The Nation Newspaper

Tag: liquidity

  • Interbank rate flat as market liquidity crosses N1tr mark

    The overnight lending rate remained flat at one per cent for a third consecutive week on Friday, as money market liquidity rose to over one trillion naira ($5.05 billion) after budgetary disbursal to government agencies, traders said.

    Nigeria disburses revenue from crude exports among its three tiers of government – federal, states and local – on a monthly basis and a portion of state and local government funds passes through the banking system.

    Dealers said over N221 billion belonging to state and local governments hit the banking system this week. Market liquidity was also boosted by Central Bank of Nigeria (CBN) refunds on Friday of about N400 billion cash set aside by banks to buy dollars.

    Traders said the Central Bank for the first time in three months sold about N47 billion this week in Open Market Operation (OMO) bills, but the impact on market liquidity was minimal due to further cash inflows from other sources.

    “Since the Central Bank has shown willingness to resume issuance of OMO bills, we expect an aggressive mopping up of liquidity next week to further reduce excess cash in the system,” one trader said.

    The secured open buy-back (OBB) – the rate at which lenders can borrow from the interbank market using treasury bills as collateral – closed at 0.5 percent, far below the central bank’s benchmark rate.

    Overnight placement closed flat at one per cent on Friday.

    Banking system credit stood at about N1.2 trillion on Friday, up from N571 billion last week. The Central Bank had last week lowered the cash reserve ratio for commercial banks to 20 percent from 25 per cent, in a move to encourage banks to lend money to the productive sector and stimulate growth.

  • Overnight rate falls on liquidity boost

    Overnight rate falls on liquidity boost

    The overnight interbank lending rate fell to 12 per cent from the previous day’s record high of 100 percent, after the Central Bank of Nigeria (CBN) refunded naira to dealers who were unsuccessful at its dollar auction.

    Dealers said a N30 billion budget allocation to some government agencies was also credited through the banking system, boosting liquidity.

    Banks’ balance with the CBN stood at a credit of N123 billion, from N52.3 billion in credit previous day. The CBN has been tightening liquidity and intervening directly with dollar sales to commercial lenders to support the ailing naira, hit by falling oil prices.

    Nigeria may have its credit rating cut as lower oil prices and political uncertainty weaken Africa’s largest economy, Standard & Poor’s said.

    Meanwhile, three-month naira-dollar historical volatility climbed to 21 percent on Wednesday, the highest since March 2009, according to data compiled by Bloomberg. That compares with 3.3 percent in September and an average 8.4 percent over the past 12 months. The naira weakened as much as 2.3 percent to N204.10 per dollar and traded at N204.05.

    The S&P said it is reviewing Nigeria for a possible downgrade, indicating there’s more than a 50 percent chance for the country to lose its BB- rating, or three steps below investment grade. The move came one day after it cut a group of oil producing countries including Kazakhstan, Bahrain and Venezuela and lowered the outlook for Saudi Arabia to negative.

    “The decline in oil prices has a significant impact on the outlook for Nigeria’s external position,” S&P’s analysts led by Ravi Bhatia wrote in the statement. “Political risks also remain significant.”

  • Two ‘large banks’ record zero liquidity ratio, says CBN report

    Two ‘large banks’ record zero liquidity ratio, says CBN report

    Three banks have recorded a negative liquidity ratio in a liquidity stress test conducted by the Central Bank of Nigeria (CBN) on 21 deposit money banks and 14 foreign subsidiaries.

    Of the three, two are among those categorised as “large banks”.

    Liquidity ratios measure the ability of  banks to meet short term debt obligations.

    The CBN Financial Stability Report released at the weekend said the zero liquidity ratio recorded by the lenders followed a cumulative 30-day shock conducted by the regulator to assess the resilience of the industry to liquidity and funding shocks. The test was conducted using the Implied Cash Flow Analysis (ICFA) and Maturity Mismatch/Rollover Risk approaches.

    The ICFA test, the CBN said, assessed the ability of the banking system to withstand unanticipated substantial withdrawal of deposits, as well as short-term wholesale and long-term funding over five-day and cumulative 30-day shocks, with specific assumptions on fire sale of assets.

    However, the stress test conducted, based on their end-December 2013 call reports indicated that the banking industry is stable and resilient. The key challenges in the industry, however, remain corporate governance and risk management practices.

    The test assumed a gradual average outflow of 3.8, five and 1.5 per cent of total deposits, short-term and long-term funding, during a five-day assessment.

    The test also showed a cumulative average outflow of 22, 11 and 1.5 per cent of total deposits, short-term and long-term funding,  on a 30-day balance.

    The test revealed that, after the five-day and cumulative 30-day shocks were applied, the industry liquidity ratio declined to 12.2 and 10.4 per cent,  from 50.53 per cent. Most banks’ liquidity ratios were also below the 30 per cent threshold after the two scenarios.

    The worst-hit were the three unnamed lenders that recorded a negative liquidity ratio, following a cumulative 30-day shock. Two of these banks were among the categorised “large banks”.

    However, the report said the banking industry was resilient to liquidity stress, although the test results indicated deterioration in the banks’ resilience, compared with the position in the preceding period.

    The CBN also conducted a solvency stress test on the industry to assess the stability of the sector under various hypothetically strained macroeconomic conditions.

    The pre-shock Capital Adequacy Ratios (CAR) for the entire banking industry, large, medium and small banks stood at 17.20, 16.24, 18.05 and 18.33 per cent. These, the report  said, reflected decreases of 1.49, 2.62, 0.2 and 0.5 percentage points over the June 2013 positions.

    The CBN said its actions were focused on ensuring that the banks maintain healthy loan portfolios by creating high quality assets that will ensure sustainable growth. The regulator added that the proactive actions taken to resolve the distress situation in the system had achieved the desired results and contributed to the overall stability of the financial system.

