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Tag: Nigerian banks

  • ​JUST IN: Nigerian banks resume international transactions on naira cards after three years

    ​JUST IN: Nigerian banks resume international transactions on naira cards after three years

    Three commercial banks in Nigeria have announced the re-activation of international transactions on their naira cards.

    The development comes after the service was halted for about three years when Nigerian financial institutions suspended transactions on naira debit cards.

     Between July 2022 and January 2023, several banks temporarily suspended international transactions on ATM channels.

    In July, Standard Chartered Bank suspended international transactions on its naira visa debit card.

    First Bank of Nigeria (FBN), on September 21, 2022, suspended international transactions on its naira Mastercard.

    Guaranty Trust Bank (GTBank) also stopped global payments on its naira Mastercard, with Zenith Bank joining the fray on January 9, 2023.

    Flutterwave, Eversend, and other financial technology platforms also made similar moves, suspending their virtual card services for international transactions.

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    In separate announcements to customers seen by The Nation, United Bank of Africa (UBA), Guaranty Trust Holding Company Plc and Wema Bank said the service has re-commenced on their naira cards.

    In a recent notice to customers, the UBA said the resumption aligns with its continued commitment to providing clients with seamless and enhanced banking experiences.

    “In line with our continued commitment to providing you with seamless and enhanced banking experiences, we are pleased to inform you that all UBA Premium Naira Cards, including Gold, Platinum, and World variants are now enabled for international transactions,” the statement reads.

    “This means you can now use your Premium Naira Card for everyday payments, online shopping, POS, and ATM transactions across the world, with more ease and flexibility.

    “If you haven’t used your card recently, now’s a great time to rediscover the convenience and prestige that comes with being a UBA premium cardholder.”

    Also announcing the development in a recent statement, Wema Bank said customers can now “pay in dollars” with their naira cards.

    “Your Wema Naira Mastercard just went global! Now you can pay in dollars on all your favourite international platforms; Amazon, eBay, AliExpress? Netflix, Spotify, YouTube,” the bank said.

    Confirming the update, Personal Assistant to the former President Muhammadu Buhari on New Media, Bashir Ahmad, tweeted: “So, finally, Nigerian banks have now resumed international transactions on Naira cards. I received an email from @GTBank this afternoon confirming the development, stating that customers now have a quarterly limit of $4,000 on their Naira cards for international payments.” 

  • Five major banks declare N4.56trillion full year profit

    Five major banks declare N4.56trillion full year profit

    • Net gains after tax grew by 66.2 per cent

    • Assets of top financial institutions hit N100tr

    The Nigerian banking industry appeared resilient amid the changing macroeconomic landscape and ongoing banking recapitalisation.

    Pre-tax profit for five major tier 1 banks rose by about 70 per cent to N4.56 trillion in 2024.

    Key extracts of the full-year financial results of five headlining banks – United Bank for Africa (UBA) Plc, First Holdco Plc, Zenith Bank International Plc, Guaranty Trust Holding Company (GTCO) and Stanbic IBTC Holdings Plc – showed strong growths in profitability and assets.

    A survey by The Nation’s Market Intelligence yesterday showed that pre-tax profit for the five major banks rose by 69.5 per cent while net profit after tax grew by 66.2 per cent, underlining their increasing profitability.

    Total assets crossed the N100 trillion mark – N108.21 trillion during the year ended December 31, 2024, compared with N72.80 trillion recorded in 2023.

    The assets base was driven substantially by expansion in deposits and retained earnings.

    Total profit before tax for the five banks stood at N4.56 trillion in 2024 as against N2.69 trillion in 2023.

    After taxes, net profit rose from N2.27 trillion in 2023 to N3.78 trillion in 2024.

    The data were drawn from approved financial statements submitted to the Nigerian Exchange (NGX) by the banks.  

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    The five major banks control not less than two-thirds of the industry and are euphemistically referred to as systemically important banks, due to their domineering influence.

    Standalone analysis showed that all the banks recorded growths in profitability and assets base, showing a positive industry trend that suggests a stable outlook.

    Notably, the profit performance in 2024 was driven by operational growth, rather than extraordinary items, such as foreign exchange (forex) revaluation gains, which ballooned the bottom line in 2023.

    For instance, UBA, which boasts of the largest asset base at N30 trillion in 2024 as against N20.6 in 2023, recorded a pre-tax profit of N803.72 billion in 2024 compared with N757.68 billion in 2023.

    After taxes, UBA’s net profit rose from N607.7 billion to N766.6 billion.

    Zenith Bank’s profit before tax rose from N795.96 billion in 2023 to N1.32 trillion in 2024.

    After taxes, net profit also crossed the trillion naira mark from N676.9 billion to N1.03 trillion.

    Total assets expanded from N20.4 trillion to N29.96 trillion.

    GTCO, which boasts of more efficient asset utilisation, recorded a pre-tax profit of N1.27 trillion in 2024 as against N609.3 billion in 2023.

    Net profit nearly doubled from N539.66 billion to N1.02 trillion.

    Total assets had increased from N9.7 trillion in 2023 to N14.8 trillion in 2024.

    First Holdco, the holding company for first-generation First Bank of Nigeria (FBN) and its subsidiaries, doubled profit before tax from N356.15 billion in 2023 to N862.39 billion in 2024.

    Profit after tax jumped from N308.4 billion to N736.7 billion. Total assets rose from N16.9 trillion in 2023 to N26.5 trillion in 2024.

    Stanbic IBTC Holdings, which has the largest foreign ownership among the major banks, showed impressive growth across all indices.

    Profit before tax doubled from N172.91 billion in 2023 to N303.8 billion in 2024. Profit after tax increased from N140.62 billion to N225.3 billion. Total assets expanded from N5.15 trillion in December 2023 to N6.91 trillion in December 2024.

    With strong growth in profitability, directors of banks are recommending higher dividend payouts to shareholders.

