The Nation Newspaper

Tag: profitability

  • ‘Price changes affecting profitability’

    A significant drop and  rise in commodity prices  is causing a fall in profitability in the farming sector, the  Director,AfricaRegion,Cassava Adding  Value  for Africa (CAVA), Prof Kola Adebayo, has  said.

    He  told The Nation that  the  susceptibility of the agricultural industry to increased volatility is affecting profitability of farmers.

    In  the year,  he said the industry  had seen farm-gate prices across all commodities falling and rising attributed to overabundance of certain crops causing glut and surplus in the market.

    Following bumper harvests, he  said lower prices for  the commodities were expected,adding  that  it will substantially reduce the profitability of crop producers.

    Such market volatility, he noted, underscores the need for crop producers to address strategies to minimise price risk at various times.

    Adebayo  stressed the need for  key crop prices to be moderated. He  said  this was  necessary in the face  of  rising  costs of  input prices and it resulting in tighter profit margins for producers.

    He explained that when farmers chose to plant at the same time and   harvest at the same time, they produce more enough for a certain time and cause scarcity in later  months  when  the harvest is exhausted.

    To address this, he  said  his project is encouraging farmers to stagger planting  to enable  them  record  all- year round  harvests  to cope  with demand.

    According to him, producers are in business to produceand sell them at a profit. He explained  that  many variables, including production costs, growing conditions and the uncertainty of future pricesaffect profitability.

    He  saidfarming’s contribution to the wider economy has increased cent. With the right conditions, he saidfarmers can continue this impressive long-term performance.

    He  wants the next government to create the right environment to encourage investment, growth and innovation, therefore securing the future of the country’s food and farming industry.

  • How to grow SMEs to profitability, by CWG chief

    Founder and Chief Executive Officer, Computer Warehouse Group Plc, Mr. Austin Okere has identified three elements that would assure the success of Small and Medium Enterprises (SMEs) owners in the country.

    Encapsulated in what he termed the “Three Power of Success”, he urged SMEs to ensure that their business visions are driven by the success factors.

    The three power of success include the Way Power, the Will Power and the Wait Power.

    He said: “The three powers are secrets that will keep every entrepreneur going. The Will Power is the competence you possess to run your business. The knowledge of how to run the enterprise you want to venture into.

    “Many people will start a business, create solutions then go about looking for the problems. And when people don’t buy it, they become disappointed. You first ought to be finding out peoples’ problems and pain points then create solutions that ameliorate the pain. This is the best way to ensure patronage.

    “The will power is the resolve to keep going when everyone say give up. Sometimes people close to you will advise you to dump your venture and seek a proper job. But, what should keep you going at such times is your passion. It is the passion of a footballer that makes him complain when he is benched, despite the fact that he will still receive his pay at the end of the day. Your will power makes you go the extra mile, while your passion makes you persist in your venture while waiting for pay day.

    “Most businesses fail because the proprietors abandon them as soon as they face challenges, because it is not yielding as much as they want. After you have put so much effort into your business, you need to patiently wait for the benefits that will accrue from it. This is the essence of the third power; the wait power, which takes you eventually to light at the end of a dark tunnel.”

    On how SMEs can leverage on technology to maximise costs and maximize result, Okere encouraged merchants to explore the opportunities that the CWG 2.0 platform offers. He spoke on Leveraging Technology for SME Growth during the maiden edition of the Annual Fidelity SMEs conference in Lagos.

    He said: “SMERP and Openshopen platforms are designed to meet the peculiar needs of SMEs in Nigeria. Openshopen will give you the visibility your business requires to thrive in this age where businesses are going online, while SMERP will take care of your accounting and generate the records banks such as Fidelity Bank will require from you to access loans. Beyond that, they are reliable and affordable, and are available on a subscription basis.”

    He said the essence of developing the CWG2.0 platform is to democratise the technology that companies such as Jumia and Konga have while used exclusively to great advantage, and make them available to the over 17.7m MSMEs in Nigeria.

    “Seeing the value that this platform shall bring to the SME’s in the country, SMEDAN has signed an MoU with CWG Plc culminating in a partnership that will address the technology needs of the sector,” Austin concluded.

  • Shareholders’ group lauds insurance firm’s profitability

    Shareholders’ group lauds insurance firm’s profitability

    Shareholders under the aegis of Constance Shareholders’ Association of Nigeria, one of the frontline shareholders’ groups has passed a vote of confidence on Lasaco Assurance Plc, stressing that the latter has lived up to its pedigree.