  • N1tr AMCON bonds,political spending raise market liquidity

    N1tr AMCON bonds,political spending raise market liquidity

    The maturity of N1 trillion Asset Management Corporation of Nigeria (AMCON) bonds by October and increased spending ahead of next year’s general elections are taking liquidity pressure on the economy to new heights, analysts have said.

    Head of Research, Standard Chartered Bank, Razia Khan said the liquidity surge is likely to set in by September, and that the decision from the last Central Bank of Nigeria (CBN’s) Monetary Policy Committee (MPC) meeting was to check the trend.

    “The decision at the last MPC meeting was largely as expected -with all rates kept on hold.  While mention was made of the upward pressure on inflation, with the CBN stating that it would be carefully monitoring liquidity levels, the committee nonetheless restated the Governor’s goal of lower interest rates in the long-term,” she said.

    She said the committee’s position raises key questions around how the CBN might react when liquidity pressures are even more pronounced than they are now.

    “An additional AMCON maturity of just less than N1 trillion is expected in October.  The political primary season and pre-election spending are likely to build in intensity from September on,” she said adding that for now, the foreign exchange rate is stable – reflecting continued inflows into Nigeria.

    Khan said the macro-prudential measures announced by the CBN, the increased capital requirement for Bureau De Change (BDCs), should help at the margin. But global factors will also be keys – with much pointing to a confluence of greater pressures in fourth quarter of 2014.

    While the long-term goal may well be lower rates to boost private sector credit, to achieve some level of policy accommodation in order to ‘support’ the real economy, the way in which the CBN chooses to navigate upcoming challenges will be carefully monitored.

    Maintaining faith in the stability of the FX rate, even in the face of these challenges, in an environment of low T-bill yields will be key.

    The Monetary Policy Committee (MPC) met on July 21 and 22, 2014 against the backdrop of continuing quantitative tapering by the U.S Federal Reserve which has resulted in the slowing of inflows to emerging markets and frontier economies; and the attendant uncertainties in the outlook for monetary policy and financial stability in the post-tapering period.

    The Committee noted that the rebound in global economic activity strengthened in the first half of 2014; although at levels lower than previously projected.

    The tapered growth arose mainly from the emerging and developing economies owing to the rising real interest rates and geo-political crisis. On the whole, the effects of the global financial crisis have continued to wane even as the issues of rising income inequality, unemployment and poverty appear to be gaining prominence; engaging the attention of the monetary authorities.

    These latest projections indicate that the euro area is gradually coming out of recession, as growth projection for 2014 is positive for all member countries albeit with significant variation.

  • IMF says emerging market turbulence raises concerns over liquidity

    IMF says emerging market turbulence raises concerns over liquidity

    The International Monetary Fund urged central banks at the weekend to ensure that financial market rout in the developing world does not lead to an international funding crunch.

    An IMF spokesman said some emerging market countries need to take “urgent action” to improve their economies threatened by a recent sell-off in markets from India and Turkey to Brazil.

    “The turbulence also underscores the need for vigilance among central banks over liquidity conditions in international capital market,” the spokesman said.

  • Interbank rate rises, liquidity drops

    Interbank rate rises, liquidity drops

    The interbank rate has risen. But liquidity declined over the Central Bank of Nigeria’s (CBN’s) 38 per cent hike on Cash Reserve Ratio (CRR) for public sector deposits.

    The rate rose by 196 points to 18 per cent from about 12 per cent which was applicable before August 7, when the policy took off.

    Liquidity is the ability of banks to meet obligations when they come due without incurring unacceptable losses. It requires maintaining a balance between short-term assets and short-term liabilities.

    Equally, the call/overnight and seven-day money market rates were at 18 per cent while three-month Nigeria Interbank Offered Rate (NIBOR) traded on 18.8 per cent, though fewer activities were done on the tenor.

    The interbank secured lending (Open Buy Back) rose by 200 points to 17.6 per cent for Deposit Money Banks and 17.8 per cent for discount houses. Analysts said despite the liquidity status, the rate might fall to 14 per cent this week, and moderate around the Standing Lending Facility (SLF) of about 15 per cent.

    Chief Executive Officer, Economic Associates, Ayo Teriba, told The Nation that the impact of the CRR hike on the naira and interest rate will not be immediate. He said whatever effect the policy is having on key economic indicators and currency may be temporary until the policy implementation gets far underway.

    But Managing Director, Financial Derivatives Company Limited Bismarck Rewane said the impact was being felt in the rise of interbank rate. He said a less than four per cent withdrawal of money supply led to an eight per cent increase in interest rates or an 80 per cent increase in the range of money market rates.

    “The CBN’s new policy initiative targets high-powered money such as bank reserves plus vault cash. It is a policy tool to curb inflationary threats that emanate from fiscal excesses, and possible currency weakness,” he said.

    The policy, however failed to lift the naira from its fall. The naira weakened 0.1 per cent against the dollar in the Inter-bank and has lost 2.97 per cent of its value this year. Weakening continued to reflect sustained strong demand to pay for imports and other sundries expenses. It closed at N161 to a dollar. For now, the naira remains under pressure due to structural imbalance between dollar supply and demand which reflects strong import demand and declining United States of America oil demand.

     

    Agent banking

     

    The CBN last week, reviewed agent banking guidelines it issued in February this year. The new guidelines stipulate that deposit Money Banks (DMBs), Microfinance Banks (MfBs) and Primary Mortgage Banks (PMBs) that want to deploy agent banking services should apply for a one-off approval from the apex bank.

    CBN Director, Banking & Payments System Department Dipo Fatokun said licensed mobile money operators need not seek any such approval as the regulatory framework under which they are licensed already permits them to appoint agents in line with the existing provisions.

    However, they only need to include the details of such appointed agents in their regular reports to the CBN. He said that DMBs, MfBs and PMBs with regional, state or unit authorisations are only permitted to establish agency relationships within the geographical scope of their licences.

    However, he said these groups of financial institutions are not authorised to appoint entities to carry out agent banking activities outside Nigeria.

