The Nation Newspaper

Tag: cbn

  • CBN may sell N410bn worth of bonds in second quarter 2013

    CBN may sell N410bn worth of bonds in second quarter 2013

    The Debt Management Office (DMO) says the Central Bank of Nigeria (CBN) may sell as much as N410 billion worth of bonds during the second quarter of this year.

    The DMO disclosed this in its provisional calendar published on the Website.

    It said that bond sales for the quarter would open on April 17.

    According to DMO, the bonds to be sold in April will include N25 billion to N45 billion bonds each of seven-year, 10-year and 20-year tenor.

    It said that the bonds were expected to mature in June 2019, January 2022 and July 2030 with coupon rate of 16 per cent, 16.39 per cent and 10 per cent, respectively.

    The DMO also said that it would on May15 issue another set of three bonds which will include N25 billion to N45 billion bonds of five-year bonds.

    Others are N10 billion to N20 billion bonds of five-year tenor and seven-year tenor bonds of between N20 billion and N30 billion.

    The DMO also said that the N25 billion to N45 billion bond of five-year tenor would mature in April 2017 at 15.10 per cent yield rate.

    The N10 billion to N20 billion bonds at four per cent yield rate will mature in April 2015.

    The seven-year tenor bonds of between N20 billion and N30 billion with 16 per cent yield rate will mature in June 2019.

    The DMO said that the sales for the quarter would end on June 12 with the sale of N25 billion to N45 billion each of five-year debt to mature on 2017 with coupon rate of 5.10 per cent.

    The DMO said that it would also offer another five-year tenor bonds on June 12 with coupon rate of four per cent.

  • MfBs reject N20m proposed capital for unit operators

    MfBs reject N20m proposed capital for unit operators

    Microfinance Banks (MfBs) have rejected the N20 million capital proposed by the Central Bank of Nigeria (CBN) for unit operators.

    The National Association of Microfinance Banks (NAMBs) said many unit operators would die if the proposed capital is implemented.

    The proposed capital “is too high”, NAMBs Lagos Chapter Chairman Valentine Whensu said.

    In a statement, Whensu appealed to the banking watchdog to allow the operators to open more branches to enable them raise the N20 million capital base. He said when the banks are allowed to open more branches, it would be easier for them to generate enough profit.

    He said it would be more convenient for operators at the state level to raise the N100 million capital base required of them.

    Citing Lagos, Whensu said the state has 20 local government areas and 37 local council development areas, adding that these would make it easier for those that want to play at the state level to get enough funds for recapitalisation.

    He advised CBN to consider the association requests, adding that the Microfinance Banks are committed to serve the poor in the country.

    Whensu commended the apex bank for extending the recapitalisation deadline to December 2013 from December last year, stressing that this will enable the banks to shop for more funds.

    The Managing Director, Gold Microfinance Bank Limited, Mr Lanre Abiola, said there is need to have a critical look at the recapitalisation fees of the banks, adding the fees must be moderate to foster growth of the operators.

    Abiola said the bad economy is taking its toll on the banks, arguing that it is becoming increasingly difficult for some operators to raise the minimum capital base of N20 million.

    He said: “The cost of operations of microfinance banks is high in Nigeria. When you consider the cost of procuring diesel to provide alternative alternative power supply, payment of salaries of staff, among others, one would discover it is not easy to operate MfBs in a country with poor infrastructure.

    “Besides, it is difficult to satisfy all the customers that are coming for loans. The reason is because savings is very low in the banks. The money that the banks are giving as loans comes from the savings. In a situation where a customer lodge in let say, N60,000 for a year or two, and is expecting a loan of N300,000 or N500,000. That is impossible. There are many problems facing the banks, of which illiquidity is the major one.”

    NAMB Chairman, Mr Olufemi Babajide, said liquidity is the major problem among the banks, in spite of the flexible recapitalisation fees imposed on the banks by the CBN.

    Babajide advised banks to choose from the N20 million, N100 million and N2 billion capital base to serve their customers better.

