: “The N6 billion figure that the governor gave was the figure that he had. I think the current figure that I am giving you, since we started — and we have been able to recover N8.6billion. We have been able to recover more than N8.6billion in favour of various consumers.”

    She said: “So far, the department has received and treated over 2800 complaints from consumers against deposit money banks as at the end of first quarter of 2013.”

    Some banks, she said, have been fined N2 million for these infractions.

    This figure “excludes complaints that have to do with ATM and other electronic related complaints and also complaints from other financial institutions, like the micro finance institutions, the primary mortgage institutions; it is just complaints against the deposit money banks.”

    The complaints, Mrs Dutse noted, “are mostly complaints that have to do with excess charges, conversion, fraud and such other complaints.”

    For now the CBN has decided to exclude ATM and other electronic complaints “because those are treated by bank payment department for now but eventually, I know when the structure is approved, the process will come to consumer protection department”.

    She told The Nation that her department had “received complaints against all banks in the country but some banks had more complaints from their customers than others.”

    Mrs. Dutse said “there are various categories of complaints and the length of time for resolution usually depends on the nature and complexity of the complaint”.

    For example, a customer may complain of refusal of his bank to issue him a bank statement while another consumer may complain of excess charges over a long period of time, but our regulation is clear-that financial institutions must resolve all complaints within two weeks of receiving such.”

    Any case that cannot be resolved within two weeks, she explained, “must be referred to the Central Bank – in line with the help desk circular that we issued out to banks, but with the benefit of experience that I mentioned, I can tell you that certain categories of complaints take a longer time to resolve.”

    Complaints that have to do with excess charges, fraud and some that may require legal interpretation take more than a few days to resolve.

    The Consumer Protection amazon who the CBN governor described as “ruthless” in pursuing customer complaints against banks said the CBN was very worried at the incidence of banks cheating customers.

    To check these, she said the CBN “is going to put a very strong monitoring clients team that is going to ensure that the banks do what they are supposed to do and I can assure you with time, the banks will stop all the excess charges.”

    Mrs. Dutse said the CBN and her department in particular “have had course to sanction some banks for breach of regulatory directives.”

    “In addition, the banks are compelled to indicate in their annual financial statements all these breaches, so I don’t think banks would want shareholders to be seeing all the statistics that they are not consumer friendly or this is what they do to their customers.

    Her adivse to Nigerians is that they should be financially literate and understand financial products and services. Nigerians should not “just sign any contract with your bank, try to understand what is there and take advantage of the Central Bank of Nigeria consumer protection initiatives.

     

  • e-clearing of cheques may begin in third quarter

    e-clearing of cheques may begin in third quarter

    Electronic clearing (e-clearing), which is being implemented only at banks’ headquarters, will be extended to the branches between July and September.

    The extension is subject to the approval of the Central Bank of Nigeria (CBN), The Nation has learnt.

    The policy, which became effective last August, could not be decentralised to all the banks’ networks because of technical hitches and infrastructure needed for its seamless take-off.

    An executive of Sybrin Systems Limited, Daniel Parreira, said provision of sophisticated payment solutions, adoption of fully integrated management systems and anti-fraud mechanisms by banks would enable them to achieve the feat.

    Decentralisation to branches, he said, would further reduce the pressure on clearing centres at banks’ headquarters. Sybrin Limited, a software technology firm based in South Africa, provides e-clearing services and other payment solutions among Africa’s leading banks, clearing houses and corporations.

    e-clearing involves stopping the physical movement of the cheque and replacing the physical instrument with the image of the instrument and the corresponding data contained in the Magnetic Character Ink Character Reader (MICR) line.

    The cheque details are captured, typically by the bank presenting the cheque or its clearing agent and electronically presented in an agreed format to the clearing house for onward delivery to the paying bank for payment. Unlike the more common form of presentation where a cheque is physically presented to the paying bank, a truncated cheque is typically stored by the presenting bank electronically.

    Clearing period under the new rule would allow cheques clear on a T+1 basis such that customers receive value in the morning of T+2 even as the clearing house is also expected to operate three sessions.