    For DMBs, every applicant seeking to engage in agent banking business shall, on one-off, apply to the CBN. He said the application is a signal of intent to engage in agent banking business and will contain the DMB’s strategy for agent banking, including proposed number and structure of agents per state, over a three year period, description of the agent management structure to be used by the institution, Know Your Customer (KYC) procedures among others.

     

    Sinking fund

     

    The CBN signed the resolution trust deed with the 24 banks for them to contribute 0.5 per cent of their total assets to the sinking fund. This will amount to about N105 billion from the banks to help cover the cost of the banking crisis of two or three years ago.

    CBN Director, Banking Supervision Mrs Agnes Tokunbo Martins said at the end of the Bankers Committee meeting in Abuja that banks had accepted the 0.5 per cent contribution, an increase from previous 0.3 contributed.

    She said the committee agreed with the CBN Governor on the rational for the policy and agreed to help meliorate the difficulties. Mrs Martins said that with this development, the banking system is safe, and tax payers’ money will not be used in resolving banking crises.

    She said the 24 banks hold about N21 trillion in assets in various proportions and the percentages they hold these assets differ from bank to bank. As a result “each bank, will contribute 0.5 per cent of their total assets and we will calculate 33 per cent of their off balance sheets items and then take another 0.5 per cent of that,” she said.

     

    GDP rebasing

     

    National Bureau of Statistics (NBS) disclosed plans to release new figures for gross domestic product (GDP) in December. Nigeria is updating its GDP base year to 2010 to give a better indication of the size and composition of its economy. The country’s GDP is currently based on production patterns in 1990.

    The data are slated for publication on December 10, the NBS disclosed last week. Yemi Kale, the head of the agency, confirmed that 2010 will be the new base year.

    He had earlier disclosed that the agency was also considering last year as a possible base year, after consulting experts from inside and outside government.

    The schedule for release of the new GDP data has been changed several times. While the statistics bureau’s website still mentions a target of October 24, Kale said in May that it may not happen until next year.

    Nigeria’s economy, the second-largest in sub-Saharan Africa, was estimated at $268.7 billion last year and is forecast to expand 7.2 per cent this year by the International Monetary Fund. The true size and composition of the economy hasn’t been properly reflected in the yearly calculations, which don’t capture the activities of companies created since 1990.

     

    Leasing

     

    Firms in leasing should consider raising funds from the capital market to finance their enterprises, Chairman, Equipment Leasing Association of Nigeria (ELAN), Keinde Lawanson has said. He spoke at the Vendors/Lessors Business forum organised by ELAN in Lagos.

    He said for such fundraiser to be successful, operators should prevail on the National Assembly to pass bills to guide the business. He said enacting the enabling laws will also enable multilateral agencies like the World Bank, International Finance Corporation (IFC), African Development Bank (AfDB), among others to grant loans to leasing firms.

    He said leasing is one of the most vibrant and dynamic industries facilitating the finance of equipment that enhance productive capacity, creating employment and fostering economic growth.

    According to him, leasing encompasses all range of assets from automobiles, computers, telecoms equipment, and medical equipment to power plants and explorative machinery.

    He said the contribution of leasing to economic development takes place through access to finance particularly to the small and medium sized enterprises (SMEs), increase in domestic capital base, financial product innovation and development of secondary market.

     

    Bank to bank report

     

    Standard & Poor’s (S&P) assigned ‘B/B’ counterparty credit and ‘ngBBB/ngA-2’ national scale ratings to Skye Bank Plc. The agency said the stable outlook reflects the lender’s business and financial profile which would remain broadly unchanged over the next 12 months.

    It also forecasts that the positive economic prospects in the country will further support the bank’s earnings growth. “Our ratings on Skye Bank reflect its anchor of ‘bb-‘, as well as our view of its “moderate” business position, “moderate” capital and earnings, “moderate” risk position, “average” funding, and “adequate” liquidity,” it said.

    S&P said Skye Bank has a modest, but profitable franchise, which accounts for about five per cent of the Nigerian market, with a little over N1 trillion in assets.

    Guaranty Trust Bank Plc is a top bank, according to African Business’ Annual Rankings Magazine.

    The bank said it achieved the feat even as it continues to consolidate its position as a foremost African brand through adherence to high corporate governance principles, strong financial performance and the introduction of innovative products and services. These, it said, ensured its stakeholders are well-satisfied each time they encounter the brand.

    Heritage Bank pledged to work with stakeholders in the entertainment industry to develop a funding model for the sector. Managing Director/Chief Executive, Ifie Sekibo, spoke while responding to enquiries about the bank’s plan for the entertainment industry.

    He said the lender is committed to developing a strategy on how to fund the sector. He said the bank will also need to understand the industry first before committing funds to it.

    “We have quite a number of people in the entertainment industry. The last time we met with the President of Nollywood, we wanted to find out, how to bank the sector. Do we deal with each person, or take the industry as a whole? This, and many other issues, need to be addressed in funding the sector, he said.

    Jaiz Bank Plc said last week that it had grown its capital base from N5 billion to about N10 billion.

    The lender also said it would apply to the CBN for a national banking licence to enable it to expand its operations to other states of federation.

    Head, Corporate Communications Department, Jaiz Bank, Idris Salihu, said the lender has also joined commercial banks in processing foreign exchange (forex). Thus, it can process transactions for Bureaux de Change (BDCs).

    It said the bank would start bidding for its BDC customers from all branches by first week of September.

    It also added that the bank has also commenced over- the- counter transactions of Personal Travel Allowance and Business Travel Allowance sales at all its branches.

     

     

  • Interbank rates up on CBN’s liquidity mgt slowdown

    The inter-bank rate last week rose by 179 basis points to 14.1 per cent, following the slowdown of the Central Bank of Nigeria (CBN’s) liquidity management exercise.

    Consequently, the call/overnight and seven-day money market rates inched up to 14.08 per cent and 14.12 per cent on July 16 and 17.