    He said the association few years ago divided the banks in Lagos into six zones to enable them to serve their customers well in their zones and get enough money for recapitalisation.

  • Why banks’ audited reports are delayed

    Why are banks’ audited reports not released in time by the Central Bank of Nigeria (CBN)?

    The delay is caused by impairment test on assets, full disclosure of ac-counts, related party transactions, estimated future cash flows, among others, contained in the International Financial Reporting Standards (IFRS), says an accountant, Uwadiae Oduware.

    Oduware, a partner in Delloite and consultant to the Financial Reporting Council (FRC) on IFRS, said these issues weigh in CBN’s considerations for the release of the reports.

    Oduware said the apex bank is delaying banks’ financials because its wants to be sure that banks conducted impairment test on their assets. He said the test must be carried out before a company is deemed to have complied with IFRS guidelines.

    He said: “As a bank, you need to test your assets to know whether their values have been impaired. For instance, if a bank bought some vehicles, which are supposed to last five years. It is important for the bank to conduct impairment test on the vehicles after two years. This will help in knowing whether the vehicles can last five years or not. Through the test, it would be clear whether the current test values of the assets are beyond their carrying values. CBN is taking its time because it wants to avoid a situation where there would be problems on the assets of banks later.”

    He said another problem is full disclosure of accounts, adding that CBN wants to ensure that banks disclose transactions made in their accounts.

    “IFRS allows full disclosure of accounts, and banks must comply with this. Disclosures in the IFRS are more than the previous accounting standard. Under IFRS, a lot of judgments are expected on the part of the Board of a company. The board must in vivid terms say how they came about the estimates in their accounts. Those estimates are subjective to management’s judgment. Therefore, they must disclose everything in their bid to comply with IFRS. For example, when a loan is given to a customer before, he/she must not fail to pay back within 91 days. However, IFRS will not tell a customer to pay back within a stipulated period. Rather, it will tell the bank to test the collateral the customer is bringing to ascertain its genuineness. So, the CBN would not be happy to see loopholes in the accounts of banks. They have to be very careful,” he added.

    Oduware also a consultant to Securities and Exchange Commission (SEC), said IFRS requires a more extensive disclosure on related party transactions.

    He said CBN wants to be sure that disclosures on such transactions have been made beyond what banks have disclosed in their accounts.

    According to him, financial reports must contain estimated future cash flows in line with IFRS provisions. He said assets, such as buildings or properties, must be able to generate economic benefits, adding that the development would help banks in making cash projections in their accounts.

    He said the values of a property must go beyond physical existence, adding that these must be stated in the accounts.

    He said the apex bank is trying to ensure that banks comply with the relevant provisions of IFRS before releasing the audited reports of banks to the public.

    He said Financial Reporting Council has control over the issue of compliance to accounting standards, stressing that the CBN would still present its works to the council for approval.

  • The coming of e-Form M

    The coming of e-Form M

    The era of manual Form M is now history. Banks within the first quarter of the year fully embraced e-Form M, which the Central Bank of Nigeria (CBN) sees as critical in the management of trade in the country.

    The CBN Director of Trade & Exchange, Batari Musa, said before the feat was achieved, manual operations made it difficult for lenders to process forex transactions for their customers. “Prior to the automation, there were delays in handling forex transactions. There were lots of challenges in tracking transactions done by banks, audit trail is almost impossible,” he said.

    He said banks’ full compliance with the automation of e-Form M as mandated by the CBN was achieved in the first quarter of the year.

    Speaking at the a customers’ forum organised by Access Bank, Musa said the e-Form M as it is commonly known is completed by importers while bidding for foreign exchange for importation of goods.

    “Prior to e-Form M, there were delays in handling forex transactions. There were lots of challenges in tracking transactions done by banks, audit trail was difficult too,” he said.

    He said full automation gives banks the opportunity to adapt fully to the process and master the challenges that come with the e- version of the process. “The automation of the e-forms reduces cost transaction; eliminate delays; provide reliable data for monitoring and planning purpose; and achievement of overall efficiencies of trade processes,” he said.

