The Nation Newspaper

Tag: loans

  • CBN loans N848b to banks monthly

    CBN loans N848b to banks monthly

    The Central Bank of Nigeria (CBN) advances an average of N848 billion to Deposit Money Banks monthly to boost their liquidity, The Nation investigation has shown.

    The fund, a Standing Lending Facility (SLF), given at 14 per cent, is an overnight credit available on banking days between 2 pm and 3.30 pm, with settlement done on same day value.

    The CBN had at last month’s Monetary Policy Committee (MPC) meeting maintained the Monetary Policy Rate (MPR) at 12 per cent, and kept the symmetric corridor of +2 per cent around the MPR for SLF. However, the SLFs are available only to banks and discount houses that have executed the Nigerian Master Repurchase Agreement (NMRA) with the regulator.

    The NMRA, covers the operations of the SLF and addresses issues relating to pricing, duration, custodian as well as default resolution in lending.

    According to the CBN Economic Reports for July, first and second quarters’analyses, the regulator advanced a cumulative N5.94 trillion to the beneficiary financial institutions during the period, bringing the monthly average to N848.7 billion.

    A total of N2.78 trillion SLFs were advanced to banks in the first quarter, the figure dropped to N2.56 trillion during the second quarter, and stood at N599.7 billion in July this year. The decline in the SLF demanded in the second quarter, compared to the first, this was attributed mainly to the adjustment in the investment pattern of banks following the restrictions placed on standing facilities by the CBN in the third quarter of last year.

    The SLFs intakes are expected to rise further after the apex bank on August 7, mopped up over N1 trillion from the financial system. Subsequent mop ups, following the increase in the Cash Reserve Ratio on public sector deposits rose by 38 per cent to 50 per cent.

    The total Standing Deposit Facility (SDF) was N6.1 trillion during the second quarter of the year, representing a decline of 84.5 per cent below the level in the preceding quarter. The development was attributed to the liquidity condition in the banking system during the quarter. The rate for the SDF was maintained at 10 per cent, or two per cent below the MPR.

    July also saw a daily average SLF of N14.17 billion advanced for the 23 working days, while interest received stood at N0.36 billion.

    CBN data indicated that during the month, total assets and liabilities of the DMBs amounted to N22.7 trillion, showing an increase of 0.8 per cent above the level at the end of the preceding month.

    The regulator’s data showed that the level of liquidity in the money market further increased in July due to the injection of N1, 266.18 billion. The injections comprised the repayment of OMO matured Bills, Statutory Revenue Allocation (SRA) and Value Added Tax (VAT) to the Federal, states and local governments, Joint Venture Cash call and Subsidy Re-investment and Empowerment programme (SURE-P), as well as contractual obligation and arrears of February Statutory Revenue Allocation.

    Also, there was a N11.9 trillion banks’ credit to the domestic economy, which rose by 0.4 per cent above the level in the preceding month. The breakdown showed that relative to the level at the end of the preceding month, credit to both the private sector, state and local governments rose by 0.9 and 9.4 per cent, respectively, which more than offset the 11.1 per cent decline in credit to the Federal Government.

    Total specified liquid assets of the banks stood at N7.6 trillion, representing 49.5 per cent of their total current liabilities. At that level, the liquidity ratio fell by 6.6 percentage points below the level in the preceding month, but was 19.5 percentage points above the stipulated minimum ratio of 30 per cent.

    The loans-to-deposit ratio, at 34.1 per cent, was 9.8 and 45.9 percentage points below the level at the end of the preceding month and the prescribed maximum ratio of 80 per cent, respectively.

    However, during the second quarter ended June, banks’ total assets and liabilities stood at N22.4 trillion, , representing an increase of one per cent over the level at the end of the preceding quarter. The funds, which were sourced, largely, from reserves and increased mobilization of demand deposit liabilities, were used mainly to extend credit to the private sector and acquisition of unclassified assets.