    Besides, the images of all the instruments in a batch/file shall be duly captured along with MICR data using scanners set up for the purpose. The amount needs to be captured/keyed in to complete the data record.

    “The incoming images are subjected to validations. The images, which fail validations are rejected with an appropriate response file. The bank may rescan the instrument and present in line with bank’s internal processes/control procedures. The member banks have to maintain control over such re-presentments,” it said.

    Besides, banks are expected to plan transmission of their outward presentation by taking into account presentation volume, the bandwidth of network with the clearing house, and the session window. In the event of an exchange file being received at the clearing house within a session time but not passed to the clearing house, the clearing house would unbundle the exchange file, and reattach to a new session.

    In case validation of digital signature of presenting bank fails, paying bank may return such items with appropriate return reason codes. The introduction of the truncation process changes the roles and the responsibilities of the various participants in the clearing system and may lead to introduction of certain risks.

  • Pension funds may be invested in mortgage banks

    The Central Bank of Nigeria (CBN) will soon adopt a comprehensive reforms package for mortgage banking to reposition the sector for growth, spokesman Ugochukwu Okoroafor has said.

    Okoroafor said the reforms would not only be all-inclusive, but would transform the practice of mortgage banking.

    The reforms, he said, would address risks management, funding system, capacity of the mortgage firms to use another investment outlay for growth and corporate governance structures.

    He said: “Through the reforms, we will provide a refinancing package for the mortgage banks. We will create a strong secondary market for mortgage banks soon so that they would seek and explore other means of growth. Most pension assets are idle because there is no alternative window or destination through which they can be utilised. We are trying to see how mortgage institutions can tap into the opportunities.”

    The discovery of illiquidity, low profitability, and weak corporate governance in the balance sheets of the banks necessitated the reforms, he said, adding that other short comings include loss of confidence and gradual extinction of some of the firms.

    He said various regulatory bodies are coalescing to see how the mortgage industry can become a panacea for economic growth, adding that as many options as possible would be explored to improve the growth of the sub-sector.

    Okoroafor said: “We are working with the World Bank, Securities and Exchange Commission (SEC), Federal Mortgage Bankers of Nigeria (FMBN), National Pension Commission (PenCOM), and Debt Management Office (DMO) to revive the mortgage operations. These regulators are coming together to provide their input on how the operations of mortgage bankers can be made stronger and competitive.”

    He said the CBN was not concerned with recapitalisation of the banks alone, arguing that there are others issues that they are of importance to the growth of the mortgage companies. Okoroafor said the apex bank is awaiting for the deadline to expire at the end of this month before taking the next step.

    “Let’s wait till the end of April before we can talk about the issues of companies that would meet the recapitalisation deadline or not. When we get to the bridge, we would know how to cross it,” he said.

    Meanwhile, operators are upbeat about the April 31 recapitalisation deadline for them to shore up their base to N2.5billion and N5billion for those that want to play at the state and the national levels.

    The Managing Director, Skyfield Savings and Loans Limited, Mr Kola Abdul, said the mortgage firms are eager to raise the capital because of its benefits to them. Abdul said the deadline is sacrosanct because CBN has promised not to change it. He said the major issue facing the companies is how to get the required capital and make good returns.

    He said banks that are able to recapitalise will be able to compete favourably for business, expand their operations and improve their profitability. He said the recapitalisation signals a good omen for the sector that is struggling to survive.

    In a related development, the President, Mortgage Bankers Association of Nigeria(FMBN), Mr Abimbola Olayinka, had predicted that 25 mortgage companies would scale the deadline, stressing that there would not be any need for extension. He added that the recapitalised banks would have capacity to absorb shocks.

  • IMF hinges low inflation on Central Banks’ autonomy

    IMF hinges low inflation on Central Banks’ autonomy

    As the dust raised over the autonomy of the Central Bank of Nigeria (CBN) settles, the International Monetary Fund (IMF) has said preserving central banks’ independence is key to anchoring inflation.