    GTCO has announced a final dividend of N7.03 per share, which brought the total dividend for the 2024 financial year to N8.03 per share, a 151 per cent increase on N3.20 per share paid in 2023.

    Zenith Bank proposed a final dividend of N4 per share in addition to interim dividend per share of N1, bringing the total payout for the year to N5 per share.

    UBA, whose Group Chairman, Tony Elumelu, had promised shareholders bumper dividends, has proposed a final dividend of N3 per share.

    This brings the total dividend per share for the 2024 business year to N5.

    This implies a double-digit dividend yield of more than 14 per cent on the bank’s recent offer price of N35 per share.

    Stanbic IBTC is recommending a final dividend of N3 per share as against N2.20 paid for the 2023 business year.

    Banks attributed their strong performance to expansions across business segments and improved operating efficiency.

    Group Managing Director, United Bank for Africa (UBA) Plc, Oliver Alawuba, said the 2024 financial performance demonstrated the bank’s continuing focus on driving earnings growth, preserving asset quality, expanding business operations and deepening market share.

    He pointed out that the overall performance underlined the resilience of the bank despite prevailing macroeconomic challenges, geopolitical uncertainties, and exchange rate volatilities.

    “Our continued investment in our highly diversified global network allows UBA to deliver high-quality, consistent earnings.

    “Our businesses have been able to grow product and service income and expand our deposit base, allowing the Group to increase earnings while maintaining strong spreads and margins,” Alawuba said.

    He highlighted the marked improvement recorded in the bank’s core earnings profile, pointing out that the profit performance was derived from high-quality income streams from funding intermediation, fees and commissions.

    “Our ex-Nigeria- rest of Africa and international operations have expanded significantly over the past five years, now contributing 51.7 per cent of group revenue, up from 31 in 2019, delivering diversification benefits and further boosting long-term shareholder value.

    “This will continue to grow, as we further explore strategic markets that align with our overall vision.

    “We are currently upgrading our business scope and authorisation in France, and considering other viable markets in the short to medium term,” Alawuba said.

    Group Chief Executive Officer, Guaranty Trust Holding Company Plc (GTCO Plc), Mr. Segun Agbaje, said the performance reflected not just strong earnings but also the quality and sustainability of the earnings, underpinned by a well-diversified revenue base, robust risk management practice, and disciplined capital management.

    According to him, the strong performance for 2024 underscored the resilience and depth of the group’s business, driven by a well-diversified earnings base across banking and non-banking subsidiaries, all of which were profit and loss-positive.

    He said the group’s capacity to generate sustainable high-quality earnings, maintain strong asset quality, and drive cost efficiencies reflected the soundness of its long-term strategy and disciplined execution.

    “Looking ahead, we remain committed to building a financial services group that thrives on innovation, operational efficiency, and sustainable profitability.

    “We will continue to deepen our relationships with customers, leverage technology to deliver cutting-edge financial solutions, and accelerate the growth of all our business verticals—banking, funds management, pension, and payments—to unlock new opportunities and create more value for our shareholders,” Agbaje said.

    President of the Association of Corporate & Marketing Communication Professionals of Banks (ACAMB), Rasheed Bolarinwa, said the continuing positive performance of the banks underlined long-term investments in human capital and technologies.

    He said Nigerian banks were farsighted and proactive, thus able to navigate the changing dynamics of the economic environment.

    He pointed out the substantial growth in customers’ deposits and lending as indicative of the brand attractiveness of the banks, despite the growing incursion of financial technologies companies (fintechs).

    He expressed optimism that with the strong earning performance and success of the banks’ offers so far, the recapitalisation is headed towards unprecedented success, with banks seamlessly meeting their new capital requirements without any major negative fallout.

    President of the Association of Capital Market Academics of Nigeria, Prof. Uche Uwaleke, attributed the banks’ performance to the operating environment, characterised by high interest rate regime and foreign exchange (forex) volatility.

    He noted that the services sector, where banks operate, had been the major driver of the overall national economic growth, despite the weak growths in many other sectors such as manufacturing and agriculture.

  • Why Nigerian banks, fintechs are spreading tentacles across Africa

    Why Nigerian banks, fintechs are spreading tentacles across Africa

    Babatunde Olofin, CEO Moniepoint Mfb

    In this interview with Ibrahim Apekhade Yusuf, the Managing Director of Moniepoint MFB, Mr. Babatunde Olofin, shares interesting insights on why Nigerian banks and fintechs are exploring other markets outside Nigeria, nay Sub Saharan Africa and beyond. According to him the motivation is both for profit maximisation and also aligns with the overarching mandate of the African Continental Free Trade Agreement (AfCFTA) to boost intra-African trade, investment, and economic integration across the continent. Excerpts:

    Nigerian-Owned banks and fintechs have been expanding their frontiers across the continent of Africa, Europe and Asia in recent times. What could be responsible for this expansionist drive?

    Firstly, many African countries still have a large unbanked population which means that they are untapped. As such by expanding, Nigerian banks and fintechs can tap into these markets and provide financial services to millions of people who currently lack access. This in turn helps to bolster their overall profitability while creating impactful and meaningful change in societies that need them the most. Also this expansionist agenda is fueled by the rise and adoption of digital technologies which has made it easier for financial institutions to offer innovative products and services irrespective of where they are situated. This includes mobile banking, online and offline payments, and blockchain technology, which can process cross-border transactions more efficiently.  By expanding their frontiers, Nigerian banks and fintechs are not only growing their businesses but also contributing to the financial inclusion and economic development of the continent and beyond.

    How do you think this would affect the continent’s economy?

    There are a lot of positive takeaways on the African economy from the expansionist regime. By reaching unbanked and underserved populations, these institutions help bring more people into the formal financial system. This will increase access to credit, savings, and insurance, which can boost economic activity and reduce poverty. Stimulating and deepening economic activity while creating opportunities for job creation and entrepreneurship which will reduce unemployment and improve living standards is another win. As Nigerian banks and fintechs expand across Africa, they contribute to regional economic integration by facilitating cross-border transactions and trade. This can strengthen economic ties between African countries and promote regional cooperation.