    Shehu Mallam Mikail, National President, who gave this commendation on behalf of his group at the weekend shortly after its annual general meeting in Ilorin, Kwara state capital, said the insurance firm has proved through its impressive business fundamentals that it is one of the companies to beat in the sector.

    “This is one of the most transparent insurance firm its in Nigeria in giving accurate information to shareholders/stakeholders who believes in adherence to good corporate governance also taking bold steps to make sure that Nigerians show interest in having taking insurance policies and to believe in insurance companies and the company was able to make a profit after taxation of 271,405 in 2013 compare to 2012 which was 92,903 This is an encouraging development in an insurance industry.”

    Expatiating, Mikail said: “We would like to implore NAICOM to give adequate support to all insurance firms that abide to a good corporate governance so that Nigerians would be able to have confidence in Nigeria Insurance firms in order for people to be able to take one insurance policy or the others as we investors would be able to have confidence in investing in Nigeria insurance companies.”

    NAICOM, he further stressed, ” should build a better relationship with the insurance firms by giving prompt response to any required information by the companies and not wait until they are  penalised which does not necessarily required in other to build a room for the insurance industry in the country so that our economy would be able to have a sound understanding because most of Western World Insurance companies are the backbone of their economy which give adequate confidence to an investor to invest in their economy.”

  • Driving growth, profitability via money transfer

    Driving growth, profitability via money transfer

    Access Bank Plc is leveraging on the Central Bank of Nigeria (CBN) money transfer policy which raised money transfer limit to $5,000 from $2,000 to deepen its growth and profitability. The lender, which recently launched outbound money transfer services in partnership with MoneyGram, said the feat is boosting  money transfer market and adding value to its stakeholders, COLLINS NWEZE writes.

    With over $21 billion Diaspora remittances recorded in 2013, banks with eye in the future have to take money transfer services seriously. That explains why Access Bank, in partnership with MoneyGram, has launched outbound money transfer service.

    The bank’s Head, Personal Banking, Victor Etuokwu said the partnership has boosted the money transfer market.

    He said the outbound money transfer  service, marketed as “Naija Sends” allows Nigerians to send their naira abroad through any Access Bank branch, and the funds are received in the currency of the receiving country.

    He said: “What we promise our customers is speed, service and security. This means that we would offer them this service in a manner that is expeditious, quick, with minimal, but legal documentation; the service would be prompt and done in an environment that is secured. In other words, there would be no errors and there would not be fraud.

    “There were some discussions around the transfer limit. If you put the limit so low, you will cut off some micro entrepreneurs. So, it is a welcome development that the regulator is sensitive to some ideas that would grow the economy.”

    Head, Franchise Group, Access Bank Plc, Ola Isola encouraged Nigerians to see this as a platform to relate with their loved ones and business partners across the world.

    “So, be it payment for a child in school, medical payment, business purchases across the world, this is a safe and secured platform. This is a platform that the people within the bottom of the pyramid are conversant with. The charges are competitive when you compare them with the alternative platforms. But we have to always note the service because service that is not paid for is not sustainable.”

    MoneyGram Regional Manager for Anglophone West Africa, Mrs. Kemi Okusanya, said the launch of “Naija Sends” has further deepened the brands reach and service in Nigeria.

    In her remarks she noted “Over the last two decades MoneyGram has facilitated over 15 million transactions in Nigeria, enabling safe, convenient and reliable transfer of funds from the Nigerians in Diaspora to their loved ones. As Africa’s largest economy, with over 10 million migrants, we are glad we are able to offer this service in Nigeria today.”

     

    The CBN policy

    The new money transfer policy permits individuals who want to send money outside the country through the International Money Transfer Services, can now send up to $5,000 per transaction, 150 per cent above the initial allowed limit.

    The limit for transfers was reviewed upward from the initial $2,000 data from the CBN website showed. Although the CBN did not give any reason for the upward review, it specified that the new limit of $5,000 applies only to individuals, excluding corporate bodies.

    The circular which was signed by the CBN director, Trade and Exchange, Olakanmi Gbadamosi, reads, “authorised dealers and members of the public are hereby notified that the threshold of $2,000 per transaction has been reviewed upward.