    Equally, banks credit to domestic economy rose to N11.9 trillion, 5.3 per cent above the level in the preceding quarter. The development was attributed, largely, to the 14.3 per cent increase in claims on the Federal Government.

    The loans-to-deposit ratio, was at 43.9 per cent, 5.6 percentage points above the level at the end of the preceding quarter, and 36.1 percentage points below the prescribed maximum ratio of 80 per cent.

    The second quarter also saw money market rates influenced by the liquidity condition in the banking system. Monetary Policy stance remained largely restrictive as the MPR was maintained at 12 per cent. The Liquidity Ratio, Cash Reserve Requirement (CRR) and the Net Open Position were also retained at their previous levels of 30, 12 and one per cent, respectively. Money market indicators were relatively stable in the review quarter. However, on two occasions, the CBN offered special Open Market Operation auctions at fixed rates of 12.75 and 12.35 per cent.

  • NIRSAL: CBN guarantees N25b agric loans

    The Central Bank of Nigeria (CBN) has guaranteed N25 billion agricultural loans under the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) initiative.

    Data from the CBN indicates that banks’ total loan to the agric sector increased to four per cent, from the average of 1.5 per cent it stagnated since 2009. The NIRSAL guarantees up to 75 per cent of bank loans to the sector.

    Introduced in July last year, NASAL, the brainchild of the CBN, the Bankers’ Committee and the Federal Ministry of Agriculture & Rural Development (FMARD), seeks to create incentives and catalyse processes that will encourage the growth of formal credit, direct and indirect, for the agriculture value chain. This, the CBN said, is key in driving wealth creation among value chain participants.

    The apex bank plans to spend an estimated $500 million to create further incentives for the banks to sustain the flow of agric credit. There is also a Risk-sharing facility of $300 million, planned to address banks’ perception of high-risks in the sector by sharing losses on agricultural loans.

    There is an insurance facility of $30 million intended to expand insurance products for agricultural lending from the coverage to new products, such as weather index insurance, new variants of pest and disease insurance.

    Besides, there is also a Technical Assistance Facility amounting of $60 million meant to equip banks to lend sustainably to agriculture producers to borrow and use loans more effectively and increase output of better quality agricultural products, among others.

    The increase in loans to the sub-sector has also been linked to the N200 billion agriculture credit scheme and N600 billion NIRSAL. The current improvement in the sector was also linked to access to credit through the new policy focused on increasing private sector participation, emphasis on the agriculture value chain, and using agriculture to boost employment, wealth creation and food security.

     

  • More loans

    More loans

    IF the nation hitherto harboured doubts about the Jonathan administration’s appetite for debts, the $1 billion Eurobond offer (which Minister of Finance Ngozi Okonjo-Iweala earlier in the month gleefully announced its over-subscription by 400 percent), and the $1.1 billion loan deal with the Chinese government said to have been finalised during President Goodluck Jonathan’s recent visit to the country ought to have settled all pretensions. The $.1billion loan is part of the $3 billion loan package being considered for Nigeria by the Chinese government.

    Today, only the administration pretends that the trajectory of the debt is anything but worrisome. From the rather modest level of $3.5 billion post-exit of the London and Paris Clubs debts, the foreign debt stock has since ballooned to $6.9 billion as at June 30 – a figure that excludes the Eurobond and the latest loan from the Chinese government.

    What comes as even more frightening is the prognosis. Under the Medium Term Rolling Plan of the Debt Management Office (DMO) for instance, the debt for 2013 is projected at $12.165 billion; this figure is expected to rise to $14.585 billion in 2014 and $16.765 billion in 2015. No less scary is the domestic debt situation with its projection of $7.125 billion for 2013, $7.92 billion for 2014 and $8.44 billion in 2015.

    Now, the government’s argument is familiar: the current debt stock is sustainable as the nation is said to be under-borrowed. The extension of the argument is the nebulous rationalisation that the Debt –to- GDP ratio now at 21.50 percent still falls within acceptable limits. In this, the government has been quick to cite the corresponding figures for ‘similar’ emerging economies of Brazil and South Africa of 68.47 percent and 42.30 percent, respectively.

