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Tag: money

  • No group should collect money at ports, says ANLCA chief

    The National Association of Nigerian Licensed Customs Agents (ANLCA) has advised officers of the Apapa Area Command of the Nigeria Customs Service (NCS) to know the provisions of the Customs and Excise Management Act (CEMA), the Common External Tariff (CET) regime and explanatory notes in their various operations.

    ANLCA National President, Prince Olayiwola Shittu, gave the advice at a training initiated by the Customs Area Controller (CAC), Comptroller Charles Edike, for Assistant Superintendents II serving in the Command.

    He said an understanding of guidelines of cargo clearance in the ports would enable officers to discharge their duties effectively to defend their actions.

    Shittu said while the Customs enforced the government’s policies, the Customs agents implemented the rules. Therefore, when interfacing with agents, clarity of what is expected of them should be uppermost in the officers’ minds.

    He advised the officers to utilise their weekends and public holidays to improve their knowledge in order to make the desired progress in their chosen careers, and also be courteous in relating with others.

    Shittu advised the officers never to report what they are not sure of during physical examination, and not to allow money be their main focus at the expense of doing the right thing.

    The Customs Area Comptroller Edike thanked Shittu for his time in training the officers. He noted that the officers must have been better for it because of the practical examples in the lecture.

    ANLCA chief, while reacting to the recommendations in the report submitted by the committee set up by the Minister of Transport, Senator Idris Umar, to proffer solutions to the problem of congestion at the Lagos ports, said it was not right for an association to collect money from its members in the port premises.

    Shittu said the adoption of this recommendation by the Transport Minister is a right step in the right direction. “It is not right and professional for an association to say that they’ll be collecting money in the ports. We have been saying this for so long. At the national level, we are not in support of collection of fees inside the ports,” he said.

    He said there is an adhoc arrangement made at the chapter levels of the association which members agreed to contribute money to their respective chapter’s purse for handling of their welfare. “There was no general declaration that this is where ANLCA is going to be collecting money,” he added.

    Shittu said ANLCA has worked out better ways of collecting dues from its members.

    He said: “Collection of dues from members has been made easy by the present leadership. I can tell you that our members have never at anytime raised eyebrows over collection. The money being collected was approved by our members at a town hall meeting in 2010/2011, where they voluntarily decided to contribute money from their income to sustain the association. I can also tell you that that was an improved way of collection, because, before then, taskforces were set up who go about harassing people at the gate.

    “Those were the days when things were not being done professionally. But, I can tell you that we don’t have anybody chasing anybody to collect money. We have even designed a better means of collecting money from our people where they pay their money yearly for the purpose of running the affairs of the association.”

     

  • StanChart targets Nigeria, others for Africa retail growth

    Standard Chartered Plc (StanChart) expects to open 100 new branches in Africa by 2016 to benefit from the continent’s $1 trillion annual retail spending,it has said. The lender will be focusing in key African countries, including Nigeria, where only about 14 to 15 per cent of the population has bank accounts.

    The lender opened 27 new outlets last year and will “invest heavily” in digital technology over the next four years, Raheel Ahmed, the bank’s Dubai-based head of consumer banking for the Middle East, Africa and Pakistan, has said. The bank will focus on small and medium-sized companies and private banking, he said.

    “There is so much growth potential, particularly where economies are growing rapidly,” Ahmed said.

    “In Nigeria, only 14 or 15 per cent of the people have bank accounts,” he said.

    StanChart’s operating revenue at its Africa consumer banking unit rose 9.4 per cent in the first half to $257 million. Economic growth in Sub-Saharan Africa will accelerate to 5.1 per cent this year and 5.9 per cent next year from 4.9 per cent in 2012, according to the International Monetary Fund.

    The bank posted a 24 per cent drop in first-half profit to $2.18 billion after a $1 billion write-down of its Korean business. Revenue rose 6.6 per cent as growth in Hong Kong and India helped offset declines in Korea, Singapore and China.

    Its income from retail banking in Africa, including credit cards and personal loans, is growing helped by expansion in Kenya and Botswana, Ahmed said. Income in Ghana grew 32 per cent and in Zambia by 45 per cent in the first half, he said. The bank has a “high single digit” market share in consumer banking in most countries on the continent in which it operates and more than 10 per cent in some, he said.

    The bank also expects to benefit from growing trade between Africa and China, which it forecasts to rise to $1.7 trillion by 2030 from $200 billion in 2012. Its presence in Asia, the Middle East and Africa will help it connect companies and help facilitate trade, Ahmed said.

  • Challenges of implementing money laundering against lawyers

    Challenges of implementing money laundering against lawyers

    Arguments on why lawyers should be regulated by Giaba

    Specific roles of lawyers, notaries and Trust service providers under the AML/CFT Regime