    The three-month Nigeria Inter-Bank offered Rate (NIBOR) also traded on 14.87 per cent, though less activities are done on the tenor. The inter-bank secured lending (Open Buy Back) rose 13.79 per cent for commercial banks and 14 per cent for discount houses.

    Currencies Analyst at Ecobank Nigeria, Olakunle Ezun confirm that the liquidity status was partly due to slowdown in CBN’s management exercise from June to-date. The CBN offered and sold $300 million on July 15 at N155.76 to support the naira.

    He said the CBN’s liquidity management remained active and supported by the circular issued on August 1, reviewing its guidelines for how banks access its Standing Lending Facility window and Wholesale Dutch Auction System forex auction this he said is in addition CBN’s Monetary Policy Committee decision to hold the rate unchanged at 12 per cent on 21 May, this year.

    He said the naira will continue its downward trend this week as impacts of strong market demand and falling reserves bite harder. For him, the trend will persist although the CBN remains poised to support the currency’s short term outlook through monetary operations and robust foreign exchange reserves of $47 billion (about 12 months of imports equivalent).

    He said the naira will continue to depreciate within the week, reiterating investor’s “wait and see attitude” on the naira short term outlook.

    The global crude oil price (Bonny Light) was broadly steady on $109.0/bbl even as the volatility remains elevated and continued to reflect deep uncertainties in global economies.

     

    Global economy

    The dollar is undermined by uncertainty over timing of Federal Reserve’s “tapering” of quantitative easing and Federal sequestration spending cuts that could slow growth. But as monetary policy expansion slows, dollar is expected to strengthen, thereby boosting economic recovery.

    Euro volatility is heightened and will remain elevated until Euro Union leaders confirm policy move towards greater fiscal integration and joint banking sector regulation. European Central Bank support however, remains crucial in underpinning Euro outlook.

     

    Financial Inclusion

    The apex bank has emphasised the need for stakeholders’ support in its drive to achieving targets set in the Nigerian Financial Inclusion Strategy (NFIS).

    CBN Governor, Sanusi Lamido Sanusi, disclosed this at the launch of the Geospatial mapping of Financial Institutions in Nigeria in conjunction with the Bill and Melinda Gates Foundation (BMGF).

    He said the target outlined in the NFIS strategy is the reduction of the number of adults excluded from access to financial services from 46.3 per cent in 2010 to 20 per cent in 2020. As a member of the Alliance for Financial Inclusion (AFI), he said Nigeria’s declaration was in line with the Maya declaration in 2011.

    According to him, it is targeted that at least 70 per cent of the proposed 80 per cent adult Nigerians to be financially included, would be in the formal sector, with specific targets for services such as payments, savings, credit, insurance and pensions. To achieve this however, he said there must be collaboration among all the stakeholders in the financial industry.

    Sanus said the CBN had since approved a number of initiatives aimed at improving financial inclusion. He listed some of these initiatives to include the development of Agent Banking Guidelines, tiered Know-Your-Customer (KYC) requirements to encourage Financial Institutions to reach out to under-served segments, the development of a Consumer Protection Framework under a newly set up Consumer Protection Department and a National campaign to promote Financial Literacy.

     

    AfDB

    The African Development Bank (AfDB) is planning to raise as much as $1.5 billion in local-currency bonds in Nigeria and Zambia to finance infrastructure projects. This became exigent as emerging-market bond yields rise on speculation the Federal Reserve will reduce economic stimulus, Bloomberg report said.

    The AfDB, which gives money to African governments for projects in areas such as roads, ports and energy, is completing the planned size of the medium-term note programmes and is in talks with authorities in the two countries, Olivier Eweck, financial technical services manager in the bank’s treasury department, said.

    “Before the end of the month we would have made up our minds on the numbers,” he said. The Nigerian issues may be worth as much as $1 billion and the Zambian debt may reach the kwacha equivalent of $500 million.

    It said African countries are stepping up sales of local and foreign debt, targeting funds for infrastructure on a continent where many lack regular access to services such as water and electricity. The offers come as borrowing costs increase amid speculation that the Fed will begin scaling back a United States debt-buying programme that pumped cheap money into assets around the world, including emerging markets.

     

    Dud cheques

    Bank customers issued dud/dishoured cheques worth N166 billion last year, the CBN had said. CBN Acting Director, Financial Policy and Regulation, Y.B. Duniya said in a circular to all banks and financial institutions that over 167,507 dud cheques were issued and processed by deposit money banks from January to December last year.

    He said that henceforth, the CBN, in order to check this malaise will forward the account details of erring customers to the Economic and Financial Crimes Commission (EFCC) for further investigation and prosecution.

    Duniya said the enormous volume of dishonoured cheques in the financial sector has shown no sign of abating. The implication of the development, he said, is the low confidence generated in the use of financial instruments, which adversely affects the CBN’s cash-less policy aimed at reducing the volume of cash-based transactions and businesses in the country.

    The CBN director said that over-indulgence of cash in the economy increases the cost of banking services, raise the incidence of crime and facilitate money laundering.

     

    FAAC

    The Federal Government may resort to bank loans and external borrowings to fund gaps in revenue shared by states under the Federation Account Allocation Committee (FAAC). This has become exigent as revenue from oil drops. Managing Director, Financial Derivatives Company Limited, Bismark Rewane, hinted on this possibility in this month’s Economic Report obtained by The Nation.

    He explained that total federal allocation shared in first half of the year was N3.3 trillion, about 13.74 per cent higher than the N2.92 trillion shared in the same period of last year.

    However, the revenue from the Federal Account in July and the remaining months in the second half of the year is expected to fluctuate within N500 billion to N900 billion as in previous months.

    He hinted that a decline in the federal allocation remains possible, and will have a downside risk to the naira as the government battles with ways of bridging funding gaps.

    Rewane explained that a depreciation of the naira would result in a depletion of external reserves and consequently affect the federal allocation. Also, further decline in oil price is expected to increase the disparity between the approved budget and revenues leaving government with the option of relying on bank loans and or external borrowing to manage the funding gap.