    We think that the government missed the argument. In the first place, the nation did not have to exit from the debtor cartel only to relapse into the bad habit of stacking up dubious loans for future generations. This is not only unacceptable, but immoral. Secondly, whereas the rate of debt accumulation has grown somewhat exponentially under the Jonathan administration; the obverse side is that citizens have had great troubles appreciating where the huge monies went. In other words, they see very little activities going on that could remotely match the scale of the debts known to have been contracted.

    As for the government’s rationale that some of the domestic debts were inevitable to the cause of deepening the domestic bond market, the position falls flat if only for the fact that the government has been known to use some of the proceeds for recurrent expenditures such as wage increases in the public sector.

    These, however are not the only grounds on which citizens continue to voice anxiety. Some of the loans are not known to be tied to specific projects, hence prone to misuse. The $1 billion Eurobond issue falls into this category. Even where, as in the case of the Chinese loan which is said to be tied to specific infrastructure projects, the choice of the projects has tended to come across as questionable.

    For instance, what makes the four airport projects “priority” at this time? Couldn’t the government have looked for alternative but less burdensome funding arrangements for the airport projects, more so as the infrastructure concessioning framework is not only in place but already has the backing of law? And just in the event that the government considers loans as inevitable, couldn’t these have been restricted to projects with high social and economic impact?

    The bottom-line is this: the Federal Government has not been entirely convincing on the rationale of taking more loans at a time when oil prices continue to surpass projections. And, has been said, it does not make any rational sense to stash our reserves abroad at nominal interest of barely one percent while shopping for foreign credit which attracts interest of six percent. Not only is it bad mathematics; it is also bad economics.

  • PPPs; Banks, loans and the naira; Police Service Commission affair

    PPPs; Banks, loans and the naira; Police Service Commission affair

    Who can forget today is June 12 when democracy was so callously killed at a huge cost to normal Nigerians who are yet to recover. Governments should stop calling for public/private sector partnerships before they themselves do anything good. Government should stop haemorrhaging so much wealth needlessly in corruption and deal with the poverty issues. Only then will the private sector come on board through CSR projects. Governments should not shirk their leadership role in this anti-poverty area.

    A slum is a slum and almost impossible to escape. Everyone in the slum needs water, toilets, security, education and a job just like those in the government reservation area or a mansion near the governor’s lodge. A poorly equipped school is a poorly equipped school. Poor people do not ruin banks. Rich people do with schemes and rich people’s unpaid loans. Bankers are rich men and women. Therefore they have no real right to talk about poverty alleviation especially since it is their policies which perpetuate that poverty in the land. How many poor Nigerians are victims of shylock lenders because the bank interest rates are too high and the bank loan is unavailable to the poor? Greed-eaten landlords demanding two or three years exorbitant rent for shabby gutter-close face-me-I-face-you or better put face-me-I-disgrace-you holes glorified with the name ‘rooms’ must accept their own responsibility in perpetuating poverty in the ‘failed state affair’. Lagos State has banned the taking of more than one year rent, but is that working? Landlords are just as guilty as bankers. In Ibadan, government has given notice that toilets are essential in all houses.

    Everyone needs a small loan at one time or another, even CBN governors. It is now realised that even a funeral or wedding can be turned into a business venture with projected profits after a short term investment in flashy IVs and infrastructure like wakings, wedding parties, canopies, luncheon and well-placed N500,000 obituary adverts in newspapers and on the NTA nine o’clock news to bring the waking and wedding worms, www, out of the woodwork. The sympathy helicopters and jets, often paid for by government and therefore people’s taxes, scuttle from and to Abuja swarm like fat flies and mosquitoes darkening the sky and filled with the great, the good, the bad and the ugly to be seen with lesser mortals regardless of whether or not they knew the deceased or the wedding couple.