    However, All Authorised Dealer Banks (ADBs) will, henceforth, pay N1,500 per declaration of e-Form M, the CBN has said. In circular to all authorised dealers, CBN Director, Trade and Exchange, W. D. Gotring, said this became exigent following the successful deployment of the e-Form M on the Nigerian Single Window Trade portal and the commencement of on-line submission of the of the Form M by the banking watchdog.

    He said a charge of N1, 500 as fee per declaration for e-Forms M took effect last December. He said there should be a direct debit of the processing bank’s current account for each declaration which should be recovered from the customer of the bank. However, the charge on the customer for the e-Form M should be separated from other bank charges.

     

    Budget

    The delay in passage of the 2013 budget slowed activities in the banking sector in the first quarter. Fiscal releases by the Federal Government create huge economic activities that translate to increased businesses for banks, since the former is the biggest spender in the economy.

    President Goodluck Jonathan signed the budget on February 26 some months after its passage by the National Assembly. The National Assembly passed the budget before the end of last year. It jacked up the proposal from N4.92 trillion to N4.98 trillion.

     

    Economy

    Also within the quarter, Standard & Poor (S&P) said economic growth and a sustained period of lower political risk, including the successful reform of the natural resource, power, and agricultural sectors could improve Nigeria’s economic diversification. This, it said, would support stronger long-term economic growth, reduce the risks arising from an oil price or production shock, and help Nigerian banks diversify their loans books.

    S&P said loan growth could then proceed at manageable levels to the real economy, mitigating the inherent risks of foreign currency lending, large concentrations, and real estate bubbles. It said Nigeria’s narrow economic structure also exposes the economy, and the banking sector, to a fall in oil prices or production. This risk is exacerbated by foreign currency lending and loan concentrations in the oil and gas sector.

     

    Interbank rates

    Also, inter-bank rate was steady in the last week of the quarter, due to repaid N354.93 billion inflow from treasury bills and Open Market Operations (OMO) bills. Call and seven-day money market rates were steady at 10.25 per cent and 10.5 per cent on March 27. The three-month Nigeria Interbank Offered Rate (NIBOR) was also steady at 11.5 per cent though less activities are done on the tenor.

    The interbank secured lending (Open Buy Back) rose slightly to 10.16 per cent for commercial banks and 10.2 per cent for discount houses. The inter-bank money market remained liquid and might continue this week due to expected treasury bills and OMO bills maturities.

    Olakunle Ezun of Ecobank Nigeria said the CBN liquidity management remained active and supported by the circular issued on reviewing its guidelines for how banks access its Standing Lending Facility window and forex auction. “Given the market liquidity of about N408.9 billion on March 28, the CBN might continue its liquidity management through the sale of OMO bills to ensure price stability,” he said.

    The apex bank also said banks’ customers will from 2016 enjoy free Commission on Turnover (COT) on their transactions. This was contained in a ‘Revised Guide to Bank Charges’ released by the banking watchdog last week. It took effect from April 1, 2013.

     

    Bank charges

    The report, first issued in 2004, was meant to provide a standard for the application of charges in the banking industry, and to minimise conflicts between banks and their customers. The revised policy will serve as a regulation on applicable charges for banking services and products offered to customers.

    CBN Acting Director, Financial Policy and Regulation, I. T. Nwaoha, said in a circular to banks and discount houses that COT applies to customer-induced debit transactions on current accounts. He said the banking watchdog has begun a gradual phase-out of COT from N3 per mille in 2013; N2 per mille in 2014; N1 per mille in 2015 and zero per cent per mille in 2016.

    He said loan repayment from current or savings account will attract zero COT, while there is no charge attached to debits representing transfer to other accounts in the same name.

     

    PMI’s capitalisation

    The CBN extended the recapitalisation deadline for Primary Mortgage Institutions (PMIs) to December 31, 2013. The decision to extend the recapitalisation deadline for PMI, the apex bank said, “is to allow the companies more time to recapitalise.”