    “Accordingly, the allowable limit for the outbound international money transfer of $2,000 per transaction has been increased to $5,000 of its equivalent per transaction. However, it is important to note that this service is only applicable to person-to-person transfer. For the avoidance of doubt, corporate entities are not allowed to use this product,” it said.

    Access bank has continued to take major steps that add value to its stakeholders, and these steps are already paying off.

     

    Third quarter performance

    Access Bank Plc has announced an profit of N44.2 billion for the nine months ended 30 September 2014 based on mproved efficiency, rising market share and strong risk management practices.

    The bank’s profit before tax (PBT) showed an increase of 20 percent from N35.1billion recorded during the same period in 2013.

    Access Bank Group unaudited IFRS nine results released to the Nigerian Stock Exchange (NSE) yesterday also showed gross earnings of N182bn, up 17per cent from N154bn in the corresponding period of 2013. The growth in gross earnings was driven by an increase in interest income from loans.

    The lender posted 21 per cent growth in operating income to N126bn from N104bn in 2013. Customer deposits increase by 11per cent to N1.5 trillion from N1.3 trillion in FY 2013. The bank’s asset quality ratios also improved as Non Performing Loan (NPL) ratio was down 20bps to 2.5per cent, from 2.7per cent in December 2013.

    Further analysis of the result indicated that Access bank continued to improve on its operating efficiency and steady income growth resulting in cost to income ratio of 61per cent in  third quarter 2014 compared to 75per cent in 2013. Total assets grew by 14per cent to N2.1 trillion from N1.8trillion in full year 2013. Loans and advances of N1.1trillion showed an increase of 33per cent compared to N811bn in full year 2013.

    Commenting on the result, Group Managing Director, Herbert Wigwe said “The Bank’s resilient 3Q 2014 results reflect consistent improvement in our balanced growth and target metrics. Our performance over the past three quarters demonstrates the effectiveness of our corporate strategy as the Bank continues to grow its market share in key segments whilst enhancing shareholder value.”

    “We have implemented a disciplined and conservative capital enhancement plan, designed to ensure we maintain our moderate risk appetite. This will ensure a stronger capitalised bank, enabling us to remain competitive and take advantage of significant.

     

    Diaspora remittances

    With a yearly growth rate of three per cent over the past five years and $21 billion inflow of personal remittances last year, Nigeria is the fifth largest remittance receiver worldwide in terms of volume, a KPMG report has shown.

    The Banking Industry Customer Satisfaction Survey 2014 by the firm obtained by The Nation showed that remittance to Nigeria accounts for 65.6 per cent of total flows into sub-Saharan Africa. The feat, it said, presents some avenue for banks that may want to tap into the opportunities created by this class of Nigerians who wish to transact banking business using their local bank accounts.

    In an online survey of 127 Nigerians resident in 12 countries who maintain local banking relationships, convenience was the overwhelming driver of value.

    According to the report, when asked for the most important factor in their banking relationships, 44 per cent of the customers selected the availability of internet banking. In particular, customers identified the ease of use of the internet banking platform as the most important factor followed closely by the quality of customer service.

    Seventy-seven per cent of those surveyed transfer money through formal channels – banks (48 per cent) or other money transfer agencies (29 per cent) – compared to 19 per cent who said they send money home through less informal ways – family and friends – travelling home.

    Also, on the effectiveness of the contact centre, the ease of complaints resolution was cited as a major area of dissatisfaction.

    It also showed that more than 50 per cent of customers who have used their bank’s contact centre have been dissatisfied with the promptness of issues resolution and quality of feedback. It cited one bank’s  response to a customer facing some debit card challenges that the customer should wait until his next visit home, for his query to be resolved.

    The increasing frequency and magnitude of cybercrime incidents globally make it apparent that cybercrime is here to stay. The Central Bank of Nigeria’s (CBN) report for the first half of last year noted that there were 2,478 fraud and forgery cases  banks worth over N20 billion. This, it said, represented an eight per cent increase over that of the previous year but a significant increase in value of over 200 per cent from 2012.

    In this year’s survey, two per cent of retail customers indicated that they had experienced a fraud  in the last year and while this number appears small today, it may signify the start of a potentially disturbing future trend.

     

    Eye on fresh capital

    Access Bank’s Deputy Group Managing Director, Obinna Nwosu said the lender will be raising N68 billion capital through Rights Issues. He advised shareholders to take up their rights when the issue begins, as the bank has proven its ability to deliver superior returns on investment.