    Do you think this resurgence of cross country expansion by these businesses aligns with the African Continental Free Trade Agreement (AfCFTA)?

    The expansion of Nigerian banks and fintechs is in solid alignment with the AfCFTA’s goals of boosting intra-African trade, investment, and economic integration. The AfCFTA aims to create a single, continent-wide market for goods and services, which would facilitate trade and investment across Africa. By expanding their operations, Nigerian banks and fintechs are contributing to this vision by enhancing trade and deploying services that can facilitate cross-border transactions, making it easier for businesses to trade within the continent.

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    Can you quantify the quantum of these businesses in terms of value of the investments?

    I can say that the quantum is huge in the billions of dollars but the impact has been equally transformative. Take a business like Moniepoint, it has had a seismic impact on the financial inclusion landscape with more work to be done.

    Can this all be about the value of ROI in those markets or it has something to do with African alliance by these businesses?

    It’s a combination of many factors. But yes, return on investment (ROI) in these markets is a significant driver. African markets, especially those with large unbanked populations, present substantial growth opportunities. Businesses have to return value for shareholders and other stakeholders.  With strategic alliances and collaborative partnerships, there are opportunities to  leverage each other’s strengths and resources in a manner that maximises cost. These alliances help them navigate regulatory environments, access new customer bases, and innovate more effectively.

    Your company is also playing in the global field especially within the fintech ecosystem. Can you share your success stories and investments trajectory across the continent of Africa in particular within the last 12 months or more?

    With our recent Series C fundraiser we are looking to accelerate our expansion across Africa. We want to share our integrated platform offering services such as digital payments, banking, foreign exchange, credit, and business management tools with a huge swathe of Africans and power their dreams. Today, we process over 800 million transactions monthly, with a total value exceeding $17 billion, our expansion is in tandem with our mission to drive financial inclusion and support Africa’s entrepreneurial potential.

  • NDIC allays fears, gives Nigerian banks clean bill of health

    NDIC allays fears, gives Nigerian banks clean bill of health

    The Nigeria Deposit Insurance Corporation (NDIC) has reassured Nigerians about the stability of the nation’s deposit money banks, urging them not to worry.

    The corporation emphasised that all active banks are safe and sound, encouraging Nigerians to continue their banking activities without fear.

    Reaffirming its commitment to the safety of depositors’ funds in all licensed banks, the NDIC stated, “Members of the public are enjoined to continue their banking activities without fear, as all other banks remain safe and sound.”

    The NDIC also addressed account holders of the defunct Heritage Bank whose deposits exceeded the insured amount of N5 million.

    It advised them to be patient, as the payment of their deposits beyond the insured amount would depend on the availability and realization of the bank’s assets, which would be distributed as liquidation dividends.

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    Furthermore, the organization highlighted that following the revocation of Heritage Bank’s banking license by the Central Bank of Nigeria (CBN) on June 3, 2024, the NDIC, as the appointed liquidator, commenced the payment of insured deposits just four days after the bank’s liquidation.

    These details were revealed in a statement on Sunday by the corporation’s director of communication and public affairs, Bashir Nuhu, who reiterated the organization’s responsibilities to banks and their depositors.

    As an example of its commitment, the Corporation highlighted the unprecedented payment of the insured N5 million maximum per depositor within a record time of just four days following the bank’s closure.

    The feat, according to the organization was achieved using Bank Verification Numbers (BVN) as a unique identifier to locate depositors’ alternate accounts in other banks.

    The statement clarified that any challenges or delays depositors might face in accessing their funds are likely due to necessary administrative procedures.

    It reads in part: “However, depositors with balances exceeding Five Million Naira have been paid the initial insured sum of five million naira, while the remaining balances (classified as uninsured deposits) will be paid as liquidation dividends upon realization of the defunct bank’s assets and recovery of debts owed to the defunct bank.

    “This unprecedented achievement of direct payment through BVN-linked alternate accounts without the need for depositors to visit NDIC offices or fill out forms marks a historic shift for the NDIC in the prompt reimbursement of depositors with payment of about 82.36% of the total insured deposit to date.

    “It is instructive to state that, the remaining 17.64% of the insured deposits yet to be paid were largely depositors whose accounts have post no debits (PND) instructions or have no BVN.

    “Others are those with no alternative accounts in other banks or accounts with KYC limit on the maximum lodgment per day and are yet to come forward for verification.

    “These categories of depositors are presently being contacted by the Corporation through telephone calls and text messages to come forward for verification.

    “As earlier mentioned in our press release, press conference, and advert in the print and electronic media, the verification can be done by visiting any of the Corporation’s offices or online at www.ndic.gov.ng/claims“.

    The corporation said notwithstanding, the significant progress recorded in the payment of the insured deposits, it is not unmindful of the uninsured deposits which constitute the larger portion of the total deposits of the defunct bank but working assiduously to resolve the issue

    “In this regard, the Corporation is already working assiduously to ensure that all depositors with amounts over the maximum insured amount of N5 million are timely paid through liquidation dividend from the realisation of the defunct bank’s assets.

    “The Corporation has already initiated the process of debt recovery and realisation of investments and physical assets of the defunct bank to ensure timely reimbursement of the uninsured depositors of the defunct bank.

    “Subsequently, after the full payment of both insured and uninsured portion of deposits, the Corporation will proceed with the payment of creditors in accordance with priority of claim as provided in the extant law.

    “We would like to reiterate that, all payments other than that of insured deposits, are subject to availability and realisation of assets of the bank in the form of liquidation dividend,” the statement added.

  • Banks attract highest foreign capital inflows

    Banks attract highest foreign capital inflows

    Nigerian banks accounted for about two-thirds of foreign capital inflows in a major shift of inflows into the financial services sector.