    He said July inflation is estimated at 8.99 per cent against 8.49 per cent in June. This, he said, would be fuelled by increased demand for consumer goods as Ramadan begins. “There was also a decline in average inter-bank interest rates in first and second quarters of the year as they averaged 11.6 per cent and 12.2 per cent per annum.The naira equally depreciated at the parallel and inter-bank markets in first quarter,” he said.

     

    Currency in circulation

    Currency in circulation fell by 2.5 per cent to N1.47 trillion in April, a report from the CBN had shown. This is in contrast with an increase of 4.9 and 3.4 per cent at the end of the preceding month and corresponding period of last year.

    The development, the apex bank said, reflected, wholly, the 4.6 per cent decline in currency outside banks component. Total deposits at the CBN amounted to N6.1 trillion, indicating a decline of 10.2 per cent below the level at the end of the preceding month.

     

    Bank to bank report

    FirstBank of Nigeria Limited signed a $100 million facility agreement with China Development Bank (CDB), a leading bank in the Peoples’ Republic of China.

    In a statement, FirstBank said the agreement was in line with its bid to boost lending to Small and Medium Scale Enterprises (SMEs) in Nigeria. It is also expected to stimulate economic growth in the country.

    According to the statement, the signing of the landmark agreement, witnessed by President Goodluck Jonathan, who was on a state visit to China; and his host, President Xi Jinping of China, reinforces the bank’s leadership position as a National Icon and Global Player.

    The FirstBank Group Managing Director, Bisi Onasanya, is a member of the Presidential delegation, which also includes four state governors and 10 cabinet ministers.

    According to the document signed by the managements of the two banks, both lenders will work together to further strengthen the business co-operation between both parties within the framework of each party’s respective articles and memorandum of association and applicable laws and regulations in Nigeria and China.

    United Bank for Africa (UBA) Plc has introduced the World MasterCard, which is the most exclusive card in the MasterCard staple.

    In a statement, the bank said the introduction of the product is consistent with the bank’s focus of providing appropriate product to every customer segment, including high net-worth customers who cherish rare and exclusive privileges.

    Head, Cards, UBA Plc., Adidèjì Olówè, said the card programme, which is available by invitation only, can be tied to any of Naira, US Dollar, Pounds Sterling and Euro domiciliary account.

    He emphasised that the product offers a chockfull of benefits such as travel accident and inconvenience insurance; extended warranty; purchase protection; concierge services; and emergency cardholder services. The card, Adédèjì stated, is exclusively made from a rare alloy of silver nickel, only a few materials of which exist in the world.

    “The heft of the material is its signature. The recognition of the programme has afforded it the highly coveted MasterCard premium hologram. In addition, there is a great security service protecting our esteemed customers everywhere they shop with Fraud Protection and MasterCard Zero Liability,” he added.

    Access Bank UK Limited has announced that Assets Under Management (AUM) in its private banking and asset management business rose by over 200 per cent to $18.5 million by the end of last year. Also, the bank’s AUM stands at $66 million.

    In a statement, the bank said the increase in AUM has been driven by the ability of Access Bank UK to deepen its client relationships by expanding its product portfolio to its clients beyond the traditional focus on banking and asset management services.

    “Buy-to-let property loans, Investor Visa and discretionary portfolio lending provide new routes for customers to access hard currency outside of Africa. Access Bank UK provides private banking services to African/Nigerian Ultra-High Net Worth Individuals (UHNWIs) in the UK and Sub-Saharan Africa. Services provided include traditional private banking services, property and discretionary portfolio lending,” the statement said.

     

  • Inter-bank rate bullish on CBN’s liquidity control measures

    The inter-bank rate, last week, rose by 333 basis points to 14.5 per cent. This was largely due to Central Bank of Nigeria (CBN’s) liquidity management efforts. The CBN had mopped up over N200 billion via treasury bills on June 5 to support government liquidity needs.

    The overnight and seven-day money market rates rose to 14.45 per cent and 14.79 per cent respectively while three-month Nigeria Inter-bank Offered Rate (NIBOR) also rose to 15.4 per cent, though less activities are done on the tenor.

    The inter-bank secured lending (Open Buy Back) rose to 14.16 per cent for commercial banks and discount houses respectively even as the CBN liquidity management remained active within the week.

    It was also supported by the circular issued on 1 August reviewing its guidelines for how banks access its Standing Lending Facility (SLF).

    However, Currency analyst at Ecobank Nigeria, Ezun Olakunle hinted that the inflows of about N200 billion matured treasury bills and Open Market Operation bills on 6 June might gradually reduce rates by 200 basis points to about 12 per cent this week.

    At the Wholesale Dutch Auction System (WDAS), the apex bank offered and sold $300 million on June 5 at N155.74 to a dollar against $350 million sold on June 3 at N155.74. Over the short term, the naira is expected to continue to trade on the inter-bank market within the CBN’s three per cent band either side of N155 to a dollar.

    On Friday, the naira dropped by 0.4 per cent before trading 0.3 per cent lower at 159.35 per dollar. The decline extended its weekly decline to 0.7 per cent, the biggest fall since the five days through June 8, 2012.

     

    Banks’ stocks

     

    Oil and gas as well as power projects financing have been tipped to soar returns on banks’ stocks to 42 per cent by this year end, Vetiva Capital Management Ltd, an investment and research firm told Bloomberg.

    The Bloomberg NSE Banking Index, which tracks Nigeria’s 10 biggest banks by market value, is trading at a price-to-book ratio of 0.8 times, less than the 1.4 times book value of assets for lenders in the MSCI Emerging Market Banks Index.

    It said the gauge for Nigerian banks has gained 34 per cent this year compared with a 0.5 per cent drop in MSCI EM Banks Index. Nigeria’s all-share index has rallied 37 per cent this year, Africa’s best performer after Ghana’s benchmark equities measure.