    The bank chief also listed some of the major attributes that makes Access Bank an institution of choice for investors.

    Nwosu said the bank has Capital Adequacy Ratio of 21 per cent, and has seven banking subsidiaries. The lender also employs 3,192 professional staff working in 366 branches. The lender has 1,042 ATMs, with 11,846 Point of Sale channels.

    He said with a vision of becoming one of the most respected banks in Africa, Access Bank has grown to be the top five banks in Nigeria, stating that between 2002 and 2007, the bank ranked among the top 10 lenders in the country. “That feat was triggered by its role as a dominant trade finance bank; top three foreign exchange and money market bank and model of compliance in the banking industry,” he said.

    Nwosu, who spoke in company of other Senior officials of the bank, including the Executive Director, Commercial Banking, Roosevelt Ogbonna at a media briefing in Lagos, said that between 2007 and 2012, the bank emerged among the top five in the financial services group, adding that this was achieved based on its reference point of Service Delivery; leading e-business support bank; employee of choice in Africa; reference point for corporate governance; attainment of high independent credit rating and as a top five trade finance lender.

     

    Leader insustainable finance

    Access Bank is also a strong converser for the implementation of sustainable banking principles by lenders. Its Chief Risk Officer, Dr. Gregory Ovie Jobome recently called on stakeholders in the Nigeria Sustainable Banking Principles (NSBP) to follow uniform reporting standards for them to achieve the desired objective.

    Speaking at the NSBP Pre-Reporting Workshop held in Lagos, he said stakeholders needed to ensure that they formulate policies that will enable them achieve their sustainable banking objectives. The workshop was organised by Access Bank.

    He said operators needed to ensure that issues around human rights, environmental sectors to  the bank and other critical issues are reported uniformly.

    The Managing Director of Sustainable Finance Limited, Carey Bohjanen, said banks should think through the NSBP and implement them. She said the Nigeria Sustainable Banking Principle is a regulatory requirement that lenders have to adhere to because it is also cost-saving.

     

     

  • How reporting standards can enhance banks’ profitability

    How reporting standards can enhance banks’ profitability

    Banks which adhere to transparent and efficient reporting standards and improve risk management structure, will be rewarded with higher returns on investment. COLLINS NWEZE writes on steps taken by banks to achieve enhanced and sustainable reporting standards amid declining earnings.

    In recent times, banks’ profits have come under intense pressure due, mainly, to tight regulatory policies. But there is reprieve around the corner. The solution, many analysts said, lies in their ability to adopt improved reporting standards.

    The practice, the proponents said, remains a condition for them to achieve higher profitability, and ensure responsible as well as sustainable business practices.

    Such acts are expected to enhance banks’ overall risk management, reduce cost of operations, create more avenues for fresh capital inflows and ability to attract and retain talents.

    Although the lenders are facing tougher regulatory environment based on the Central Bank of Nigeria (CBN) commitment to corporate governance and accountability, the easiest way to meet regulatory expectations remains, largely, adopting and implementing sound reporting standards. Some of the lenders’ second quarter results showed that the regulatory headwind is impacting negatively on their profitability.

    For instance, the half-year ended June 30 result of Skye Bank indicated that its Profit Before Tax (PBT) dropped to N7.266 billion as against N10.545 billion during the corresponding period in 2013.

    Profit After Tax (PAT) also decreased to N5.786 billion as against N8.428 billion the previous year.

    For Fidelity Bank Plc, the PBT dropped by 16 per cent from N11.2 billion to N9.43 billion. Total customer deposits also declined by five per cent to N766 billion.

    GTBank recorded a 6.92 per cent drop in PBT to N53.40 billion, compared with N57.36 billion last year June, while PAT stood at N44.01 billion, lower than N49.01 billion in June 2013.

    Although UBA Plc got 8.7 per cent increase in gross earnings from N127.25 billion in 2013 to N138.32 billion this year, its profit before tax dropped by 13.1 per cent to N28.89 billion, compared with N33.25 billion in 2013.

    FirstBank of Nigeria’s result showed that PBT dropped by 12 per cent to N48.25 billion against N54.81 billion recorded in same period of last year. Likewise, PAT declined by 19.4 per cent to N37.18 billion from N46.1 billion in 2013.

    Speaking at the G4 Sustainability Reporting Guideline Training Workshop recently held in Lagos, Access Bank Group Managing Director, Herbert Wigwe said for a business to be truly sustainable, it must maintain not only the necessary environmental resources, but also its social resources, including employees, customers (the community), sound reporting standards and its reputation.