    International standards against money laundering and terrorist financ ing recognised the critical roles of legal professionals in the fight against these menaces and comprehensive provisions and guidance have been developed to assist them not only to appreciate these roles, but ensure that they indeed comply as appropriate. Specifically, the FATF Recommendations 5 and 12 require lawyers and notaries to undertake customer due diligence (CDD) measures, including identifying and verifying the identity of their clients, when:

    a) establishing business relations;
    b) carrying out occasional transactions: (i) above the applicable designated threshold;
    c) there is a suspicion of money laundering or terrorist financing; or
    d) have doubts about the veracity or adequacy of previously obtained customer identification data.
    With regard to higher risk, under Recommendation 5, a country must require its DNFBPs, including legal professionals, to perform enhanced due diligence for higher-risk clients, business relationships or transactions. The customer due diligence (CDD) measures to be undertaken includes:
    a) Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information;
    b) Identifying the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner such that the legal professional is satisfied about who the beneficial owner is. For legal persons and arrangements this should include legal professionals taking reasonable measures to understand the ownership and control structure of the customer;
    c) Obtaining information on the purpose and intended nature of the business relationship; and
    d) Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the legal professional’s knowledge of the clients, their business and risk profile, including, where necessary, the source of funds.
    Furthermore, lawyers and notaries are required to pay special attention to business relationships and transactions with persons, including companies and financial institutions, from countries which do not or insufficiently apply the FATF Recommendations. They should as far as possible, examine their background and purpose whenever these transactions have no apparent economic or visible lawful purpose, establish their findings in writing and report to the competent authorities.
    Under the same Recommendation 12, lawyers and notaries are required to apply appropriate client due diligence measures when they act on behalf of their clients and represent individuals or entities, in connection with one or more of the following regulated activities:
    a) buying and selling of real estate;
    b) managing of client money, securities or other assets;
    c) management of bank savings or securities accounts;
    d) organisation of contributions for the creation, operation or management of companies; and
    e) creation, operation or management of legal persons or arrangements, and buying and selling of business entities.
    Recommendation 12 also requires trust and company service providers to apply due diligence when they prepare for or carry out transactions for their clients. However, it may be understood from the enumerated activities above which lawyers are required to report that “legal advice and representation” as such are not within the activities contemplated by Recommendation 12.
    Accordingly, the provision of legal representation in and of itself is not one of the activities that are subject to regulation pursuant to the FATF Recommendations. Only the activities that fall within the stated regulated activities enumerated are so subject. This is an important distinction. Critically, the lawyer­client relationship is protected by common law, statutory obligations and rules (such as legal professional privilege) in many countries, including constitutional provisions. It is beneficial for a designated legal professional to be aware of the potential risk of money laundering and terrorist financing and to apply an appropriate level of due diligence in the circumstances when the lawyer undertakes a representation of clients which involve regulated activities.
    Lawyers and notaries are acting in an advisory capacity concerning the regulated activities when they represent clients in these regulated activities. These matters in practice mainly concern arrangements concerning business entities or real estate. In considering these types of work, lawyers would act, or not to act, for clients – at their discretion.
    A lawyer or notary who makes a report is prohibited from disclosing the fact that a Suspicious Transaction Report (STR) or related information is being reported to the FIU. In view of the risk involved in the reporting obligation, the FATF requires that persons who make reports are to be protected by legal provisions in their national legislation from criminal and civil liability for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, if they report their suspicions in good faith to the FIU. These persons will be protected even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred.
    Lawyers and notaries are also required to develop programmes against money laundering and terrorist financing. The programmes should include internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees. They should also provide ongoing employee training programme and an audit function to test the system.
    Also, under Recommendation 8, a country must require legal professionals to give special attention to the risks arising from new or developing technologies that might favour anonymity. As stated earlier on, the potential risks faced by legal professionals vary according to the type of transactions between them and their clients and such risks may be affected by internal and external factors, such as inadequate risk controls, weak compliance resources and lack of senior management involvement. The action of third parties and/or political and public developments may also affect the risk level.

    What services do launderers want from lawyers?
    Dr. Abdullahi Shehu, in his paper titled: The role of lawyers in the fight against money laundering and terrorist financing, which he presented at the National Executive Session of the Nigerian Bar Association (NBA) on February 19, 2009, highlighted the type of services launderers want from lawyers.
    According to him, criminals need the services of legal professionals in order to disguise and conceal the origin and ownership of their illegal proceeds. Although the services that lawyers offer which criminals will find desirable may vary from one jurisdiction to another, nevertheless, regardless of the jurisdictions in which legal professionals operate, they should have a common perception of money laundering risks as determined by acceptable standards and best practice.
    The use of client account is one of the services provided by lawyers, which can be misused by those who seek to launder “dirty” money. Since financial institutions are increasingly applying CDD measures, those seeking to conceal the origin and ownership of their wealth would attempt to introduce funds into the banking system through an intermediary like a lawyer. Lawyers may receive cash deposits on account, issue or cash cheques, assist with the purchase or sale of stock, or send or receive international funds transfers.
    Other services which lawyers provide to their clients -and which may also be misused by launderers include the purchase or sale of property, the creation of corporate entities and trusts, provision of a safe-haven through the use of lawyer/client privilege to refuse disclosure of the activities of a client with criminal record, provision of guarantees, introduction of clients to financial institutions or to law enforcement agencies. The use of power of attorney and the creation of false legal documentation are also services required by launderers from lawyers.
    It is worthy of note to mention that several lawyers have been implicated in money laundering issues. Some have ended up in jail, while others are either going through prosecution or under investigation.
    In one case, it was alleged that a lawyer collaborated with a former public officer to launder public funds. The public officer engaged the services of the lawyer to register company A, – one of the several front companies the public officer used to purchase high-priced real estates in country BA and registered them in country CD.
    The lawyer’s major engagement with the former public officer was over company B, another company registered in country EF and used to purchase a high-priced asset from a company DC in country CA. The lawyer’s firm incorporated company B which also owns a property in country BA. He also incorporated company V Limited, in country MY. V Limited received an assignment from company B to help in the purchase of the high-priced asset.
    The contract with company DC was executed by way of a deed of assignment made on February 14, 2007 between company DC and V Limited. Funds for the purchase of the £11 million high-priced asset were paid to the manufacturer of the asset through different shell companies around the globe. First, the sum of £2.5 million was transferred to company DC from a company based in country MY through the lawyer’s firm. The money from the company originated from an account opened and maintained by the public officer in the name of company S. Further funds were transferred to the lawyer’s firm from company AV.