    The Fund, which made this known in its April, this year’s World Economic Outlook released yesterday, noted that the growth performance of Low-income countries (LICs) has improved markedly in the past two decades, with a rising share of strong growth takeoffs.

    The National Assembly had attempted to remove the autonomy of the CBN by either compelling it to submit its budget to the National Assembly for scrutiny and approval to whittle down its power.

    But experts, including the Managing Director, Financial Derivatives Company Limited, Bismark Rewane; the Director- General of the West African Monetary Institute (WAMI), Dr. Joseph Nnanna; a Senior Advocate of Nigeria, Koyinsola Ajayi, and the Vice President of the Nigeria Labour Congress (NLC), Comrade Isa Aremu, have urged legislators not use the controversy surrounding the N5,000 banknote to cut the powers of the CBN. They warned that the economy would be suffer if the legislators succeed.

    Rewane, who noted that there is empirical evidence globally that the economy suffers when the autonomy of the CBN is removed, said once the lawmakers have powers to approve the budget of the CBN, it means that they have finally succeeded in taking away its autonomy.

    “There is empirical evidence that the more independent the Central Bank is, the better the economy of the country performs. Take a look at countries, such as Switzerland and Canada, which are some of the countries where the Central Banks are completely independent. The economies of these countries are very strong and that is why they are not affected by the Eurozone crises.

    “I want to assure you that once the autonomy is infringed on, the economy will suffer. What the legislators are trying to do will be judged by history,” Rewane said.

    Dr Nnanna also said once the autonomy of the CBN is compromised, it would not be able to respond effectively and promptly to macro-economic and monetary policies.

    He said once this happens, the mandate of the CBN, which is to grow the economy and maintain price stability, will also be compromised.

    The World Bank had also warned against tampering with the apex bank’s autonomy, saying it had dare consequences for the economy.

    The autonomy of the apex bank has helped in reducing inflation, which rose slightly to 9.5 per cent in February, from nine per cent in January, although still within the CBN’s single digit target.

    Historically, from 2006 until this year, Nigeria’s Inflation rate averaged 10.65 per cent reaching an all-time high of 15.60 per cent in February of 2010 and a record low of three percent in July of 2006.

    Meanwhile, the IMF has expressed concern over the sustainability of the growth performance of LICs.

    The Fund, however, said: “There is concern about reversals. Although dynamic LICs in both generations tended to see their income per capita rise by 50 to 60 per cent in the 10 years following takeoff, some dynamic LICs in the previous generation slowed sharply over time and even experienced reversals in income gains. Thus, a key question for today is whether recent takeoffs are less vulnerable than those in the past.

    “Take-offs highlight the key roles of capital accumulation and trade integration in development:  take-offs in both generations were accompanied by higher investment and saving rates and larger export  growth compared with LICs that did not take off.

    “However, dynamic LICs in the second wave will benefit from a stronger economic footing compared with those in the previous generation. These LICs experienced declines in inflation and debt after take-off, and their real exchange rates were more competitive, whereas the previous generation experienced widening imbalances after take-off.”

  • Banks’profits may fall over revised charges, AMCON levy

    Banks’ earnings may fall this year following the implementation of the revised Guide to Bank charges by the Central Bank of Nigeria (CBN).

    The implementation of the policy, which has been in the pipeline since 2004, began last week.

    The policy slashed Commission on Turnover (COT) from N5 to N3; by 2016, no COT will be charged. It also reduced some of the high charges collected by banks. The offshore Automated Teller Machine (ATM) fees was cut from N1,000 to N240, among others. These are expected to eat into the banks’ profits.

    Also likely to affect banks’ earnings is the increase in the levy paid to the Asset Management Corporation of Nigeria (AMCON). The raise from 0.3 per cent to 0.5 per cent represents about three to four per cent increase in banks’ total operating costs. These factors, analysts said, will make it difficult for interest rates to be reduced from current 12 per cent within the year.