    When a loved one falls sick, name the bank which will give a troubled wife or husband tiding-over money for surgery, medicines, or school fees? Most banks worldwide would, but Nigerian banks would not, so what is the use of putting your salary there year after year for your working life. No trust or shared responsibility!

    Can the new Police Service Commission actually do anything? Remember the fate of the last Police Trust Fund meant to upgrade the police and with the likes of past IGP Tafa, of N19b fame, still giving advice to the current IGP, what hope have we in heaven of getting a police to be proud of? A sum of N5-10billion should be set aside now as we are at an intermediate stage between war and peace. The police need a higher visibility with more mobility and patrols. N1billion will buy 100-500 vehicles@N2-5m each. In most cities small cars costing N2m will suffice for corner parking and increased presence. The larger jeeps@N5-7m are for centralised police station back-up, convoys and interstate roads.  Therefore if we allocate N5b to different sized vehicles costing N2-5m, we will triple the available vehicles on the country. Motorcycle patrols, in pairs are also valuable for around the police station and neighbourhood patrols. Instead of crushing okadas, perhaps it would be more useful to recruit the machines to this job although they are usually two stroke pollution generating engines. Each equipped police patrol motorcycle probably costs about N500,000. How many police stations are there in Nigeria? 5000? The annual maintenance budget is what? Investment in data bases, criminals fingerprint, photographic, occupational etc must to be pursued quickly as must a network of forensic laboratories. In these days of unemployment and entrepreneurship and Sure-P employing 5,000/ state or LGA, it should be obvious that white collar computer jobs for photographic and fingerprint and personal records and DNA data base entry are needed. In addition hackers and other computer wiz kids, retired yahoo yahoo 419ers, digital still and video photographers, basic scientists, biochemists, food technologists, microbiologists, ballistic experts, forensic anatomists  etc are all needed to make up a formidable forensic armament against corruption, fraud, crime and political devilry. Even accountants and banking experts are required to unravel the intricacies of bank fraud. You cannot employ such people on a silly salary scale.  They should be treated as if on secondment from the private sector equivalent elsewhere to avoid being frustrated by police interested parties to any investigation.

    One cannot escape the conclusion that powerful forces have consistently paralysed good police work and police workers by deliberately refusing to properly elevate the forensic laboratory to international standards even though money was allocated annually in the budget. Someone should tell us how much that money is in total. Is it N1b in some Past IGP pockets? We can all see investigative forensic policing and crime detection on television, so we know our deficit. The 1930-style police station requires to be upgraded in design and content.

  • Kebbi to assist SMEs get loans

    The Kebbi State Government said it would support members of the state chapter of National Association of Small Scale Industries (NASSI) to obtain loans from the national body.

    The Permanent Secretary in the Ministry of Commerce and Industries, Alhaji Abdullahi Gebe, said this was part of government’s efforts to improve industrial development in the state.

    Gebe, who addressed officials of the association in Birnin Kebbi, advised them to register their proposals for the NASSI’s loans.

    NASSI Secretary in the state, Alhaji Sama’ila Sulaiman, said the state chapter would form a committee that would work with the government to obtain the loans.

    He said: “The association will ensure that members benefit from the Bank of Industry’s loans given the facts the funds have been set aside as loans to small scale industrialists with 4.5 per cent interest rate.”

    He said the association would embark on a tour in the state to ensure members registered and benefitted from the loans.

    “It is lamentable that small scale industrialists have remained dormant in spite of the opportunities that abound and we will ensure that the trend is reversed,” he added.

     

  • Interest-free loans for Ibadan traders

    Oyo State Governor Abiola Ajimobi has promised to give interest-free loans to traders, who were relocated to neighbourhood markets.

    He spoke on Wednesday after a tour of ongoing projects in Ibadan, the state capital.

    Ajimobi said the loans would be repaid at the traders’ convenience and thanked the people for their support for his administration’s urban renewal programme.

    He said: “I think things are improving generally. We are very happy and you can see that our people are cooperating. Everybody has realised the need to keep our environment clean, to make it aesthetically attractive and ensure that potential investors come to Oyo State.