    From the foregoing, it may be said that the lawyer played a very significant role in the near success of the money laundering scheme. This is a typical case of direct involvement of a lawyer in such a scheme. Some lawyers may be lured into money laundering schemes if they are not vigilant in their dealings with their clients.

     

     

     

     

     

     

     

     

     

     

     

     
    CHALLENGES OF IMPLEMENTATION OF MONEY LAUNDERING LEGISLATION AGAINST LAWYERS (4)

    CENTRAL BANK NIGERIA COMES INTO THE FRAY

    How did Central Bank of Nigeria come into the matter, one may ask? What is the connection of CBN with SCUML and FMIT&I? Let me attempt to answer these questions. Prior to the MLPA 2011, SCUML, through the National Advisory Council Against Money Laundering, applied persuasion towards implementation of the law on DNFIs. In February 2010, Nigeria made a high-level political commitment to work with FATF and GIABA to address its AML/CFT deficiencies in order to exit the list of countries that pose a high risk to the global financial system. As a result Nigeria set up the Presidential Committee on FATF which championed the enactment of and amendment to the MPLA of 2011. Section 7 of MPLA 2011 requires lawyers to keep their client’s record of identification for at least 5 years including the record of transaction and any report on suspicious transaction.

    Section 8 MLPA 2011 makes it mandatory for the records referred to in section 7 to be forwarded to CBN or NDLEA on demand or to any other regulatory agency as EFCC may, by gazette, specify. Section 9 MLPA 2011 actually gave the CBN a fundamental role by specifying that CBN may impose a penalty of not less than N1 million or the suspension of any licence issued to the lawyer for failure:

    (a) to designate compliance officers at management level at his head office and branch offices (if any);
    (b) to organize regular training programmes for his employees;
    (c) to decentralise information collected; and
    (d) to establish an internal audit mechanism to ensure compliance and ensure the effectiveness of the measures taken to enforce the provisions of the Act.

    Section 10 MLPA in the same spirit makes it binding and compulsory for a lawyer involved in a transaction as an individual to report every transaction in excess of N5 million, or N10 million or its equivalent in the case of the lawyer operating as a body corporate. Any contravention of this provision amounts to an offence liable on conviction to not less than N250,000 and not more than N1 million for each day the contravention continues.

    Pursuant to these and some other provisions, CBN, on August 2, 2012, issued a circular requiring all such account holders classified as DNFBPs (i.e. Designated Non-Financial Businesses and Professions), a euphemism for DNFIs, to update, within 6 months, their account information with their respective banks. The deadline was extended by another 3 months through another circular dated February 25, 2013. On June 18, 2013, the CBN conceded yet another extension to December 31, 2013 for ultimate compliance. The CBN claims that the circulars are in line with global best practice and consistent with the laws of the Federal Republic of Nigeria. Furthermore, the CBN has threatened to invoke the FATF rules to freeze accounts of all DNFBPs that fail to register with SCUML and forward evidence of such registration to the account holding bank on or before December 31, 2013.
    CHANGES IMPOSED ON LAWYERS UNDER THE MONEY LAUNDERING (PROHIBITION) (AMENDMENT) ACT, 2012

    Following pressure from FATF, GIABA, EFCC and CBN, presumably, the National Assembly amended the MLPA 2011 by enacting the Money Laundering (Prohibition) (Amendment) Act, 2012 (“MLPAA”), which became operative on 21st December, 2012.

    Section 3 of MLPAA 2012, which amended section 3 of the Principal Act, has virtually turned every lawyer to an investigator. It will be the responsibility of a lawyer to:

    (a) identify a customer, whether permanent or occasional, natural or legal person, or any other form of legal arrangements, using identification documents such as international passport, driving licence, national identity card or any other form of identification prescribed in any relevant regulation;
    (b) verify the identity of the customer using reliable, independent source documents, data or information; and
    (c) identify the beneficial owner and take reasonable measures to identity the beneficial owner using reliable information to the satisfaction of the lawyer.

    It is also the responsibility of the lawyer to undertake customer due diligence (CDD) measures when:

    – establishing business relationships;
    – carrying out occasional transactions above the applicable designated threshold;
    – carrying out occasional transaction that are wire transfers.

    A lawyer shall scrutinize transactions undertaken during the course of a business relationship to test consistency of information with his knowledge of the client, his client’s business and risk profile. A legal practitioner is further required to take measures to mitigate the risk he may encounter in his course of dealings with a client.

    Section 4 of the MLPAA 2012 amended section 6 of the Principal Act by asserting EFCC in the Amendment Act wherever “the Commission” appeared in the Principal Act.

    Section 5 MLPAA 2012 which amended section 9 of the Principal Act makes conjunctive compliance with the provisions of subsections (1) and (2). While Section 9 (2) of the Principal Act made payment of penalty disjunctive with withdrawal or suspension of licence of the lawyer, section 5 of the MLPAA 2012 makes both punitive actions conjunctive.

    Section 6 MLPAA amended section 10 (1) MLPA 2011 by just changing the word, “Commission” to “Economic and Financial Crimes Commission”, a meaning already ascribed to “the Commission” in section 25 MLPA 2011.