    “What matters to us is the valuation of the banks, their move to create risk assets and how well they manage those risk assets. We’ve seen emerging market banks with similar risk profile with Nigerian banks, yet trading at higher multiples,” Pabina Yinkere, an equity analyst at Lagos-based Vetiva said.

     

    Mobile money

     

    The Central Bank of Nigeria (CBN) has explained why it is unable to adopt a telco-led approach in the execution of mobile money services.

    CBN Governor Sanusi Lamido Sanusi said regulation of the telecoms sector was not within the bank’s control, making it difficult to guide mobile money operations under the telco-led model being advocated by telecoms operators.

    Sanusi, who spoke at the risk management conference in Lagos, said the risks in mobile money operations were high, regulation has to be implemented.

    He said the banking watchdog does not control what the telcos are doing, unlike in the bank-led model where there are guidelines.

    Telecoms companies have been calling on the CBN to allow them to participate in the regulation of the mobile money subsector, one of the services provided by banks in support of the cashless banking initiative.

    Speaking at a seminar in Lagos, Tunde Kuponiyi, Globacom’s Director, Telebanking Unit, said the regime of mobile money regulation, which is bank-driven, is not friendly to telecoms companies, which provide the mobile payment platform. He said though there was a lot that telecoms companies could contribute in a cash-less economy, their mandate was limited.

    Kuponiyi explained that since the mobile payments business is 90 per cent dependent on the mobile industry, it was unfair that the mobile networks are prevented from advertising their various mobile payment products, which are the foundation on which the bank products operate.

     

    Nigeria, Canada

     

    The Nigeria, Canada trade volume will double to $6 billion from current $3 billion by 2015, the Canadian Minister of International Trade, Ed Fast has said.

    He disclosed this in the Oxford Business Group (OBG) report which indicated that Canada is working closely with the Federal government to address issues relating to security.

    The report titled: ‘Nigeria -2013 Report on Economic Reforms’, the firm said rolling out of wide-ranging reforms across the Nigeria’s economy is prompting investors to take a “fresh look” at the country.

    Also, Fast said Nigerian government’s privatisation and anti-corruption reforms will create better opportunities for investors.

     

    VISA

     

    The VISA Incorporated has re-iterated the need to focusmore on getting people in remote parts of the country involved in banking.

    The Country Director, sub-Saharan Africa, VISA Incorporated, Mr Ade Ashaye, said a lot of money in circulation is outside the banking system and the CBN cash-less policy is only targeted at encouraging people to make payments electronically rather than cash.

    He said financial inclusion is being widely pursued because there has always been a problem on how to reach people that is far away from banks. This, he said will involve banks opening more branches and getting their customers into embracing e-payment services.

     

    IFC

     

    The International Finance Corporation (IFC), an agency of the World Bank, is assisting local banks to boost lending to Small and Medium Scale Enterprise (SMEs) in the country. Speaking at the SME Toolkit Global Partner conference in Lagos, IFC, Nigeria Country Manager, Solomon Quaynor, said the corporation found that banks do not want the high risk transactions associated with lending to SMEs.

    Quaynor said the SME Toolkit would enable the entrepreneurs to manage their businesses. IFC, he said, stepped in to de-risk such loans by providing financial infrastructure and developing collateral registry that will assist banks in lending to the subsector. “We are working on getting the SMEs to use toolkit, so that banks can be more comfortable lending to the subsector. Our focus is not about giving money to the banks to lend to SMEs. It is about building their confidence in the SMEs so that the subsector can easily obtain loans from lenders,” he said.

     

     

    ICAN

     

    The newly elected and re-elected members of the Institute of Chartered Accountants of Nigeria (ICAN) have been sworn in. They are Mrs. Comfort Olujumoke Eyitayo, Mrs. Uchenna Ifesinachi Erobu, Mr. Nnamdi Anthony Okwuadigbo, Alhaji Ismaila Muhammadu Zakari, Deacon Titus Alao Soetan, Mr. Sunday Abayomi Bammeke, Mr. Hart Wahab Odafen Ozoya, Mrs. Joy Onome Olaolu and Chief Oye Clement Olugbenga Akinsulire.

    A statement from the Director, Corporate Affairs, Claudia Binitie said the election which was conducted through e-balloting was in two categories: ‘Members-in-Practice’ and ‘Members-not-in- Practice’. In the first category, 18 members contested, out of which seven were elected to fill the existing vacancies.

    In the second category, seven members contested and two were elected to fill the two existing vacancies. They will serve for three years before offering themselves for re-election. The ICAN President, Kabir Mohammed, welcomed Mr. Hart Ozoya and Mr. Oye Akinsulire, to their first Council meeting and encouraged them to contribute positively to deliberations on Council issues.

     

    Bank to bank report

    Fidelity Bank Plc has concluded its 25th Anniversary Cars and Cash Savings promo during which it gave out N25 million and 25 cars to its customers.

    Speaking at the cars and cash presentation in Lagos, the bank’s Chief Executive Officer, Reginald Ihejiahi said the bank gave out the cars to assure everyone that it keeps its promises. He said the bank is gender sensitive and has taken steps to empower women entrepreneurs, many of whom won some of the prizes.

    Some of the winners who were presented with their prizes are Abimbola Oluwaseun and Nnenna Edeh who won a brand new Hyundai car each. Also, Adewunmi Mary Ladi won N100,000; Janiat Jamiu won N100,000; Nwamba Chinyere won N250,000 while Chigere Chibuzor won N500,000.

    First Bank of Nigeria Limited has partnered with LEGO, the world’s fourth largest manufacturer of children’s toys to introduce KidsFirst, one of the bank’s children products to the market.

    At an exclusive cinema screenings to mark this year’s Children’s Day, the bank unveiled a comprehensive programme that includes three new products, exciting content partnerships, a dynamic new website and Corporate Social Responsibility (CSR).

    Speaking on the programme, FirstBank’s spokesperson, Folake Ani-Mumuney said the partnership with LEGO represents the bank’s quest to create a platform for Nigerian children to express themselves and instill the culture of financial discipline in them.