    “I am happy with the compliance by our people. We went to the market and realised that those we removed from the streets are happy. We pledged to assist them financially and give them interest-free loans.

    “Traders are the bedrock of the state’s economy and we will help them. We do not want people to trade on the streets any more.”

    Ajimobi urged traders, who are still on the streets, to move to the neighbourhood markets where necessary facilities have been provided for their convenience.

    He said the Central Bank of Nigeria (CBN) has allocated funds to the state for the establishment of a library at the newly-established Technical University.

    Some of the projects inspected by the governor include the Technical University and the Transformation Housing Estate (both on the Lagos-Ibadan Expressway) as well as the Scout Camp Neighbourhood Market at Challenge.

  • AfDB blames National Assembly for non-release of $700m SMEs loans

    The African Development Bank (AfDB) has explained the rationale for delay in the release of the $700 million (N108 billion) loans for small and medium scale enterprises (SMEs). It blamed the delay on what it called technical hitches and the National Assembly.

    In 2011, AfDB approved $700 million for the development of SMEs in Nigeria. It also provided loans to the Bank of Industry (BoI) and NEXIM Bank two weeks ago following the signing of an agreement. The loans were given in two tranches of $500 million to BoI and $200 million to NEXIM for distribution to the qualified SMEs.

    AfDB’s representative in Nigeria Dr Ousmane Dore told The Nation that the loans arrived late because the National Assembly did not approve it in time.

    He said: “This is a sovereign-guaranteed (Federal Government-backed) credit lines. In this case, the credits must be approved by the parliament. So, it was one of the loans that had to wait for the approval of the National Assembly before it can be released.

    “We are trying to work out some conditions guiding the release of the loans.These are technical issues relating to the capacity of the beneficiaries to pay back the loans. Some negotiations need to be done to ascertain whether the banks have the capacity to undertake the risks of collecting the loans. This is important to ensure that confidence between the AfDB and Nigeria is intact.”

    Dore said the board of the AfDB has since approved the loans, adding that the technical issues must be sorted out before the cash is released to the would-be-beneficiaries.

    According to him, the bank is lifting its operational goals to employment generation to foster the growth of the continent. This, he said, is evident by the decision of the bank to approve and release the $700 million loans promised the operators of small and medium scale enterprises in the country.

    He said AfDB has set up loans for capacity building in some countries, including Nigeria, adding that the loans are sovereign guaranteed.

    The AfDB, he said, looks at the conditions attached to sovereign- guaranteed loans, before it releases the loans to the beneficiaries. He added that the loans are given to people at a considerable terms to ensure flexible mode of payments.

    He berated banks for not providing enough funding for the agricultural sector, adding that the sector plays a critical role in the economy. The agricultural sector, he said, is poorly funded, and as such cannot deliver expected results.

    “If you look at the overall credit in the economy, only two per cent goes to a sector like agriculture identified as one of the strongest contributors to the Gross Domestic Product(GDP). The Federal Government can work towards improving the scheme. I think the government has some schemes on that,” he added.

    He said the AfDB has dedicated loans for the growth of the power sector, stressing that infrastructural development is of major priority to the institution.

    The bank has medium-term projects in Nigeria, with a gestation period of four years.The projects spanning road construction, transportation, water, irrigation, among others, aimed at meeting the nation’s infrastructural challenges.

     

  • Anxiety on foreign loans

    Anxiety on foreign loans

    •The sin is not in borrowing but in bad faith

    The Senate Committee on Local and Foreign Debts, without doubt, has good reason to be anxious, even suspicious, of fresh demands by the federal and state governments to obtain foreign loans. On December 6, the Minister of State for Finance, Dr. Yerima Ngama, led the affected state commissioners of finance to appear before the committee to defend their proposals for external borrowing under the Medium Term Expenditure Framework for 2012 to 2014.