    Section 9 MLPAA 2012 amended section 15 of the MLPA by introducing a new section 15, which provides that:

    “15 (1) Money Laundering is prohibited in Nigeria.

    (2) Any person or body corporate, in or outside Nigeria, who directly or indirectly –

    (a) conceals or disguises the origin of;
    (b) converts or transfers; .
    (c) removes from the jurisdiction ; or
    (d) acquires, uses, retains or takes possession or control of;

    any fund or property, knowingly or reasonably ought to have known that such fund or property is, or forms part of the proceeds of an unlawful act;

    commits an offence of money laundering under this Act.

    (3) A person who contravenes the provisions of subsection (2) of this section is liable on conviction to a term of not less than 7 years but not more than 14 years imprisonment.

    (4) A body corporate who contravenes the provisions of subsection (2) of this section is liable on conviction to-

    (a) a fine of not less than 100% of the funds and properties acquired as a result of the offence committed; and
    (b) withdrawal of licence.”

    From the foregoing, upon breach of any of the provisions of these money laundering laws, a lawyer operating as an individual risks serving a jail term of between 7 and 14 years or 100% of funds or properties acquired plus withdrawal of licence if he operates as a corporate entity.

    The import of the Amendment Act, therefore, is to broaden the scope of responsibility and tighten the nooze on defaulters by increasing the punishment prescribed by the Principal Act or stipulating new punitive measures. These money laundering laws are therefore booby traps which no lawyer can escape in the long run.
    CONCLUSION

    In view of the onerous provisions of the MLPA 2011 as amended in 2012, the Registered Trustees of the Nigeria Bar Association (“NBA”) instituted an action against CBN, EFCC and AGF at the Federal High Court, Abuja in Suit No. FHC/ABJ/CS/173/2013 probably to restrain the CBN and EFCC from invoking their assumed powers under the MLPA and MLPAA.

    One can now understand why lawyers are resisting the contents of the CBN circulars and the EFCC (or SCUML) prescriptions. A combined reading of sections 37 (1), 45 (1) and 1 (3) of the 1999 Constitution (as amended); sections 102,103 and 192 of the Evidence Act, 2011; and Rule 19 of the Rules of Professional Conduct for Legal Practitioners, all lend credence to the reason why lawyers are resisting the operation of the money laundering legal regime notwithstanding this safety verve provided by section 6 (10) of the MPLA 2011:

    “The directors, officers and employees of financial institutions and Designated Non-financial institutions who carry out their duties under this Act in good faith shall not be liable to any civil or criminal liability or (sic) have any criminal or civil proceedings brought against them by their customers.”
    There are legal maxims that support that the provisions of the laws granting privilege to communication between a lawyer and his client supersedes those provisions of the MLPA and MLPAA, and relevant FAFT Recommendations that are in conflict. I refer readers to the age-long rule of interpretation of statutes as expressed in the maxim, generalia specialibus non derogant, which means that general things do not derogate from special things. This maxim, and the converse maxim of specialia generalibus derogant (meaning special words derogate from general ones), has been applied by the courts in a number of cases.

    In Kraus Thompson Org. v. N.I.P.S.S. [2004] 17 NWLR (Pt. 901) 44 at pp. 59, para. G-H and 65, para. A-E, the Supreme Court held that where an issue in a statute is governed by a general provision and a specific provision, the later will be invoked in the interpretation of the issue before the court. This is because the specific provision will be deemed to have anticipated the issue against the general provision.

    In the earlier case of Schroeder v. Major [1989] 2 NWLR (Pt. 101) 1 at pp. 18-19, para. H-G, Oputa, J.S.C. (as he then was) discussed some legal maxims that applies in this kind of situation, and these include:

    (i) General dictum generaliter est interpretandum: generalia verba sunt generaliter interlligenda, meaning “A general saying is to be interpreted generally: general words are to be understood generally.” In reference to this maxim, Oputa JSC held that Order 6 rule 15 of the High Court of Lagos State (Civil Procedure) Rules of 1972, which deal generally with service of process or documents by using general words as “any process,” “any document” did not envisage a particular process.

    (ii) Oputa further reinforced the above maxim with another one, Generale nihil certi implicat, meaning, “A general expression implies nothing certain.”

    If these maxims are anything to go by, one can safely conclude that special provisions of the law declaring the communication between a lawyer and his client privileged are superior to the general provisions of the anti-money laundering laws which require lawyers to expose this communication. In any case, we must await the verdict of the court.

  • Equities look to Q3 earnings for renewed rally

    Equities look to Q3 earnings for renewed rally

    Investment managers and market pundits have predicted a renewed rally in the stock market in the weeks ahead on the back of third-quarter earnings reports by quoted companies.

    As companies round off their operations for the third quarter, market is already expectant of the nine-month operational results, which most analysts take as windows for preview of full-year earnings and returns.

    Early filers are expected to turn in their interim results for the nine-month period ended September 30, this year in October while all quoted companies are generally required to turn in their interim results for the third quarter on or before November 15. The regulatory filing calendar of the Nigerian Stock Exchange (NSE) stipulates November 15 as the mandatory due date for final submission of third quarter earnings reports, although the Exchange may in its discretion grant an extension till December 14.

    Post-listing rules of the NSE requires that audited annual accounts of companies should be submitted within three months after the year end while quarterly financial statements are expected to be made available 45 days after the end of the quarter.