    Unity Bank Plc has received the Payment Card Industry Data Security Standard certification, the global information security standard that helps prevent card-related fraud, the lender said in a statement.

    Presenting the certificate to Unity Bank, Mrs. Adedoyin Odunfa, Managing Director of Digital Jewels, a consulting firm on the project, said Unity Bank – which currently issues MasterCard and Interswitch Verve cards to its customers – had demonstrated leadership in the industry, being the fifth bank to receive the certification in the country.

    Mrs. Odunfa said: “After achieving the ISO270001 last year, Unity Bank has shown that it is one of the banks at the forefront of good security and compliance by now attaining the PCIDSS certification. You are the second bank in the country to have attained both of those certifications. That is quite a formidable feat given that there are several other banks who may claim to be more technological advanced than Unity Bank.”

     

  • Liquidity rises on N387b TBs, OMO refunds

    The liquidity in the money market increased significantly last week as inflows of about N387.43 billion Treasury Bills (TBs) and Open Market Operation (OMO) bills repayment hit the market. Consequently, the interbank inter-bank rate fell by 408 basis points to 10.3 per cent, reflecting improved liquidity in the market.

    The call/overnight and seven-day money market rates fell to 10.29 per cent and 10.66 per cent last Thursday.

    The three-month Nigeria Interbank Offered Rate also fell to 11.5 per cent, though less activities are done on the tenor. The interbank secured lending (Open Buy Back) fell 379 bps to 10.25 per cent for commercial banks and discount houses.

    Meanwhile, the Central Bank of Nigeria (CBN) liquidity management remained active. It was supported by the circular issued last August reviewing its guidelines for how banks access its Standing Lending Facility window.

    Currency analysts at Ecobank Nigeria, Olakunle Ezun said the naira appreciated 0.2 per cent against the dollar in the Inter-bank. He said the appreciation continued to be driven by improved dollar supplies from the Nigeria National Petroleum Corporation (NNPC) and other oil companies. He said although the naira has a weakening outlook, the steady rise in reserves to $48.8 billion (around seven months equivalent of imports) and CBN’s MPC decision to hold rate unchanged at 12 per cent would provide a large cushion to support the naira in the weeks ahead.

     

    Sustainable banking practice

    Banks were urged by the CBN last week to consider environmental and social policies in their decision-making and lending processes. The apex bank also developed a reporting template for banks in filling their reports on loans to firms whose operations have negative impact on the environment. This was in line with the Sustainable Banking Practice being promoted by the banking watchdog.

    The CBN in a statement said Sustainable Banking is aimed at minimising or mitigating the negative impacts of financial institutions’ operations on the environment and local communities in which they operate especially on agric, power and the oil and gas sectors.

    According to the regulator, for the successful implementation of the principles, the institutions would be required to develop a management approach that balances the environments and social (E&S) risks identified with the opportunities to be exploited through their business activities.

    “The adoption of the principles will not only help banks in mitigating the E & S risks associated with their business operation and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global market place where environmental and social issues are becoming increasingly important.

    “They will also enjoy higher productivity, higher staff morale, lower turnover and absenteeism due to strong employee relations and workplace practices. The CBN would need to provide the structural mechanism to encourage consistent and widespread implementation of the principles and develop its institutional capacity to support the banks in their implementation of the principles,” it added.

     

    Money laundering

    The CBN reviewed its anti-money laundering/combating the financial terrorism (AML/CFT) regulation 2009. The policy was also aligned with the money laundering prohibition act and terrorism act as well as revised financial action task force (FATF) 40 recommendations initially issued in 2012.

    A circular to all banks and other financial institutions, signed by CBN’s Acting Director, Financial Policy and Regulation, I.T. Nwaoha, said financial institutions are to henceforth, report to the CBN and Nigeria Financial Intelligence Unit (NFIU) any asset frozen or actions taken in compliance with the prohibition requirements of the United Nations Security Council Resolutions on terrorism, proliferation of weapons of mass destruction and their financing including attempted transactions.

    He said during the establishment of customer relationship, or when conducting occasional transactions, a financial institution suspects that transactions relate to money laundering , then the institution should identify and verify the identity of the customer and the beneficial owner, whether permanent or occasional, and irrespective of any exemption of any designated threshold that might otherwise apply.

     

    ANAN

    The Ex-Registrar and Chief Executive Officer, Association of National Accountants of Nigeria (ANAN), Terkaa Gemade, said the last two years were for the actualisation of the association.

    ANAN, in a statement, said Gemade spoke in Abuja while presenting the achievements of the immediate past president of ANAN, Hajia Maryam Ladi at the association’s pre-annual general meeting dinner.

    “Today, we are celebrating the actualiser of ANAN vision. The vision that started in 1979 with ANAN not being known, not being wanted and today, the vision has been actualised,” he said.

    The former registrar commended the strategies pursued by Ladi Ibrahim to put ANAN on a right footing. He recalled the tortuous road the association passed through to become the most articulate and most liquid asset-based professional association in the country.

    Gemade also recalled the achievements of the founding fathers of the association and their numerous contributions toward the growth of the association. He also said that in the last two years, the association got the membership of international bodies such as the International Federation of Accountants (IFAC); Pan-African Federation of Accountants (PAFA); as well as Association of Accounting bodies of West Africa (ABWA). According to him, ANAN is also a member of the International Association of Accounting Education and Research.

     

    NDIC

    The Nigeria Deposit Insurance Corporation (NDIC) has blamed bank failures in the country on insider abuses, weak internal control system and poor corporate governance in many lenders. NDIC Deputy Director Research, Usman Wali disclosed this when members of the National Association of Banking and Finance Students (NABAFS), Federal Polytechnic Nasarawa visited the corporation in Abuja.

    In a statement, he said the role of the corporation in protecting depositors’ interest is key to the nation’s financial stability and economic development.