    The apex bank said it gave the subsector an additional eight months to shore up their capital base from the earlier deadline of April 30, 2013. These were contained in a circular to directors and shareholders of primary mortgage banks from the CBN entitled: “Extension of the deadline for compliance with the revised guidelines for primary mortgage banks.” The apex bank said the extension was to allow PMBs directors and shareholders sufficient time to exercise any of the options for capital raising, business combination and downscaling highlighted in the earlier circular dated December 14, 2012.”

     

    Interest rate

    The CBN Governor Sanusi Lamido Sanusi has said he supports keeping the benchmark interest rate on hold to contain inflation, as policy makers increasingly opt for a cut. He said: “My own inclination is to just hold and just continue doing what we’re doing, because it has worked very well. But I’m only one vote in the Monetary Policy Committee. The votes to ease are beginning to increase.”

    The 12-member MPC, led by Sanusi, left the key rate at a record high of 12 per cent for a ninth meeting to help bolster the naira and keep inflation below 10 per cent. Three members voted for a reduction, up from two in January, to support the economy. Policy makers have so far rejected calls from businesses and the government to lower borrowing costs.

  • Single digit Inflation will foster growth, say experts

    Single digit Inflation will foster growth, say experts

    The ability to keep inflation at a single digit of nine percent for three months will help in fostering macro-economic growth, experts have said.

    The yearly inflationary rate, which was 9.7 per cent on January, dropped to nine per cent in March, indicating that the Central Bank of Nigeria’s (CBN’s) aggressive mopping  up of funds via issuance of Treasury Bills among other instruments has paid off.

    CBN’s former Director of Research, Mr Titus Okunronmu, said the economy would benefit in the long run if the trend is sustained. He said various sectors of the economy would benefit on account of the drop in inflation to nine per cent.

    Okunronmu said: “Though it is expected that the rate would further reduce to seven per cent in line with CBN’s stance on the issue, the nine per cent will help in stimulating growth of some sectors of the economy. Manufacturers are hard hit in an environment with high inflation and interest rates.This implies that they are not only go battle with huge cost of production, but would find it difficult to get enough sales.  But with inflation coming down, it is a good development for real sector operators.”

    He urged CBN to reduce the benchmark interest rate of 12 per cent, arguing that maintaining it for the six consecutive periods is not good enough for Nigerian economy where there is an impeded access to funds.

    “I think a remarkable drop in major macroeconomic rates would be better. The MPR, inflationary rate, among others must be reduced to grow the economy,” he added.

    An economist with the Lagos Business School, Dr Austin Nweze hailed CBN’s decision to focus on the maintenance of a favourable macroeconomic outlook.

    “It is obvious that the economy is not moving now. Activities are very low due to hindered access to funds. While the apex bank is curtailing the rate of inflation, it must not lose sight of the fact that the economy needs credit to grow. This can be made possible by a reduction in the monetary policy rate,” he said.

    FBN Capital Limited, had in a report entitled: Inflation still single digit, projected that the headline inflation rate will fall to 7.5 per cent by the end of 2013, while that the core –inflation rate will drop to 6.6 per cent.

     

  • CBN to release microfinance development strategy in Q2

    CBN to release microfinance development strategy in Q2

    The Central Bank of Nigeria (CBN) will release the NationalMicrofinance Development Strategy in the second quarter of the year.

    The document is expected to outline modalities for devel-oping the subsector and rules for operators to improve their performances.

    The CBN is also consolidating its achievements in the development of microfinance banks (MfBs). It has strengthened the regulatory framework and other guidelines. These include the formation of the National Microfinance Development Strategy with the United Nations Development Programme (UNDP) and the recent signing of a major agreement with the Alliance for Green Revolution in Africa (AGRA).

    Besides, the CBN is considering the establishment of a Microfinance Development Fund (MDF) to deepen the financial market. The MDF would assist in addressing the challenges of underfunding for microfinance institutions.

    It will also complement past and current efforts aimed at strengthening the sub-sector, improve financial inclusion and improve the Gross Domestic Product (GDP) rate significantly, the statement indicated.