    Investment analysts at Morgan Capital Group said increasing positioning for the third quarter earnings would trigger bullish rally as investors seek to evaluate the dividend potential of the stocks.

    According to analysts, with the sustained bearishness in recent weeks, investors have largely adopted a wait and see approach with low risk appetites for perceived as the apathy for the perceived volatile banking stocks persist.

    Analysts noted most investors have chosen the safety of regular dividend paying stocks notwithstanding that some of these regular dividend-paying stock are currently trading at high price-earnings multiples with low dividend yields at current prices.

    Analysts urged investors to remain focused on stocks with good fundamentals that have the capacity to retain value noting that even when their prices crash, they are the quickest off the mark in price appreciation when the market sentiment becomes bullish.

    Managing Director, GTI Securities, Mr Tunde Oyekunle, said third quarter earnings reports could provide impetus for a new round of rally as investors anticipate returns by the year-end.

    According to him, early results for the nine-month period would wet investors’ appetite and enhance the prospects of market’s recovery.

    The stock market opened this week with a 15-day negative return of -0.42 per cent, showing no letdown in the bearishness that had shaved off about N510 billion in equities’ values in August. The reversal in August had reduced average year-to-date capital gains at the Nigerian equities market from about N3.03 trillion by the end of July to N2.52 trillion by the end of August.

    Average returns at the market, as indicated by the All Share Index (ASI) of the Nigerian Stock Exchange (NSE), shrank to 29.10 per cent by the end of August as against 35.03 per cent recorded by the end of July. Average year-to-date return opened this week at 28.56 per cent after it lost 0.84 per cent last week.

    Nigerian equities had consolidated their bullish rally in July as market capitalisation added N581 billion to throttle back to N12 trillion. Aggregate year-to-date return improved from six-month value of N2.45 trillion to N3.03 trillion by the end of July. After the downtrend in June, the market was particularly spectacular in July with a month-on-month average return of 5.08 per cent.

    Aggregate market value of all equities closed July at N12.007 trillion as against its opening value of N11.426 trillion for the month. The ASI also rose from month’s opening index of 36,164.31 points to close at 37,914.33 points.

    The stock market had closed the first half with average return of about 28.8 per cent, equivalent to N2.45 trillion in capital gains. Aggregate market value of all equities on the NSE had closed the first half at N11.426 trillion as against its value-on-board of N8.974 trillion that started the year, representing an increase of 27.3 per cent. The ASI had risen from 2013’s opening index of 28,078.81 points to close the first half at 36,164.31 points.

    The first half performance was moderated by the downtrend in the latter half of June, which saw the month closing as the most bearish month with a loss of N649 billion. Equities had shown brighter performance in the first five months with whooping capital gains of N3.10 trillion. Aggregate market capitalisation of all equities had closed May at N12.075 trillion while the ASI had indicated a five-month average return of 34.6 per cent.

     

  • ‘New Pension Act will enhance capital formation’

    ‘New Pension Act will enhance capital formation’

    The amendment of the Pension Act 2004 will lead to greater pool of investable capital that would further enhance the long-term capital formation necessary for the development of critical national infrastructures and ensure better returns for all stakeholders.

    Stakeholders in the capital market and pension management said various amendments being proposed to the Pension Act would enhance the capacity and efficiency of pension regulation, broaden investment horizon of pension fund management, increase returns to pensioners and enlarge the coverage to the contributory pension scheme to millions of new contributors.

    Stakeholders who made representations against the background of the ongoing review of the Pension Reform Act 2004 by the National Assembly said proposed amendments under the Pension Reform Act (PRA) 2013 Bill would benefit all stakeholders.

    They noted that the passage of the Bill will create new impetus for capital formation and help to address the challenges being faced by the National Pension Commission (Pencom) and other operators in the implementation of the Pension Reform Act 2004.

    In a memorandum on the Pension Reform Act (PRA) 2013 Bill, Pencom outlined that the principal thrusts of the amendments are to enhance regulatory and enforcement activities, protection of pension fund assets, unlock the opportunities for the deployment of pension assets for national development, review the sanctions regime to reflect current realities, provide for the participation of the informal sector and also provide the framework for the adoption of the Contributory Pension Scheme (CPS) by States and Local Governments.

    Deputy Group Managing Director, BGL Plc, Mr. Chibundu Edozie, noted that the amendments to the Pension Act 2004 will address the loopholes in the current Act, such as non-remittance of pension contributions to the Pension Fund Administrators, especially by Ministries, Departments and Agencies (MDAs) while it will also provide an enhanced coverage, especially in the informal sector participation in the pension scheme by introducing a minimum guaranteed pension to all covered persons.

    He said the amendment will lead to a significant increase in investable pension assets which would benefit the capital market pointing out that Nigeria’s pension asset, currently at N3.3 trillion, is estimated to grow to N7.1 trillion by the end of 2015; an estimated increase of about N4 trillion in 27 months.

    “Since most of the expected fund would be invested in equities and fixed income instruments, this would lead to a significant boost in capital market activities. The provision for the utilisation of pension funds for national development would also help capital market activities as several investment vehicles are created to meet the investment guidelines for Pension Funds,” Edozie said in response to a media enquiry by The Nation.

    According to him, capital market operators and investment managers would like to see a pension sector that is creative and more amenable to more exotic assets to meet the market’s needs. While the guarded approach by Pencom saved the industry from the market meltdown of 2008-2010, the industry is ripe now to start allowing more innovation and skilful management expertise from the fund managers.