    Renaissance Capital (RenCap), an investment and research firm, in a report, said despite these hitches, the year started off on a strong note for banks, especially in terms of share-price performance. It projected a stronger Gross Domestic Product (GDP) growth of 7.1 per cent in 2013, from an estimated 6.6 per cent in 2012. It said inflation will moderate to 10 to 11 per cent this year.

    The firm also forecast a relatively stable naira, with an average exchange rate of N158 to a dollar, owing to a stronger external sector. However, it expects the cash reserve requirement (CRR) for the banks to be maintained at 12 per cent, which could continue to hold back loan growth. This, according to the firm, is also another minus for increased earnings.

    On loan growth, it said in the absence of developments in the power sector or upstream oil and gas projects, Tier-one banks are likely to see similar levels of loan growth to those they achieved last year. However, it said power projects could propel growth into the 15 to 20 per cent range, and with expectation that the Tier-two banks could grow faster.

    RenCap said analysis on Net interest margins (NIM) showed that, as yields doubled between 2011 and 2012 and have retreated about halfway, banks are unlikely to give up all their NIM gains.

    Meanwhile, Guaranty Trust Bank full-year 2012 profit jumped 69 per cent as loans and deposits grew. Profit after tax and income from discontinued operations, rose to N87.2 billion through December from N51.7 billion a year earlier. Revenue advanced 22 per cent to N221.9 billion as loans and advances increased 11 per cent to N783.9 billion. Deposits grew 10 per cent to N1.17 trillion.

    Also, Zenith Bank Plc’s Net income rose to N100.68 billion in 2012 from N48.7 billion a year earlier, as its cost-to-income ratio fell to 54 per cent from 63 per cent. “Zenith’s operating efficiency showed material improvement” driving earnings higher, Muyiwa Oni and Rele Adesina, Lagos-based analysts at Stanbic IBTC Holding Co said.

    Access Bank Plc said full-year profit more than doubled as customer deposits increased. Net income advanced to N38.6 billion in 2012 from N14.5 billion a year earlier. Revenue rose 54 per cent to N208.3 billion as loans and advances to customers climbed five per cent to N604 billion. Deposits grew nine per cent to N1.2 trillion.

     

  • CBN settles N1.3b agric credit claims

    CBN settles N1.3b agric credit claims

    THE Central Bank of Nigeria (CBN) settled Agricultural Credit Guarantee Scheme Fund (ACGSF) claims worth N1.3 billion in 32 years, The Nation findings have shown.

    The scheme, which started in 1978, has assisted farmers to get credit from the Federal Government.

    The apex bank is also considering an intensive performance rating for commercial banks to determine their effectiveness of lending to agriculture.To achieve this, it has set aside N1.5 billion, out of the N75billion allocated for the implementation of the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) project.

    The CBN said the rating of banks is one of the strategic measures being taken by the apex bank to stimulate lending to the sector.

    The NIRSAL objective is to de-risk agriculture finance value chain, build long term capacity and instituionalise incentives for agricultural lending.

    It said the potential lenders include traditional banks, microfinance institutions, trade finance providers, asset managers, and private equity funds. Credit to the sector could also come as a loan portfolio, a loan, a bond or in some cases, a specific commitment letter.

    He said NIRSAL Credit Risk Guarantee range from 30 per cent to 75 per cent and could be loan principal, or interest payments. The funds are targeted at farmer groups, large corporate farmers, processing companies, agricultural service providers, logistic companies, wholesale distributors, among others. It can also be targeted at the agribusiness value chain which covered across crops and livestock activities.

    He said NIRSAL was a public/private initiative designed by the apex bank and the Federal Ministry of Agriculture in 2011 to disburse such grants to financial institutions for easy access by farmers nationwide.

    He explained that N45 billion had been earmarked from the N75 billion as loans to the farmers, while the balance would be used to train the farmers and insure them.

    The CBN director said the funds will be driven by five pillars, in which N45 billion will be channelled into risk sharing facility.There is a N4.5 billion insurance facility that links insurance products to loans provided by banks to borrowers. He reaffirmed that NIRSAL’s target is to de-risk agriculture finance value chain, build long term capacity and institutionalise incentives for agricultural lending.