    Many of the MfBs liquidated by the Nigeria Deposit Insurance Corporation (NDIC) ran into trouble when their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of them took excessive risks, branching out too quickly swithout considering resources at their disposal and whether utilised funds were short or long term obligations.

    A unit of MfB is authorised to operate in one location without branches/cash centres and is required to have a minimum paid up capital of N20 million; and state, of N100 million.

    It is equally allowed to open branches within the same state or the Federal Capital Territory (FCT). But the national MfB is authorised to operate in more than one state, including the FCT. It is required to have a minimum paid up capital of N2 billion and is allowed to open branches in all states and the FCT, although subject to prior written approval by the CBN.

     

  • SEC,CBN, others plan new mutual funds network

    SEC,CBN, others plan new mutual funds network

    The Securities and Exchange Commission (SEC) the Central Bank of Nigeria (CBN) are considering a tied-up cross-selling arrangement that would enable fund managers use banks and other financial services outlets as retail outlets for mutual funds.

    The Nation gathered that the mutual funds retail network muted by the SEC, would involve collaboration between the Commission, which is primarily saddled with regulation of mutual funds; the CBN, which oversees banks; the Bankers’ Committee, the a body of all banks and the CBN and the Fund Managers Association of Nigeria (FMAN), the umbrella body of all fund managers.

    Besides banks, the new retail network would also include the Nigerian Postal Services (NIPOST), which owns and manages all the post offices nationwide, and also inputs from the Nigerian Stock Exchange (NSE), which lists mutual funds on its official list.

    Under the arrangement, such as bankassurance where insurance products and services are offered within banking hall or platform, investors and bank customers can buy mutual funds from their bankers, creating a seamless arrangement that combines savings with investment management.

    Existing and potential investors would also be able to buy mutual funds and access mutual funds information through post offices nationwide.

    The source said the new retail network was part of efforts to promote the development of collective investment schemes (CISs) as veritable means of pooling huge national savings into the capital market and ultimately, for long-term funding of the economy.

    The retail network is part of an all encompassing strategic plan with the objective of expanding the reach of collective investment schemes to greater percentage of the investing public.

    The strategic plan incorporates innovations into the market such as introduction of incentives to encourage retail investors back into the market through collective investment schemes, introduction of distribution and sales points, classification of schemes to cater for the investment appetite of the various classes of investors, review of minimum subscription levels for retail investors, review of the offering process for Schemes, among other strategic initiatives.

    Besides, there would be improvement of knowledge level of operators to foster professionalism. This would be done through continuous education, training and certification of fund managers and sales marketing staff.

    Net assets value of CISs or mutual funds stood at N111.21 billion as at March 8, 2013. There are 49 registered mutual funds with about 170,000 investors participating in the funds. Analysis of the components showed equity-based funds with largest base of N51.68 billion. This was followed by money market funds at N16.15 billion while real estate funds trailed with N16.04 billion. Other components included bond funds, N10.30 billion; balanced funds, N9.82 billion; ethical funds, N6.87 billion while other funds totaled N2.7 billion.

    Director General, Securities and Exchange Commission (SEC), Ms Arunma Oteh, recently identified collective investment schemes as part of the priorities of the Commission for this year.

    According to her, SEC would build on the momentum of the past year, which saw the return of retail investor interest in the stock market by continuing to advocate and encourage the adoption of collective investment schemes for retail investors.

  • CBN keeps interest rates at 12%

    CBN keeps interest rates at 12%

    The Central Bank of Nigeria kept rates on hold at 12 percent for a ninth time in a row on Tuesday, citing concerns over ongoing external price pressures, despite the headline inflation rate being within the bank’s target single digit band.

    The bank also held the cash reserve requirement at 12 percent, and the liquidity ratio at 30 percent.

    Most analysts had expected the bank to keep rates on hold.

    CBN Governor Lamido Sanusi said that while Nigeria had achieved “a reasonable degree of moderation” with consumer prices, this was largely to do with cuts to the fuel subsidy no longer feeding through to higher prices, adding that there was still an upside risk to inflation.