    “We may start this by allowing investment according to the demography of beneficiaries where funds with more young contributors are allowed more investment in equities than funds with older contributors. We may also allow fund managers to invest in some private products such as infrastructure funds and other development-focused products and funds which may not fulfill all the current investment guidelines by the Pencom as long as the fund manager is convinced that it is a beneficial investment to the fund contributors,” Edozie said.

    President, Chartered Institute of Stockbrokers (CIS), Mr. Ariyo Olushekun, said there should be flexible in pension fund investment and management in line with the structures and classes of the contributors.

    Olushekun, who is also the managing director, Capital Assets Limited, a leading investment services firm, noted that increased pool of capital and flexible investment rules would allow aggressive fund managers to play in the equities market without violating any rule.

    He noted that pension funds as collective assets of the Nigerian people should be used as catalyst for the Nigerian capital market, which would in turn impact on the nation’s economic development.

    Analysts at FirstBank of Nigeria said the PRA 2013 portends some key fundamental changes that would enhance the pool and efficiency of the pension industry.

    According to FirstBank, if the National Assembly passed the bill, it will drive increased inflows of pension contribution from employers and employees, which will increase the pension assets under custody and, ultimately, positively impact profitability.

    If passed into law, the PRA 2013 will allow for a wider decree of transparency in the pension industry as the regulatory commission will be able to exercise more powers to discharge its regulatory functions.

    One of the major highlights that seek to remove the bottlenecks around pension claim and payment is the proposal by the Pencom that payment of pensions would be made by the Accountant General of the Federation (AGF) directly into beneficiaries (pensioners’) bank accounts rather than through the usual long processes during which the monies disappears in transit.

    To capture a wider number of employees in the informal sector which unarguably constitute the greater chunk of the country’s economy, the PRA 2013 Bill seeks to change initial provision of minimum requirement of five employees for organisations to participate in the scheme to three employees to allow small businesses, especially the Small and Medium Scale Enterprises (SMEs) to partake in the scheme.

    Most analysts agreed that SMEs form the largest segment of most economies, including Nigeria. Data supplied by the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) showed that more than 12 million firms, including partnerships and micro enterprises, that normally have less than five employees are registered in Nigeria.

    Analysts at BGL Group noted that with about 10 per cent of estimated working population now in the pension system, the notable gap between contributors and potential contributors can be explained mainly by the high percentage of Nigeria’s working population operating in the informal sector of the economy.

    Beyond helping Nigerian workers to secure their future, the new Act would catalyse the formation of larger and long-tenored capital that could assist Nigeria in its quest for rapid transformation and infrastructural development. The PRA 2013 Bill seeks to expand the sphere of permissible investment instruments to accommodate initiatives for national development which include among others investment of the pension funds in the real sector. This will focus on infrastructure and housing development while at the same time not unnecessarily endangering the pension fund assets. These changes will also foster the development of the Nigerian capital market.

    Sectoral review by BGL Group shows that contributors within the 40 years bracket account for more than 60 per cent of pension contributions, which implies that a large portion of contributors would not withdraw their retirement accounts until after 10 to 20 years. Under amenable amendments, this structure of contributors should give the pension fund administrators the liberty to invest the pension assets in relatively long-term investments with strong growth potential and moderate risk.

    Analysts at BGL pointed out that the concentration of pension investment assets in low-yield debt investments may be limiting the growth potential of the retirement fund for young pension contributors with long-term investment horizon.

    The pension regulator was also said to be considering the prospects of securities lending and amendments to existing legislation to allow securities lending in the pension industry.

    The market making and securities lending initiatives took off at the Nigerian capital market on September 18, 2012. Rule 350 of the Securities and Exchange Commission (SEC) and the operating guidelines on securities lending by the Nigerian Stock Exchange (NSE) jointly allow pension fund administrators and custodians to engage in securities lending.

    Besides, the PRA 2013 Bill also seeks to align with the requests from workers through various labour unions that the waiting period for accessing benefits in the event of loss of job be reduced from six months to four months.

    Also, to ensure strict operational discipline by operators in the pension industry, the bill seeks to create new offences and provide for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds assets under any guise, as well as other infractions of the provisions of the Act. This becomes very expedient as Pencom has observed that sanctions currently provided under the PRA 2004 are no longer sufficient deterrents against infractions that operators currently commit under the PRA 2004 Act.

    Another major issue among the 23 loopholes identified with the PRA 2004 which the Commission seeks to address through the PRA 2013 Bill is that the fund set aside by the Government to pay the accrued rights for past service under the Contributory Pension System is hardly sufficient. To this effect, the Bill seeks to amend Section 29(2) of the PRA 2004 to indicate that the five per cent deduction of monthly Federal Government wage bill should rather be a minimum amount and the Commission should determine and advise the Federal Government as well as the Federal Capital Territory (FCT) Administration, on appropriate rates, from time to time, that is sufficient to address the projected yearly pension liability of the Government.

    If the National Assembly eventually approves the PRA 2013 Bill, workers under the Contributory Pension Scheme will definitely get richer at retirement. In line with aspirations of stakeholders in the pension industry, Pencom has recommended that more money be contributed on behalf of the employees by the employers to the scheme. Hence, rather than the 15 per cent remittance jointly shared by both employer and employee on a monthly basis, it will move up to 20 per cent. The PRA 2013 Bill when passed will increase employers’ contribution for the employee to 12 per cent while the employee will only remit eight per cent. In addition to the 33.3 percent increase in joint contribution by employer and employee, employers will also be persuaded under the new Bill to pay gratuity as additional benefit to their workers at retirement.