    In a report released at the weekend, Afrinvest West Africa Limited, foreign currency loans rose by 165.3 per cent year on year and contributed 94 per cent of inflows in other investments segment of the capital importation data, up 171.1 per cent year-on-year to $1.2 billion.

    On the distribution of the inflows by sectors, banking with for 61.2 per cent attracted the most, followed by trading, 14.7 per cent and production, 5.7 per cent.

    Analysts explained that it was the first time since first quarter of 2023 that banking would lead other sectors.

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    “We opine that the inflows into the banking sector partly reflects the impact of improved Open Market Operations (OMO) issuances. The rise in trading contribution to $494.5 million, surpassing previous high of $311.2 million in fourth quarter of 2021) could be attributed to attraction of Nigeria’s exports due to weaker naira,” Afrinvest stated.

    The report noted that this was further validated by upbeat in first quarter 2024 Foreign Trade Statistics in which trade surplus rose to N6.5 trillion surpassing 2023 year high of N5.1 trillion.

    In terms of distribution, capital inflows were limited to three states – Lagos, $2.8 billion; Abuja, $593.6 million and Ekiti, $1,275 million. This underscores the amount of reforms subnational governments need to implement (in support of efforts by the Fed  Govt) to make their state investment friendly if they ever intend to be fiscally independent.

    Meanwhile, the report noted that the scarcity of foreign exchange is pushing many companies especially manufacturers into taking forex loans to enable them pay for raw materials and other importations that support their operations.

    The analysts at Afrinvest said this reality does not bode well for the nation’s economy as it implies the lack of confidence by foreign investors to directly invest their assets in Nigeria.

     “Besides, given the current pricey state of capital in the global market especially for emerging economies with weak credit ratings like Nigeria (Fitch Ratings: B-), we imagine that the FCY loans (which were mainly to private businesses) were secured at elevated rates. Hence, while capital importation is well on course to hitting a five-year high (current run rate should deliver $13.5 billion), it then becomes a bittersweet moment as Nigeria can’t afford to keep relying on expensive loans to boost foreign investment inflows. Besides, the challenging business environment in Nigeria has heightened the risk of loan default for businesses tapping into foreign currency markets to drive operations,” they said.

    In his address to shareholders during the company’s Annual General Meeting held in Lagos, Chairman of Board of Directors, Nestlé Nigeria Plc, Gbenga Oyebode, said the high interest rate environment, rising inflation and devaluation of the naira present difficult circumstances for Nigerian businesses.

    He said the company sometimes took forex loans to enable it access the needed dollar to import raw materials.

    He expressed optimism that the forex availability will improve and to enable the company perform better in the new financial year.

     “In the troubled socio-economic climate of today, we at Nestle Nigeria are unwavering in our commitment to creating shared value for all stakeholders,” he said.

    Also, Managing Director and CEO of Nestlé Nigeria Plc, Wassim Elhusseini, said

    “The devaluation of the Nigerian Naira in 2023 which led to a revaluation of our foreign currency obligations undoubtedly impacted our financing cost and consequently the profit after tax. However, we remain optimistic of our capacity to overcome the current economic difficulties and emerge stronger.”

    “Looking ahead, we remain dedicated to our purpose of unlocking the power of food through responsible local sourcing and confection of the high-quality nutritious food and beverages that families across Nigeria prefer. We also remain steadfast in optimizing our operations to ensure the availability and accessibility of affordable and nutritious products to our consumers in anticipation of a timely turnaround in the business environment,” he said.

    Aside , Nestle, other manufacturers and importers are finding it increasingly difficult to secure the necessary funds from the official FX market and black market.

    Legitimate needs driving the demand include Form A applications for Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees, and medical fees.

    Small and Medium Enterprises (SMEs) are also grappling with the scarcity, as highlighted by the use of Form Q.

    “The problem is that dollars are scarce in the market. People are not bringing dollars out and demand is so high,” one street forex trader disclosed.

  • Nigerian banks safe, resilient, says CIBN

    Nigerian banks safe, resilient, says CIBN

    Nigerian banks are safe and sound and there’s no threat to the operations of the generality of banks.

    The Chartered Institute of Bankers of Nigeria (CIBN) yesterday decried malicious information aimed at linking the recent revocation of the licence of Heritage Bank to the general state of the banking sector.

    The CIBN stated that using a single regulatory action to impugn the safety of the banking sector was misleading.

    President, Chartered Institute of Bankers of Nigeria (CIBN), Prof. Pius Olanrewaju, said the Nigerian banking system remains very safe, sound and resilient.

    According to him, the mendacious information making rounds in the public domain that the banking licenses of more banks would be revoked after the regulatory action taken by the Central Bank of Nigeria (CBN) against Heritage Bank on June 3, 2024 is false and misleading.

    “We would like to allay the fears of bank customers and the generality of the public that the assertion is false and misleading. The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have debunked the claim.

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    “The ongoing recapitalisation process announced by the CBN is also aimed at further strengthening the resilience of the Nigerian banks and their capacity to support the envisaged growth of the Nigerian economy.” Olanrewaju said.

    He urged the public to continue to conduct their banking services without hesitation or apprehension.

    He noted that the CIBN, as the umbrella professional body for banks and bankers in Nigeria, working with other stakeholders in the ecosystem is committed to promoting best practices and ensuring that the banking sector remains safe and sound.

    The CBN had reviewed the minimum capital requirement for commercial, merchant and non-interest banks. The apex bank increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.

    Others included merchant banks, N50 billion; non-interest banks with national license, N20 billion and non-interest banks with regional license will now have N10 billion minimum capital. The 24-month timeline for compliance ends on March 31, 2026.

    Most experts agreed that the injection of new capital into banks would support national economic growth.

    The experts included Managing Director, Arthur Steven Asset Management, Mr Olatunde Amolegbe; Managing Director, AIICO Capital, Mr Femi Ademola;  Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf; President, Association of Capital Market Academics in Nigeria, Prof. Uche Uwaleke and Managing Director, HighCap Securities, Mr. David Adonri.