    Increasing macroeconomic stability in Nigeria, including a more stable naira currency, is drawing in foreign investors, but many are still wary of excessive government spending and widespread corruption.

    Nigerian consumer inflation rose to 9.5 percent in February, from nine percent in January, the statistics bureau said on Saturday, although it was within the CBN’s single digit target for a second month in a row.

    “The sharp drop in inflation in early 2013, compared with early 2012, is largely to do with the base effect of the partial removal of the fuel subsidy,” Sanusi said, and therefore did not necessarily reflect a sustainable downward trend.

    President Goodluck Jonathan attempted to remove Nigeria’s blanket motor fuel subsidy in January 2012, but mass protests forced him to partly reinstate it.

    The CBN has come under increasing pressure from business lobbies to cut rates to stimulate the economy, but has so far resisted it.

    Sanusi told Reuters last month that the bank would not be pressured into cutting rates anytime soon, despite lower inflation, because it “cannot take stability for granted.”

     

  • CBN begins N150,000 cheque withdrawal limit nationwide

    CBN begins N150,000 cheque withdrawal limit nationwide

    The Central Bank of Nigeria (CBN) will from June 1, 2013 implement a policy that places N150,000 limit on all over-the-counter cheque withdrawals in commercial banks, microfinance banks and primary mortgage institutions (PMIs) nationwide.

    In a circular to all stakeholders, CBN Director, Banking and Payment System, Dipo Fatokun said the policy is in recognition of the success recorded in Lagos. Besides, he said the need to extend such success to other states within the federation nessecisated the new regime.

    He said the Lagos success story has also contributed to the reduction of fraud on cheques and aided the National Financial Inclusion (NFI) Strategy.

    “All banks are therefore directed to ensure that implementation of N150,000 limit on third party cheques that could be cashed over the counter nationwide , with effect from June 1, 2013,” he said.

    Also, the CBN Director, directed banks to stop charging their customers payments for third party cheque below N150,000 cashed over the counter.

    “All banks are hereby directed to stop charging their customers for third party cheques of up to N150,000 cashed over the counter,” he said. He explained that the policy is in recognition of the CBN role in the development of an efficient payment and settlement system that is well modernized.

    Head, Shared Services at the Central Bank of Nigeria (CBN), Mr Chidi Umeano had said that the cashless project has continued to record huge success, adding that the initial challenges associated with the alternative channels are being tackled. “Banks have continued to roll out more innovative electronic payment platforms to meet customers’ expectations. The cashless policy has been very successful in Lagos considering when we started and how far we have gone in terms of PoS deployment. “When we started the cashless Lagos, we had less than 10,000 PoS in Lagos, but currently we have over 150,000 PoS machines in the state alone,” he said.

  • CBN T-Bill payouts boost dollar

    CBN T-Bill payouts boost dollar

    The Naira depreciated for the third time in four days after the Central Bank of Nigeria (CBN) paid out maturing Treasury bills, boosting money supply and freeing up local currency for buyers to seek dollars.

    The naira declined 0.1 per cent to N157.85 per dollar, paring a weekly gain to 0.1 per cent, according to data compiled by Bloomberg.

    The CBN settled maturing bills amounting to N263.93 billion ($1.7 billion) yesterday, the Financial Markets Dealers Association, said on its website. The institution sells bills to help manage currency supply within the market.

    “The maturities boosted money supply as they hit the market, making dealers more able to seek dollars,” Sewa Wusu, an analyst at the Lagos-based Sterling Capital Limited, said by phone.

    The regulator held the benchmark interest rate at a record high 12 per cent for an eighth time on January 21 to control inflation and stabilise the naira. Inflation rate fell to nine per cent in January from 12 per cent in December, the Statistics Bureau said February, 18.

    Yields on Nigeria’s $500 million of Eurobonds due January 2021 fell 20 basis points to 4.08 per cent.

    The yield on the country’s 16.39 per cent domestic bonds due January 2022 rose 24 basis points to 11.1 percent, according to yesterday’s data compiled on the FMDA website