    The PRA 2013 also highlights the importance of qualification of staff to occupy certain positions within the pension regulatory system. Whereas the PRA 2004 Act did not permit anybody who does not have more than 20 years working experience to be either the Chairman or Director General of the Commission, PRA 2013 Bill is recommending 20-year and 15-year work experience for Chairman and Director General respectively. Given similar provisions relating to the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) where no emphasis is laid on the number of years one has worked but on competence, stakeholders believe the same consideration should be given to pension regulation.

    Alternatively, some stakeholders have argued that in the case when experience is linked to the number of years one had worked, the provisions relating to the Securities and Exchange Commission (SEC), National Insurance Commission (NAICOM) and the Corporate Affairs Commission (CAC), should be a yardstick to set a standard for Pencom. Investment and Securities Act (ISA) allows 15-year work experience for the position of Director General and 12-year experience for Executive Directors. Similarly, Section 10(2) of the National Insurance Commission Act 1997 also stipulates 15-year experience for appointment as Commissioner of Insurance. The Companies and Allied Matters Act (CAMA) 1990 stipulates 10 years experience for appointment as Registrar-General of the CAC.

     

  • Foreign reserves down to $46.8b

    Foreign reserves down to $46.8b

    The nation’s foreign reserves declined to $46.8 billion as at August 29. It lost $200 million from the $47 billion it entered the month with.

    Data obtained from the Central Bank of Nigeria’s (CBN’s) website, showed that the reserves were $47.7 billion on July 1, and dropped to $47 billion on July 15. The figures hit $47 billion on August 1.

    The foreign currency reserves were $68 billion in August 2008 before the global financial crises affected it. The CBN had consistently maintained that inflows into the reserves were not consistent with the oil prices, thus underscoring the need for tighter fiscal controls around oil revenues.

    The apex bank has also said there was urgent need to pursue policies that would foster macro-economic stability, economic diversification as well as encouraging foreign capital inflows.

    It said a higher rate of retention of oil revenues should facilitate the efforts at maintaining exchange rate stability as an antidote to imported inflation without excessive reliance on monetary tightening measures.

     

  • e-clearing at branches may begin in Q4

    Electronic clearing (e-clearing) will be extended to banks’ branches this third quarter of the year, it was leant.

    However, this is subject to the Central Bank of Nigeria (CBN) approval.

    The policy, which became effective last August, could not be implemented in all banks’ networks because of poor technical know-how and infrastructure needed for seamless take-off in those units.

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

    Decentralisation to branches, he said, will further reduce the pressure on clearing centres at banks’ headquarters.

    Sybrin Limited, a software technology firm based in South Africa, provides e-clearing services and other payment solutions among Africa’s leading banks, clearing houses and corporations.

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

    In case e-banking fails, paying bank may return such items with appropriate return reason codes.

    The introduction of truncation process changes the roles and the responsibilities of the various participants in the clearing system and may lead to introduction of certain risks.

     

  • Mutual funds net N30.2b gain in 12 months

    The net value of all registered mutual funds in Nigeria added N30.22 billion over a 12-month period to hit N117.5 billion, underlining the improvement in returns of collective investment schemes.

    Latest statistical report on net asset values (NAV) of mutual funds by the Securities and Exchange Commission (SEC) obtained by The Nation showed that mutual funds’ net assets grew by 34.63 per cent or N30.22 billion between July 27, 2012 and July 26, this year.

    Mutual funds, otherwise known as collective investment schemes, are joint investment vehicles through which investors can pool funds and invest in chosen basket of securities with a view to optimize returns and reduce risks.

    Net asset value is determined by subtracting total liabilities of a fund from its total assets. The net asset value can further be divided by the total number of units of the fund to determine the unit price.

    A mutual fund is usually categorised by the class of assets that forms the primary focus of its investments. Thus, there are equity funds, money market funds, bond funds, real estate funds, ethical funds and balanced funds among others.

    The report indicated that net assets value of all 49 mutual funds in Nigeria rose from N87.27 billion on July 27, 2012 to N117.49 billion by July 26, 2013, the latest available update from SEC.

    According to the report, equity-based funds remain the largest and most populous investment schemes with 18 funds that accounted for N45.95 billion, about 39.1 per cent of the total net asset value of mutual funds.

    Money market funds, which invest mainly in money market instruments such as treasury bills, have the second largest segmental net value at N18.85 billion, 16.04 per cent of total net assets. Bonds funds, with nine mutual funds, has the third segmental value with net value of N16.34 billion while real estate funds, with two funds, accounted for N16.07 billion.

    Further breakdown showed that investors’ values in balanced funds- mutual funds that seek to invest in a balanced mixture of equity and debt instruments; totaled N10.45 billion while the four ethical funds accounted for N6.91 billion. Umbrella funds, which are run entirely by Stanbic IBTC Asset Management, pooled N2.61 billion while the only Exchange Traded Fund (ETC) accounted for N311 million.

    The report indicated that Stanbic IBTC Money Market Fund was both the largest money market fund and largest mutual fund with net asset value of N15.78 billion. Two other funds under management of Stanbic IBTC Nigerian Equity Fund and Stanbic Ethical Fund, were the leaders in the equity and ethical segments with N14.64 billion and N3.67 billion.

