The Nation Newspaper

Tag: credit

  • Credit to private sector hits N15.5tr

    • State govts borrow N691b

     

    Lending to the private sector increased to N15.5trillion ( $96.8billion) in May, this year, FBN Capital Limited has said.

    The investment and research firm in its report titled: “Lending growth to the private sector subdued’, said state governments that are part of the private sector, borrowed N691billion ($4.3 billion) as at April, this year.

    Noting that the Federal Government is not part of the private sector, FBN Capital said that the private sector stands for the domestic sector of the economy.

    “Net loans from the banking system to the private sector increased in May by just 0.5 per cent monthly and seven per cent yearly. The private sector in this case is defined as the domestic economy other than the Federal Government of Nigeria, and thus includes the state governments, whose borrowings amounted to N691billion ($4.3billion) as at end-April,” the investment firm said.

    The total for the private sector in May was N15.5trillion ($96.8billion).

    The firm said the deposit money banks accounted for about 70 per cent of N15.5trilliion loan, while the Central Bank of Nigeria (CBN) accounted for the remaining 30 per cent in the form of Asset Management Corporation of Nigeria (AMCON) bonds, which are to be refinanced.

    It noted that banks’ credit to the private sector has increased in April by 1.0 per cent month to month and 11 per cent year-to-year, adding that the data is one month older when stripping the CBN from the figure for the banking system.

    According to the firm, soaring loan growth in 2007 and 2008 resulted in the country’s domestic event – that is the two bailouts by the CBN in 2009.  It noted that the granting of the bailouts coincided with the global financial meltdown, adding that the banks have learnt some lessons as a result of the developments. Besides, it noted that the regulatory authorities have put in place financial tightening measures.

    “ Nonetheless, the banks have indicated a more rapid loan book expansion this year than in 2012, and some have guided to as high as 20 per cent,” FBN Capital added.

  • SMEs bemoan lack of access to credit facility

    SMEs bemoan lack of access to credit facility

    The Small and Medium Scale Enterprises (SMEs) and busi-nessmen under the umbrella of Market Leaders Association of Nigeria have urged banks to assist them in growing their businesses.

    In a statement after a meeting in Lagos, the group said the sector had been neglected despite all the noise about availability of funds to assist them.

    The association’s President, Deacon C.F.C. Obih, said over the years, SMEs had been catalysts for economic growth and national development.

    SMEs, according to him, also play critical roles in employment generation, facilitates economic recovery and national development.

    He explained that the sector had been experiencing retarded growth because of poor access to funding/credit as banks are always reluctant to lend to the sector.

    The banks’ reluctance is informed by inadequate documentation of business proposals, lack of appropriate and adequate collateral, high cost of administration and management of small loans and high interest rates.

    He said: “We have approached banks individually and collectively to assist us with loans but most of us are usually disqualified due to lack of knowledge of the process. Moreover, banks do not have enough personnel to train all SMEs on the rudiments. That is why we have come together to be educated on how we can access loans to improve on our businesses.”

    The Managing Director of Mayakorp Nigeria Limited, Mr Martins Ndigwe, said the sector had the most need for financial loans to boost businesses. He emphasised that they also need to be educated on the process of obtaining such loans.

    Unfortunately, the banks are not helping much to enlighten the sector on how to grow their businesses perhaps due to inadequate human capacity.

    He said the Annual Business Empowerment Summit holding tomorrow at the Sports Hall of Teslim Balogun Stadium, Lagos was designed to bridge the gap.

    This inaugural edition will bring together over 5,000 SMEs and dealers on automobile, telecommunications, information technology, agriculture, food and beverages, building materials and household wares sectors in an interactive business forum with their product and service providers. He said the conference will assist the subsector overcome its challenges.

     

  • Abike Dabiri-Erewa gets credit

    The Black and White cum Elegance and Style Awards have come and gone, but those who were part of the soiree have not stopped talking about it. The ball, which also featured an award ceremony at Ruby Gardens, Lekki, Lagos penultimate Sunday, also recognised outstanding fashion enthusiasts. The tube girl turned House of Representatives member, Abike Dabiri-Erewa, was one of those recognised. She was voted the most stylish lawmaker.

    Dabiri, a journalist with the Nigerian Television Authority before embracing politics, was nominated alongside some other female House Representatives members. Still basking in the euphoria of the award, Dabiri-Erewa had another feather added to her cap recently when a street in Ikorodu part of Lagos was named after her on account of her contributions in the House of Representatives.

  • Credit to private sector drops to N15.2t on rising bond yields

    Credit to private sector drops to N15.2t on rising bond yields

    Credit to the private sector dropped by 8.1 per cent to N15.2 trillion last month, from nine per cent decline in February, the Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, Bismack Rewane, has said.

    The drop has been linked to the 10.5 per cent rise in bond yields in March as against 9.42 per cent the previous month.