    Experts agreed that considering the increase changing dynamics in the banking sector and the overall economy since the last recapitalisation, it has become necessary to strengthen the banks’ financial positions. However, they differed on the definition of new minimum capital by the apex bank, which excludes reserves and narrows the relevant capital to share capital and share premium.

    They also agreed that the extended timeline till 2026 provides ample opportunity for banks to meet the capital requirements without resorting to forced options.   

    Amolegbe said the peculiar definition of minimum capital by the CBN implies that the banks will need to raise fresh funds, because if retained earnings of some of the banks had been allowed, they may not even need to come to the market at all in order to meet the new requirements.

    “We now have a situation where virtually all the banks have about 50 per cent of requirements and they will all on aggregate need a cumulative of more than N2 trillion of fresh capital to remain in business. We expect significant capital market activities in the next 24 months,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS) said.

    Ademola, a chartered financial analyst, said the changes in the economy, banking sector and particularly foreign exchange (forex) dynamics underlined the imperatives for the recapitalisation.

    He however noted that while the announcement of recapitalisation in itself is not unexpected, the exclusion of additional tier-1 capital, such as preference shares and convertible debt and the banks’ other reserves, especially retained earnings, is unexpected and creating a serious fuss in the market.

    “Since the retained earnings are distributable earnings that belong to the shareholders, it is expected that it should count as part of capital available to run the business. It is even more confusing when the CBN recently said that the huge incomes recorded by banks due to exchange rate devaluation on 2023 should not be distributed as dividends due to possible reversal of fortunes when the naira strengthens. So, the shareholders are not able to get the incomes as dividends and won’t also be able to recapitalise as share capital. This appears ludicrous since the shareholders would have been asked to provide additional fund to recapitalise the bank should this have been a loss to the bank.

    “One other issue that needs to be clarified is in a situation where a bank meets the share capital and premium required but has negative other reserves thereby making its shareholders fund to be lower than the minimum requirement but in line with the capital adequacy ratio (CAR) requirement. How would this be dealt with? I did not see this in the explanatory notes on the circular,” Ademola said.

    He noted that it was clear that the CBN wants the banks to be freshly capitalized, urging the apex bank to make the recapitalisation exercise a very smooth one without creating any negative investors confidence for the banks.

    “I will suggest that the apex bank conducts a stress test for the banks and estimate what should be provided for from both existing liabilities and contingent liabilities. What is left in the retained reserves of the banks should be capitalised by increasing the share capital and share premium to the required minimum capital. This would be done through the issue of bonuses so as to move the fund from distributable reserves to non-distributable reserves; thus preventing any cash payout from the banks’ capital,” Ademola said.

    Yusuf said there was the need for regulatory authority to ensure that the soundness and stability of the banking sector is preserved and improved upon, especially because of the recent macroeconomic headwinds.

    He pointed out that the last major review of minimum capital requirement was done in 2005 with the minimum statutory capital requirements for banks then pegged at N50 billion for international banks; national banks, N25 billion and regional banks, N10 billion.

    “The real issue is that inflation had weakened the value of money overtime which makes recapitalisation imperative and inevitable.  The essence is to ensure the safety of depositors’ fund, strengthen the stability of the financial system, deepen resilience of the banking system and reposition the bank to support growth. The reality is that the capitalisation requirement has not increased materially in real terms, that is, when adjusted for inflation,” Yusuf said.

    Uwaleke said the recapitalisation was “a welcome development that will help strengthen the country’s financial system and a potential boost to the stock market”.

    He said the calibration of the new minimum capital base on the basis of scope of authorization is better, urging the apex bank to applying a differentiated cash reserve requirement (CRR) according to the category of license instead of a uniform rate of 45 per cent for commercial banks.

    “In view of the young age of non-interest banks in Nigeria, they should be allowed a longer period, say, three years to meet the minimum capital requirements,” Uwaleke said.

    Adonri said the apex bank has justification for the new minimum capital base given the erosion of the value of naira, which may expose Nigerian banks to risks through their foreign operations.

    He however cautioned that extending the policy to local banks with adequate capital may precipitate the kind of over capitalisation that caused unsustainable credit boom that nearly collapsed the economy between 2005 and 2008.

    “A blanket policy like this fails to consider the differentiated risks borne by each bank thus making a risk based supervision a superior approach. It is important to note that it is erroneous to tie the capital base of a bank to its ability to service a large economy because banks have access to deposit liabilities which they form into working capital finance. It is worrisome that this policy has come at a time when banks are in the surplus end of the economy from where capital ought to flow to production which occupies the deficit end,” Adonri said.

    Yusuf said the proposed recapitalisation of banks should be done in a manner that would minimise shocks and disruptions to the banking system and the economy at large.

    He urged the CBN to ensure that all players in the banking sector do not engage in predatory and other anti-competitive practices in the industry on account of the recapitalisation policy.

    “With the current approach and timeline given by the CBN, the risk of banks collapse or hasty mergers and acquisitions should be minimised. It is also laudable that the current categorisation of banks with differential capital requirements has been maintained – international, national and regional.  This is necessary to allow for inclusion and reduce the risk of dominance of the banking space by a few big banks,” Yusuf said.

  • Banks on recapitalisation march again

    Banks on recapitalisation march again

    In a strategic move to fortify the financial sector, the Governor of the Central Bank of Nigeria (CBN), Yemi  Cardoso has articulated a compelling vision: Nigerian banks must recapitalise to align with the demands of a burgeoning economy. This directive signifies a proactive step towards bolstering the banking sector’s resilience, ensuring it becomes a steadfast pillar in supporting the nation’s economic expansion. The call for recapitalisation underscores the imperative of adapting to the evolving economic landscape. As Nigeria inches towards the milestone of a $1 trillion economy, the CBN believes that the financial sector must be fortified to withstand potential shocks and contribute robustly to the nation’s economic growth. Therefore, recapitalisation serves as a strategic tool to enhance the capacity of banks to navigate uncertainties and actively participate in the economic trajectory.