    Kakawa Guaranteed Income Fund (KGIF), a mutual fund under Kakawa Asset Management Limited, which was recently acquired by Investment One Financial Services Limited, was the leader in the bond segment with net assets of N4.47 billion. Union Homes ‘s Real Estate Investment Trust (Reit) was the leader in the real estate market with N13.76 billion while FBN Heritage Fund, being managed by FBN Capital Markets, was the largest balanced fund with N5.17 billion.

    About five per cent of investors in the capital market engage in mutual funds, a paltry fraction that underlines the tendency of most retail investors to invest in the market directly.

     

  • Western Union’s $1.7m grant for Nigeria, others

    Western Union Foundation is committing $1.7 million to more than 20 non-profit, Non-Governmental Organisations (NGOs).

    This year, the Foundation has announced grants worth over $2.9 million.

    In Africa, $25,000 has been given to kick-start a small business training for farmers in Kenya and $20,000 to supporting Mashutwero pre-schools in Botswana – helping to provide academic and personal development opportunities for local youths.

    This quarter, $114,114 will be given to the Daniel Ogechi Akujobi Memorial Foundation (DOAMF) towards Project Read to Succeed, which provides libraries for public schools in Nigeria.

    The grants are designed to help increase access to, and improve the quality of education programs in multiple regions. The grant cycle provides further support for the Western Union Education for Better programme, which is a three-year commitment to growing young minds through strategic grants that focus on secondary education and vocational training.

    “We are supporting NGOs that are committed to expanding educational opportunities for global communities,” said Patrick Gaston, president of the Western Union Foundation. “Education for Betteris a long-term programme that not only includes grant making, but also consists of collaborations with Western Union Agents to make a tangible impact on the communities and customers we serve.

    To date, many Western Union Agents have joined in the Education for Betterprogramme, with the Western Union Foundation matching Agent grants to support educational programs around the world.”

     

  • Mortgage financing to cost N25tr

    Mortgage financing to cost N25tr

    ABOUT N25 trillion is needed to bridge the housing gap estimated at 18 million units and growing by two million yearly, a report by Consolidated Discount Limited has indicated.

    The report, tagged: “Retrogressive view on the Mortgage Refinance Company (MRC),” said the company, established by the Central Bank of Nigeria (CBN) to assist bridge mortgage funding gap, was expected to issue N60 billion bond, which would boost the bond market.

    The MRC supports mortgage originators, such as Primary Mortgage Banks (PMBs) and Deposit Money Banks (DMBs), to increase lending by refinancing their mortgage loan portfolios.

    It said the capital market provides an important opportunity in closing this gap and, to a huge extent, has led to the development of the fundamentals associated with countries with strong mortgage systems.

    According to the report, the growth in the mortgage/housing sector through construction, is a vital means of generating employment and has played a pivotal role in enhancing productivity of the populace in countries with a sound mortgage model.

    The MRC is to provide short-term liquidity and medium to long-term funding and guarantees to mortgage finance lenders. It is expected to increase annual mortgage origination in Nigeria to 200,000 from an average of 20,000 mortgages within the next few years, representing an increase of 900 per cent.

    The firm is expected to act as an intermediary between originators of mortgage loans and the capital market which are typically looking for long-dated high quality securities. Also, the operations of the MRC are expected to enhance the development of the secondary mortgage market which is still at its infancy.

    Already the World Bank has committed $300 million interest-free capital to the project, while other local investors have equally shown interest.

    Also, Resort Savings and Loans, said it would commit N200 million to the proposed MRC. The implication of these commitments and other interests, it said, is increased funding to the mortgage/housing sector.

    “Our forecast also indicates there will be a need to access funds from the capital market if the PMBs and DMBs can pull together more mortgage originations. To a large extent, this may help to deal with one of the twin issues confronting a viable mortgage system in Nigeria,” it said.

    It said the impact of the existing land use act may constrict potential gains that would accrue from the establishment of the mortgage refinancing mechanism. The Nigerian Land Use Decree of 1978 nationalised all land in the country and notionally handed over its administration to committees constituted at state and local government level and these constitute a huge constraint to business. This limitation would have to be removed if the level of investments desired in the housing sector is to be attained.

    The report said the mortgage market in Africa is relatively small which has led to pent up demand that could serve as a major growth driver for housing in the continent. The performance of mortgage market in Africa has been strongly linked to the performance of the various economies. South Africa is the biggest economy in Africa and equally has the most decent (size and structure) mortgage system. Mortgage accounts for 26 per cent of South African’s GDP while it accounts for a one of Nigeria’s.

    Nigeria which is sub-Sahara Africa’s largest economy after South Africa has struggled to deliver housing to the population because of the high prices of the homes in the market. This constricts demand for housing in the country while also exposing mortgage finance institutions (MFIs) to increased risk of default as mortgages are priced at unhealthy double digit rates.

    Across the continent home financing has become largely accessible by mainly the upper class and the upper middle class. This can be traced in large part to the preference of the mortgage lenders for mainly corporate clients while individuals are left to access mortgage finance at exploitative rates.

    The report forecast that interest rate on mortgage from lenders to home owners (borrowers) will be cut by 50 per cent from the present 24 per cent to 12 per cent. However, it said this may not necessarily translate to affordable housing for the huge low-income population that are the most affected in Nigeria’s housing problems.

    Also, there have been no comprehensive plans on what would happen to the entities entrusted to coordinate mortgage activities in the country Federal Housing Authority (FHA), Nation such as Housing Fund (NHF) and Federal Mortgage Bank of Nigeria (FMBN).