    Rewane, in a report by the company last week, said indicators that determine the direction of the benchmark rate, including rates cut from 12 per cent, appear positive except for the continuous weakening of the naira.

    He said the national inflation rate slowed to 8.6 per cent year-on-year in March from 9.5 per cent in February. The 0.9 per cent decline in the inflation rate makes the Consumer Price Index the lowest since April 2008 when it was 8.2 per cent.

    “Credit to the private sector growth slowed to 8.1 per cent equivalent of N15.26 trillion year-on-year in March from nine per cent year-on-year in February, due to the rise in debt yields to 10.5 per cent in March from the previous month’s 9.42 per cent,” he said.

    He argued that since the inflation is below the nine per cent benchmark, the interest rate debate will become more acrimonious and controversial, adding that it will also lead to short position taking by fixed income traders and portfolio managers until May 21, the date of the next Monetary Policy Committee (MPC) meeting.

    Rewane said the depreciating value of the naira could be linked to falling oil revenue, resulting from the state of the oil sector, where oil output is plummeting and global oil prices are falling below estimates. Nigeria’s oil production has been declining steadily due to widespread oil theft and pipeline vandalism.

    In March, Nigeria’s production declined to 1.97mbpd according to the Organisation of Petroleum Exporting Countries (OPEC). Recently, the Shell Petroleum Development Company of Nigeria (SPDC) declared a force majeure on its production of Bonny Light crude, effectively shutting down 150,000bpd worth of crude.

    He said weak global market sentiment and soft demand for oil have played a key role in the downward trajectory of oil prices, adding that the decline in oil prices and production are pointers to the risks posed to Nigeria’s revenue framework, forex inflows and external reserves. Consequenty, he said, the Federal Government might be forced to make necessary adjustments that could be fiscal, monetary and/or structural.

    He said interest rate moderation was mainly attributed to base year comparison, adding that there seems to be some fundamental downward drift in prices. He said inflation could rise in April due to the wearing off of the impact of the fuel subsidy strike on the base year.

    “Anticipated inflation is more important in determining the direction of monetary policy, especially under an ‘inflation targeting’ policy framework. However, several other factors, such as the growth rate, exchange rate, and external reserves are also considered in monetary policy decisions,” he said.

    But Razia Khan of Standard Bank Research, Africa, said the drop in inflation was due to a substantial base effect. She said the figure, which reflects in part, the stability in the forex rate seen in recent months, will lead to new calls for interest rate cut. “Should the improvement in inflation be sustained, then the risk of any easing is certainly higher. However, the recent decline in the oil price remains a key risk factor,” she said.

    For her, a second risk factor relates to the price outlook once the substantial base effect has run its course, saying the case for sustained easing may not yet be that clear-cut.

    Analysts at Renaissance Capital (RenCap), an investment and research firm, said downward adjustment of the Cash Reserve Requirement would be more effective at relaxing the interest rate, than a rate cut.

    The CBN had at its last meeting retained the interest rate at 12 per cent with a corridor of plus or minus two per cent, Standing Deposit Facility at 10 per cent and Standing Lending Facility at 14 per cent. It also maintained the Liquidity Ratio (LR) at 30 per cent and Cash Reserve Ratio (CRR) at 12 per cent.

    The firm explained that the decision means that other forms of monetary policy, such as Open Market Operations (OMO), will continue to be the preferred method for managing liquidity.

     

  • 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.

     

     

     

     

     

     

     

     

     

     

     

     

     

  • RenCap: Banks to grow credit by 20% in 2013

    RenCap: Banks to grow credit by 20% in 2013

    • Lenders’ loan to private sector falls

    • Inflation, forex top CBN’s agenda

     

    Banks’ credit to the economy is expected to grow by 20 per cent this year, Renaissance Capital (RenCap), an investment and research firm has said.

    In a report obtained by The Nation, it said the Central Bank of Nigeria (CBN) was in not a hurry to ease monetary policy. Instead, the regulator’s primary concern is to achieve lower inflation and forex stability.

    “Our read of this is that the monetary policy rate (MPR) is unlikely to be reduced by much, while the cash reserve ratio (CRR) is unlikely to be reduced at all – both are currently at 12 per cent,” it said.

    RenCap said about 20 per cent loan growth is consensus guidance for the year, with very few banks anticipating power projects from first quarter of this year to fiscal year 2014.

    It said Nigerian banks excite it most within the Europe, Middle East and Africa (EMEA) banks context this year. With growth expectations for Gross Domestic Product (GDP) put at 6.7 per cent, RenCap said the Nigerian market should benefit from accelerating top-down trends.

    Banks’ lending to the private sector has also decreased by 1.4 per cent from N15.4 trillion in November to N15.2 trillion in December 2012, a data obtained by The Nation has shown. This represents a difference of N139billion.

    The latest money and credit statistics obtained from the CBN indicated that the private inflow to the private sector was N15.2trillion in October, as against N15.4trillion in November.