    While the state governments are seeking loans worth $3.05 billion, the Federal Government wants to access $4.846 billion from the international credit market. In making a case for approval of the loans, Dr. Ngama stressed that the country’s external loan status still falls within 17 percent of its Gross Domestic Product (GDP), so there is no need to worry about any adverse effects of the loan burden.

    Quite understandably, the Senate committee was more concerned about the request of state governments to access foreign loans than the similar demand by the Federal Government. This may have been borne out of the perception that the Federal Government has a greater capacity to effectively manage and ultimately repay such loans. However, there is nothing in the country’s fiscal history to suggest that the Federal Government is necessarily more adept at managing resources, including loans, than state governments.

    Ondo State Government is seeking $77.9 million credit out of which $50 million will be expended on health programmes and $27.9 million on youth employment. The $148 million being sought by the Enugu State Government is broken down into $50 million for water shed management project, $40 million for youth empowerment and $40 million for an energy project. On its part, the Niger State Government wants $124 million of which $78 million will be for rural mobility, $14 million for irrigation and $32 million for its FADAMA project. The Anambra State government’s request for $75 million is meant for erosion and flood control.

    In his own case, the Lagos State Governor, Mr. Babatunde Raji Fashola (SAN), has requested that the second tranche of his $600 million borrowing plan to provide better infrastructure for Lagos be included in the 2013 external borrowing projections.

    Since the state governments have given the specific purposes for which they are seeking international credit, we find it difficult to understand why the Chairman of the Senate Committee on Local and Foreign Debts, Senator Ehigue Uzanere, still believes that the loans being sought are not for programmes that will have direct impact on the lives of their people. We believe that the state governments are in a better position to determine the most pressing needs of their people.

    It is perhaps the mismanagement of foreign loans by various arms of government in the past that has engendered a suspicion of borrowing by most Nigerians. Furthermore, the funfair that greeted Nigeria’s exit from external indebtedness under the Olusegun Obasanjo Administration had created the mistaken impression that the country would never need to borrow again. In reality, borrowing, either from the local or international credit market, is no sin. It is indeed normal practice in contemporary financial management as no government has all the resources it needs to meet its infrastructure and other responsibilities.

    Beyond this, the state governments have the constitutional right to borrow from international credit agencies. But we support the Senate committee’s admonition that external borrowing by either the federal or state governments must be responsibly and efficiently managed. However, since the Federal Government is expected to guarantee external loans by states, the Central Bank of Nigeria (CBN) should come up with requisite guidelines to ensure such borrowing does not ultimately harm the national economy.

  • Council gives loans to youths, women

    Faskari Local Government in Katsina State, says it has empowered 600 youths in the council with N10,000 interest-free loan each to set up micro businesses.

    The Caretaker Committee Chairman of the council, Alhaji Isiyaku Faskari-Ahmed, disclosed this at a reception in honour of the council’s football team, Dandurami FC.

    The the club was honoured for emerging the champion of the just-concluded Senate President Soccer Youths Championship in Abuja by beating Paiko FC of Niger 4-2.

    Addressing the players, Faskari-Ahmed added that 300 women had also benefited from the scheme.

    He said the council had engaged auxiliary teachers and community health officers, who were being given monthly stipends to supplement existing manpower in the education and health sectors.

    “This is to supplement the existing manpower needed in education and health departments in the council and the state.

    “Many others were also assisted to attend vocational training schemes in bore hole drilling, mobile phone and electronics repairs, while some with certificates were fixed at various establishments to promote self reliance.”

    The chairman cautioned youths in the area against all forms of negative tendencies, advising them to engage in useful ventures.

    Faskari-Ahmed praised the club for its wonderful performance, saying they were a pride to the entire local government.

    He pledged the council’s continuous assistance to the team so as to attain more successes in other national competitions.

    Also speaking, the Chief Coach of the team, Bishir Ibrahim, expressed appreciation for the honour and said it would motivate the players to do more.

    Bishir assured that the team was ready to win more trophies and solicited for maximum support from individuals and the council.

    Umar Barau, the Team Manager, also praised the council for its support to the team and other youths in the area.