     The CBN, with a firm belief that the current capital base of Nigerian banks is not sufficient to support the desirable level of economic growth, has emphasised that the goal of recapitalisation is not just to ensure the stability of the financial system in the present moment, but also to prepare banks for the future. The CBN believes that a stronger banking sector will be better able to support the growth of the Nigerian economy and create jobs for Nigerians. “it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is not just about the financial system’s stability in the present moment, as we have already established that the current assessment shows stability. However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1.0 trillion economy in the near future? In my opinion, the answer is “No!” unless we take action. Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital,” Cardoso said.

     A well-capitalised banking sector is inherently more resilient. By increasing their capital base, banks fortify themselves against unforeseen challenges, providing a buffer that insulates them from economic volatility. This resilience is pivotal not only for the stability of individual financial institutions but also for safeguarding the broader economic ecosystem. As the backbone of any economy, banks play a pivotal role in facilitating growth. A recapitalised banking sector translates into increased lending capacity, allowing financial institutions to inject more capital into key sectors. This, in turn, fosters entrepreneurship, drives investments, and catalyzes economic expansion—a symbiotic relationship between a robust banking sector and a flourishing economy. In an era of interconnected economies, aligning with global financial standards is imperative. The call for recapitalisation positions Nigerian banks on par with international counterparts, enhancing their competitiveness on the global stage. This alignment not only attracts foreign investments but also reinforces the nation’s economic credibility in the international arena.

     The recurrence of a banking system recapitalisation in Nigeria echoes the events of 2005, where the primary aim was to fortify the banking sector and stimulate economic growth. The results of the exercise were a mixed bag, showcasing both positive outcomes and drawbacks. One notable success was the substantial increase in the capital base of Nigerian banks, rendering them more resilient to financial shocks. This fortified position translated into a decline in loan defaults, fostering an overall healthier banking sector. The augmented capital adequacy and reduced loan defaults, in turn, reinstated investor confidence in the Nigerian banking system for a considerable period. With an expanded capital base, banks ventured into increased lending activities, acting as a catalyst for economic growth and job creation. The triumph of the recapitalisation resonated globally, enhancing the international reputation of the Nigerian banking sector.

     However, the recapitalisation also brought about merger-induced disruptions, triggering a wave of mergers and acquisitions that temporarily disrupted the banking sector. The differential impact on banks underscored the need for a more comprehensive approach, addressing not only capital adequacy but also corporate governance and risk management practices. Subsequent to the recapitalisation, the Central Bank of Nigeria (CBN) took steps to fortify corporate governance structures across the entire banking system. Despite these efforts, the Nigerian banking sector grappled with persistent challenges, including non-performing loans and regulatory issues.

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     Reflecting on the 2005 banking system recapitalisation reveals its significance in fortifying the financial sector and fostering economic growth in Nigeria. While challenges and limitations were evident, the exercise achieved its primary objective of bolstering bank capital, leading to enhanced financial stability and increased investor confidence. This recapitalisation laid a sturdy foundation for a more robust banking system, contributing significantly to Nigeria’s economic progress in the ensuing years. As discussions arise about the potential need for another recapitalisation, avenues to raise new capital become paramount. Banks can explore options such as rights issues, private placements, and retaining earnings. However, economic uncertainties stemming from factors like the COVID-19 pandemic, geopolitical events, domestic insecurity, and regulatory changes pose challenges. Economic downturns increase loan defaults, inflation erodes asset values, and stricter regulations elevate costs for banks. The Nigerian political environment’s volatility, coupled with uncertainties in technology and cybersecurity landscapes, adds complexity to the recapitalisation landscape. Navigating these challenges necessitates a strategic approach, considering the economic recovery, regulatory dynamics, and technological advancements. As banks contemplate avenues to raise capital, the broader economic and political context remains pivotal in determining the success and resilience of the Nigerian banking sector.

     Speaking to the issue of technology specifically and the disruptions new entrants into the banking space will make, Cardoso stated that “technology will continue to play a critical role in delivering financial services and enhancing financial inclusion. However, recent developments in the payment services landscape have raised concerns regarding the use of technology and the existing licensing and regulatory framework. We have observed that some licensees are operating outside the approved activities, breaching the boundaries set for them. Any intentional or unintended non-compliance will be subject to sanctions, as operators have the responsibility to ensure that they are licensed for the activities they undertake,” he said.

    The banking sector in Nigeria faces multifaceted challenges, with competition from various financial entities like fintechs, microfinance institutions, and mobile money operators pressuring traditional banks to reconsider their fees and enhance customer service. As the largest economy in Africa, Nigeria’s continuous growth is anticipated to amplify demand for banking services, providing banks with increased profits for potential recapitalisation. Amid these challenges, the Nigerian government’s supportive stance toward the banking sector is a positive signal, suggesting ongoing assistance for banks engaging in recapitalisation efforts.

     To successfully navigate the recapitalisation landscape, Nigerian banks are leveraging technology to enhance efficiency, expand their customer base, and ultimately boost profits while minimising costs. While the overarching goal of recapitalisation is to fortify banks against shocks and support economic expansion, several hurdles must be surmounted for a seamless process. One significant advantage of recapitalization lies in the realm of enhanced financial stability. A fortified capital base empowers banks to weather financial shocks, reducing the risk of failures and systemic instability. This, in turn, facilitates increased lending to businesses and consumers, fostering economic activity and growth. Investor confidence is a natural byproduct of a well-capitalised banking sector, attracting additional capital and spurring economic development. Recapitalisation can also drive consolidation within the banking sector, with smaller banks merging with larger, more robust institutions.