    The CBN’s economic indicator also showed that currency outside banks increased from N1.14 trillion in November to N1.3trillion in December, indicating an increase of 1.4 per cent. However, currency outside banks was N1.15trillion in October compared to N1.3trillion for December.

    Analysts have attributed the development to certain policy changes made by the apex bank. They said the on-going banking reforms have helped in improving the liquidity positions of banks, as well as making the institutions to lend to certain sectors of the economy.

    Speaking on the issue, a former director, CBN, Mr Titus Okuronmu said the issue signals a good omen to the economy. He also said an economy gets better anytime the financial position of private sector operators is galvanised through the provision of operational funds.

    He said: “The theory is that if the public sector gets more credit than the private sector, the economy suffers. But in a situation whereby credit to the private sector has increased consecutively in less than three months, the economy will benefit in the long run.”

    According to him, more investment opportunities would be created when companies have enough money to finance their operations.

    “Private sector remains the engine of growth in any economy. When the sector is provided with funds, the operators will invest, re-invest, create employment opportunities and stimulate economic growth,” he added.

    A capital market operator, Dr Olusola Dada, said banks must sustain their lending to achieve meaningful economic growth. He said the stock market is still docile because investors do not have enough money to buy stocks. He added that growth cuts across board, arguing that many sectors including capital market would grow when more money is injected into the economy.

     

  • ‘DMBs provide 70% of total banking credit’

    The deposit money banks (DMBs) provide close to 70 per cent of total credit in the banking system, FBN Capital has said.

    It said that net loans from the banking system including the Central Bank of Nigeria (CBN) to the private sector, defined as the domestic economy other than the Federal Government, contracted by 0.9 per cent month on month in December and increased by just 7.4 per cent year on year.

    It said the modest rate of loan growth over the year may surprise, given GDP growth of more than six per cent. “We could query both data series but we can also observe that the marked slowdown of lending growth since the twin bank bailouts of 2009 has had a limited effect on Gross Domestic Product expansion,” it said.

    FBN Capital said although some might argue that the banks’ cash reserve requirement (CRR) of 12 per cent inhibits lending growth but the growth was subdued before the increase in the CRR by the Monetary Policy Committee in July 2012.

    “Over this period the banks have enjoyed higher and safer returns in the government debt market although this advantage has been eroded by the yield compression of about 600bps on FGN bonds and NTBs since August 2012,” it said.

     

  • FBN Capital backs CBN’s credit ban on debtors

    FBN Capital backs CBN’s credit ban on debtors

    The decision taken by Central Bank of Nigeria (CBN) to restrain debtors owing Asset Management Corporation of Nigeria (AMCON) from further access to credit is plausible, FBN Capital, an investment and research firm has said.

    The CBN had in a circular issued last on September 17, barred banks from extending credit to more than 100 companies, which owed the AMCON. This, FBN Capital said, was relevant because the full list, published in the local media, includes some members of successful consortia bidding for power plants.

    The investment firm said that AMCON, which acquired the debts under its bond exchanges, has suggested that the power sector bids will not be derailed as a result.

    It said that the National Council on Privatisation (NCP) has already indicated that the preferred bidders for five power generation companies (GENCOs) for sale offered a total of N110 billion.

    According to the report, a cursory look at the lists of successful bidding consortia reveals household names in the Nigerian banking, oil and gas, and conglomerate sectors as well as one state government and a state owned Chinese electricity utility.

    However, it observed that the preferred bids are still subject to due diligence by five public bodies and a final go-ahead by the NCP. They then have 15 business days after signing the appropriate concession agreement to pay 25 per cent of the total consideration.

    It recalled the unsuccessful privatisation of NITEL where one approved bidder paid the deposit but failed to produce the balance while another failed to make any payments and so forfeited its bid. However, the firm insisted that the strength and reputation of the consortia bidding for the GENCOs suggest this is an unlikely outcome.

    “There have already been delays in the sale of the GENCOs and more may follow. That said, we would stress that the process has attracted bids from consortia with technical expertise and financial clout. The exercise was never fiscal in nature but was designed to deliver power to the population,” it said.

    On the Excess Crude Account (ECA), it said the accounting treatment may still be affected by the dispute between the state governors and the Federal Government over ECA and the Sovereign Wealth Fund (SWF).

    It said the governors are now arguing that signature bonuses and dividends from Nigeria Liquefied Natural Gas (NLNG) should be paid into the federation account, adding that the governors may also broaden their demands as negotiations unfold.

    Besides, the research firm noted that analysis of the draft 2013 budget has shown that only N10 billion earnings are targeted from asset sales.

    The firm said that although the Bureau of Public Enterprises (BPE) suggested a figure of N200 billion in June, the N10 billion appears more plausible, given that bids for the electricity distribution companies (DISCOs) will not be opened until 16 October.