    Wali emphasised that the visit was crucial to the enhancement of the NDIC’s public awareness on its mandate and activities. The Deputy Director said the corporation’s operation is focused on its core mandate of deposit guarantee, banking supervision, distress resolution and liquidation.

    He said the NDIC insured deposit liabilities of deposit money banks (DMBs), microfinance banks (MfBs), licenced primary mortgage banks (PMBs) and licensed depositor of insured banks are entitled to up to N500,000 for DMBs and N200,000 for MfBs and PMBs in the event of failure.

    Representatives of Bank Examination Unit (BEU) Shehu Aladire said on-site and off-site activities of the corporation are aimed at operational efficiency and compliance with banking rules and regulations in the system. He identified the four types of on-site bank examination as maiden, routine, target and special examinations.

     

    London Exchange

    African companies that are quoted in the London Stock Exchange (LSE) raised 4.2 billion Pounds Sterling from the exchange in five years, the Lord Mayor of London, Alderman Roger Gifford had said.

    The listings cover periods from 2008 till date.

    He spoke during the United Kingdom-Nigeria Investment Partnership Forum organised by Guaranty Trust Bank in Lagos.

    The Mayor said there are a total of 600 non-UK companies currently quoted in LSE, adding that the Exchange gives opportunity to interested firms to be listed with minimal requirements.

    He said such listings must however, comply with ethical and regulatory requirements, adding that Nigerian firms are encouraged to list in the LSE. He said the Nigerian Stock Exchange (NSE) remains a gateway to African market, adding that there is however, need to build more confidence in the market.

    Chief Executive Officer, NSE, Oscar Onyema said the Exchange is looking inward and boosting local participation. He said the capital market appreciated by 35 per cent last year, and has so far achieved 19 per cent. He said the management of the NSE is committed to developing framework for the market operation. He urged Gifford to continue in his efforts at promoting further collaboration between NSE and LSE.

     

    Bank to bank report

    Access Bank has partnered MasterCard in its drive to promote cash-less and financial inclusion policy of the Central Bank of Nigeria (CBN). The collaboration was also involved the Nigerian National Identity Management Commission (NNIMC) in order to roll-out 13 million MasterCard-branded National Identity Smart Cards (NISC).

    In a statement, the bank said the collaboration was revealed on the sidelines of the ongoing World Economic Forum on Africa in Cape Town, South Africa.

    According the Bank’s Group Managing Director, Aigboje Aig-Imoukhuede, “Access Bank’s involvement in this project is testament to our ongoing efforts to expand financial inclusion in Nigeria. The new identity card will revolutionize the Nigerian economic landscape, breaking down one of the most significant barriers to financial inclusion – proof of identity, while simultaneously providing Nigerians with a world class payment solution”.

    Group Managing Director/Chief Executive Officer of Skye Bank Plc, Mr. Kehinde Durosinmi-Etti, said Nigerian banks are more favourably disposed to lending to oil producing companies if such firm’s oil reserves are confirmed.

    Speaking during the UK-Nigeria Investment Partnership forum held in Lagos, he said oil exploration is capital intensive in nature and it only makes sense to ensure that funds being availed the oil companies are paid back so that the banks will not suffer monumental losses and put shareholders capital at risk.

    Speaking on “Sustainable oil and gas sector Reforms” he said the consolidation exercise in the banking industry has strengthened banks’ ability to fund the oil and gas sector, even as he stressed the contributions his bank has made in strengthening players in the local exploration market.

    He explained that since banks do not want to lose money, they would rather lend to oil exploratory companies after reserves have been confirmed.

    Speaking on the marginal oil fields, which were given to indigenous companies and investors, he said the challenge banks face in lending to indigenous oil firms is that some of the companies have one dominant individual as the promoter, which is not in tandem with good corporate governance.

  • CBN loans banks N356b to shore up liquidity

    CBN loans banks N356b to shore up liquidity

    THE Central Bank of Nigeria (CBN) advances an average of N356 billion to deposit money banks monthly to boost their liquidity, The Nation has learnt.

    The fund, a Standing Lending Facility (SLF), is given at 14 per cent as approved by the Monetary Policy Committee (MPC).

    The SLF is an overnight fund available on banking days between 2 pm and 3.30 pm, with settlement done on same day value. The SLFs are available only to banks and discount houses that have executed the Nigerian Master Repurchase Agreement (NMRA) with the regulator.

    According to a CBN Financial System Stability Report, the total SLFs granted to banks last November was N356.83 billion, compared with N319.71 billion in the preceding month. Average daily request for SLF was N16.99 billion, compared with N15.99 billion in October.

    Also, total assets and liabilities of the deposit money banks (DMBs) amounted to N21.8 trillion, showing an increase of three per cent compared with the level at the end of October.

    Such funds were sourced mainly from mobilisation of time, savings and foreign currency deposits (N324.8 billion) and demand deposits (N317.4 billion). The funds were used, largely, to buy Federal Government securities (N454.7 billion), extend credit to the private sector (N250.2 billion) and unclassified liabilities (N173.0 billion).

    At N13 trillion, commercial banks’s credit to the domestic economy grew by 5.4 per cent, compared with the growth of 3.4 per cent in the preceding month. Monthly, the credit to the private sector rose by 2.7 per cent, while credit to the government rose by 17 per cent relative to the level in the preceding month.

    On January 21, the CBN retained the Monetary Policy Rate (MPR) at 12 per cent for the for eighth time consecutively, since November 2011, due to inflationary concerns and uncertainty in the global economy.

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

    Analysts insist that the decision means that other forms of monetary policy, such as Open Market Operations (OMO), would continue to be the preferred method for managing liquidity.

    Razia Khan explained that with the threat of a higher benchmark crude price being adopted in this year’s budget, there is the likelihood that the CBN would leave the rates unchanged today. She said there are some interesting points to note about the December inflation figure, which decelerated to 12 per cent yearly from 12.3 per cent.

    According to her, the key driver of Consumer Price Index appears to have been a rise in core inflation – up to 13.7 per cent as at December last year.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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