     The ripple effects of recapitalisation extend to supporting economic growth by providing ample credit to businesses and consumers, fueling investment, innovation, and job creation. Expanding banking reach into underserved areas promotes financial inclusion and equal access to financial services. A well-capitalised banking sector translates to lower borrowing costs for businesses and consumers, further stimulating investment and economic activity. Importantly, a stronger financial system bolsters the economy’s resilience to external shocks, enhancing the country’s attractiveness for foreign investment and fostering global competitiveness.

     While recapitalisation is a pivotal step toward fortifying the financial system, its success in birthing new and larger banks hinges on various factors, including the economic environment, regulatory landscape, and competitive dynamics. Policymakers, by reinforcing banks’ capital bases, not only mitigate risks but also foster a resilient and inclusive financial ecosystem. Ultimately, recapitalization is a strategic maneuver to navigate the complexities of the financial landscape, ensuring the sector remains robust, adaptable, and conducive to sustainable economic growth.

     These potential outcomes of the recapitalisation exercise paint a diverse landscape for the banking sector. The scenario unfolds where smaller, less well-capitalised banks grapple with meeting the heightened capital requirements; their recourse might be merging with larger, more robust banks. This could pave the way for a banking sector consolidation, characterised by fewer but more formidable banks wielding greater market influence. Conversely, if the recapitalisation process opens avenues for new entrants, the industry may witness the emergence of fresh players, injecting heightened competition and innovation into the banking landscape. However, it’s plausible that the recapitalisation may leave the size and structure of the banking sector largely unaltered, with existing banks simply bolstering their capital bases to align with the new mandates.

     The economic backdrop plays a pivotal role in determining the success of new entrants. A robust economy provides a conducive environment for new banks, while a weaker economic setting may pose challenges to their viability. Regulatory policies further shape the landscape; supportive regulations foster an environment conducive to new bank formations, while stringent regulations can impede the entry of new players. The existing level of competition within the banking sector also stands as a determinant. In an already saturated market, new entrants may find it challenging to compete effectively. The recapitalisation of Nigerian banks stands as a transformative event with far-reaching implications for the banking sector and the broader economy. Whether Nigeria eventually witnesses the emergence of new, larger banks hinges on a nuanced interplay of economic conditions, regulatory frameworks, and the competitive dynamics at play.

    Challenges and opportunities

    While the mandate for recapitalisation presents challenges, it also unveils opportunities for innovation and strategic restructuring within the banking sector. Banks will need to explore diverse avenues, from optimising operational efficiency to embracing technological advancements, to meet the new capital requirements. This transformative journey could usher in a new era of agility and competitiveness. The success of the recapitalisation initiative hinges on collaboration between regulatory bodies, financial institutions, and stakeholders. A transparent and consultative process will be essential to navigate the complexities of this transformation. Engaging all stakeholders ensures a collective commitment to the vision of a resilient and dynamic banking sector. CBN’s call for recapitalisation marks a decisive chapter in Nigeria’s financial narrative; it is a visionary stride towards ensuring that the financial sector becomes a driving force in shaping a $1 trillion economy. As banks embark on this transformative journey, the landscape of Nigerian finance stands poised for innovation, resilience, and sustained economic growth. The recalibration of the banking sector is not just a regulatory measure; it is a strategic investment in the nation’s economic future, if well managed.

  • Fraud volume in Nigerian banks climbs to N25bn in 5-years

    Pro-tem President, Chartered Institute of Forensic and Investigative Auditors of Nigeria (CIFIAN), Dr Victoria Enape, has said that fraud volume in Nigerian banks increased dramatically to about N25 billion in the past five years.

    Enape said this in Abuja on Friday at the opening of intensive training for forensic and investigative auditors with the theme “The Use of Forensic and Investigative Auditing for Prevention of Fraud, Corruption and Cyber-crimes in Nigeria”.

    She noted that the training had become necessary going by the global acknowledgment of corruption in most government and financial institution and its (corruption) rejection by the United Nation (UN), World Bank and International Monetary Fund (IMF).

    “Government at all levels are losing billions of Naira every day and most of these criminal cases bordering on fraud, corruption and cyber-crimes are partly because there are no forensic and investigative auditors in Nigeria to prevent fraud from taking place.

    “The place of training of forensic and investigative auditors cannot be overemphasised because the whole world has embraced this current trend years ago which has assisted them in the fight against fraud.

    “Chartered Institute of Forensic and Investigative Auditors is an anti-fraud organisation, saddled with the responsibility of providing skills to relevant professionals on the use of science and technology to prevent, detect and investigate fraud of all kinds.

    “The Institute also has mechanism to block illicit financial flows in the country; it, therefore, becomes indispensable in Nigeria if Nigerians and the future generation must experience peace and economic development,” Enape said.

    According to her, scandalous collapses, financial loses, loss of employment, investment and investors, loss of earnings and means of livelihood are some of the consequential social dislocations and risks of corruption and fraud.

    She explained that fraud and corruption weakened the institutional capacity of governments and organisations as well as impedes trade and investment.

    The CIFIAN boss, therefore, reiterated the urgent need for the passage of the Institute’s Bill by the House of Representatives to give concurrency after Senate passed the Bill on July 5, 2018.

    The Registrar of the Institute, Mr Valentine Ugwu, said the Bill, when passed would also assist government during elections.

    “Forensic auditing can also be used to tackle and prevent electoral fraud. And President Buhari is the only Nigerian leader that has openly tackled corrupt persons since the existence of the country.

    “We intend to help President Buhari in the fight against corruption by validating and enhancing members’ standing as forensic and investigative auditors with a credible, comprehensive and internationally recognised certification,” Ugwu said. (NAN)

  • ‘Poor compliance bane of Nigerian banks’

    The lack of adherence to compliance, especially standard requirements, external regulatory statutes in the operations of most financial institutions in the country is responsible for the incessant fraud in the system.
    Making this submission at the weekend was a cross-section of experts.
    The event was at a workshop organised for compliance officers of deposit money banks, held in Lagos.
    Speaking at the occasion, a board member/trustee of the Compliance Institute of Nigeria (CIN) Mr. Wumi Adeniyi said both the government and captains of industries with the Central Bank of Nigeria (CBN), especially as the apex bank that regulates Banking and the Financial Intelligence Unit (BFIU), coordinate data and financial analytics, to work with the institute to help in the prevention, detection and control of money laundering, as well as combating terrorism.”
    The event also coincided with examination exercise for the compliance officers of banks and other financial institutions.
    The President/Chairman, CIN, Pattison Boleigha, said about 130 persons wrote the examination.
    He said, “It is a continuation of the programme we started about a week ago, where we had trainings in various aspects of compliance and today, we are capping it up with certification examinations for the award of Designate Compliance Officers. We are also using this opportunity to grandfather existing compliance professionals.”
    Boleigha said the minimum educational qualification for those writing the exam was a graduate degree of either HND or BSc.
    He stated that it was considering those who had worked in the compliance field but don’t have either HND or BSc basic qualifications, as they could still be grandfathered.
    The president, however, noted that at the end of the current process, anyone who did not take advantage of the process will have to write the examination of the institute in future.
    “Though this batch is those available to take the examination, we have 20 persons who we will grandfather today out of about 60 persons who applied to do the grandfathering,” he said.
    Director of Membership, Mrs. Oluyemisi Olukoya, said the CIN was set up by the Committee of Chief Compliance Officers of Banks in Nigeria, basically to set the right tone for compliance in the country.
    “Compliance should be part of an organisation which is what we are trying to entrench, to guide them in the daily work in the offices, to ensure they are doing the proper things in their organisations,” Olukoya said.
    Also speaking at the event, Pattison Boleigha said, “Our goal is not just to ensure that banks stay out of trouble, but to ensure improvement in service delivery and create competitive environment for sanity, thereby presenting the organisations as credible and responsible corporate citizen to the world.
    “For the first time in Nigeria, we have trained and engaged a set of people that will operate differently from the way banks used to do things, particularly when it comes to complying with rules and regulations and our internal policies.”
    Other facilitators at the event included Mr. Obafemi Oyenuga, a board member/trustee of the institute; Mrs. Oluyemisi Olukoya, Principal Partner, Oluyemisi Olukoya and Co. and Head, Regional and Subsidiary Compliance, Diamond Bank, Mrs. Isioma Gogo-Anazodo.

  • Nigerian banks’ credit report poorest worldwide

    Nigerian banks’ credit report poorest worldwide

    The entire 22 deposit money banks in the country process a paltry 1, 500 credit report on a daily basis, The Nation has learnt.

    Making this disclosure recently was Mr. Miguel Llenas, who sits atop Dun and Bradstreet Credit Bureau Limited, a world acclaimed credit reporting agency with headquarters at the Dominican Republic.

    Mr. Llenas, who was the lead speaker at a public forum organised by CRC Credit Bureau Limited in Lagos, noted that most banks in the country today were technically in distress because they chose to jettison core banking regulations.

    Specifically, he said most businesses in the country were experiencing stagnant growth because they lacked access to finance from banks, who favour conglomerates and corporates with better loan facilities at the detriment of hundreds of businesses that can actually drive the economy.

    “South Africa records over 60, 000 credit report on a daily basis alone. Argentina does about 160, 000. Sri Lanka does over 25, 000, Egypt processes over 50, 000, Dominican Republic does 40, 000. But sadly, Nigeria with a population of over 170million people process a ridiculous 1, 500 credit report. This may account for the slow economic growth witnessed across the sectors,” he said.

    “Most Nigerian banks are not involved in serious lending, especially to the retail market,” he said.

    Raising some posers, Llenas, who boost of over three decades experience as a credit expert said: “Do banks really need a credit bureau? How do you extend credit to customers if you don’t use credit report?”

    Most of the banks in the country today, he insisted, “Have swift from lending to survival mode. Most of the banks are risk averse. This is partly why the economy is not moving forward.”

    According to him, Nigeria with 22 banks only process just about 1, 500 credit reports, which are prerequisite to loan requests.

    Most deposit money banks in the country today are still smarting from the losses incurred over the years as a result of toxic debts.

    Llenas who leads the over 170 year old credit bureau firm, said Nigeria’s credit reporting was very poor for a size of the country when compared to countries within Africa and globally.

    Speaking further, Llenas, who has traverse over 40 countries as part of his commitment to help grow the capacity of credit bureaus, stressed that Nigerian banks have the potential to drive the economy by lending to the critical sectors, especially the retail market rather than the high end market in order to enable them better manage risks when they occur.

    “With credit monitoring, and a credit score, banks and lenders alike can easily predict the future. The use of credit report has to be a powerful tool if well harnessed,” he maintained.

    Speaking earlier, Tunde Popoola, Managing Director/CEO, CRC Credit Bureau Limited, observed that most of the banks were exposed to a lot of risks, especially oil and gas, whose revenue projections have been badly affected by the economic crunch.

    According to him, the challenges confronting most of the banks is how to reduce their risk portfolio given the bad debts they incurred these past years, especially at a time they are have more risk assets.

    Thankfully, he said, the CRC Credit Bureau has been able to develop fool-proof measures that can help the banks contain the incidence of bad debts.

    At the risk of sounding immodest, Popoola said what banks need to do to reduce the incidence of bad debts is to be more circumspect in the way they spread risks.

    “Most of the toxic debts within the banking sector happened because they were done without proper due diligence analysis as it were. But that can be taken care of with our products and services like I-CON Plus, which can help to build a good credit industry.”

    Echoing similar sentiment, Mrs. Peggy Chukwuma-Nwosu, Haed of Sales and Marketing at CRC Credit Bureau Limited, who gave a presentation on CRC Credit Monitors: Useful Tools to better manage Customer Loans, disclosed that the different products developed by her organisation rsets on the wing of technology.

    Specifically, she said, the CRC Prospector, which is one of her company’s offerings, “Provides alternative contact information of customers you can no longer reach.”