    He said Access Bank has been collaborating with the Global Reporting Initiative (GRI) Focal Point South Africa, Swedish International Development Cooperation Agency, (SIDA) and Thistle Praxis on sustainability capacity building workshop in the country.

    He said the workshop was designed to provide participants with requisite knowledge of sustainability reporting, help them manage the reporting process and benefit from the transparency of adopting such standards.

    “Additionally, the programme provides a strategic opportunity for advancing the shared mission of mainstreaming sustainability reporting into business practices Nigeria and Africa as well as enhancing the presence of the Global Reporting Initiative in Nigeria at the national and regional levels,” he said.

    Wigwe who was represented by the bank’s Chief Risk Officer, Gregory Jobome, said sustainability and responsible business practices are important to the bank and consistent with its vision, in championing and supporting such initiatives across Africa.

    Access Bank had in the past, organised several workshops and conferences, notable amongst which are the Nigerian Sustainability Banking Principles (NSBP) Steering Committee Meeting in partnership with IFC and Access Conference 2013 where global leaders deliberated on the theme “Embracing Sustainable Leadership.

    “These corporate actions are a testimony to the bank’s sustained efforts at nation building and support for the Nigerian financial services sector in achieving a seamless integration of sustainable business practices into the core of its business operations,” Wigwe said.

    Head, GRI Focal Point South Africa, Douglas Kativu, encouraged Nigeria banks and government agencies to improve on the standard, in the practice of sustainability reporting, given the size and relevance of the country to global economy.

    These have prompted campaigns that the global community should consistently review business decisions and their environmental impact to make the earth truly sustainable in the long term.

    Chief Executive Officer, Thistle Praxis Consulting, Ms. Ini Onuk, said the workshop was able to improve participants’ capacity to present sustainability reports in a manner that demonstrates linkages between strategies and commitment to sustainable global economy.

    This, she said, would help organisations measure, understand and communicate their economic, environmental, social and governance performance accurately, the world will become more accountable.

     

    Stakeholders’ roles

    The GRI Focal Point South Africa, works to promote the importance of transparency for markets and better knowledge of sustainability reporting (SR) in key target markets on the African continent, as well as in the SADC region.

    It is also committed to building and strengthening sustainability performance and reporting capacity as well as shaping the reporting environment by influencing public policy and market initiatives.

    Also, the SIDA is a government organisation under the Swedish Foreign Ministry that administers almost half of Sweden’s budget for development aid while the ThistlePraxis Consulting is a Strategy and Assessment Management Consulting firm that assists organisations of all sizes and in all sectors through the delivery of innovative solutions from effective strategies.

     

    IFC partnership

    Access Bank Plc, International Finance Corporation (IFC) and other signatories of the NSBP last year advocated a holistic implementation of the policy in order to contribute to the development of the economy.

    The stakeholders noted the need to encourage knowledge and experience sharing among industry players and other international organisations if the objective of the NSBP would be achieved.

    According to the Chairman of the committee, Jobome “the conference was convened to foster a holistic implementation of the NSBP by encouraging knowledge and experience sharing amongst industry players and other international organisations like the IFC and Sustainable Finance Limited.”

    He explained that the bank’s objective as the Chair of the NSBP Steering Committee, and Co-host of the event was to encourage practices that would aid the actualisation of the objective of the committee in ensuring the successful implementation of the Nigeria Sustainable Banking Principles across Nigeria’s financial institutions.

    Jobome added that the NSBP was developed by and for the banking sector in Nigeria to signal the industry’s commitment to economic growth that is environmentally responsible and socially relevant, noting that the bank has successfully embedded sustainability into the core of its operations by initiating capacity development of its employees. This, he said would ensure that all staff understand what sustainability means.

     

    Regulatory backing

    The CBN and Nigeria Deposit Insurance Corporation (NDIC) have provided regulatory support and framework for the sustainable banking practice in the country.

    The CBN and NDIC want banks to shift focus from profitability alone and consider also other issues around sustainability, before lending.

    The United Nations Environment Programme (UNEP), through its UNEP Financial Initiative on the Environment and Sustainable Development at the Earth Summit in 1992, placed it as pertinent concern for financial systems across the world.

    It said sustainable banking in Nigeria, therefore, is focused on energising the influence of the banking sector (being financier of economic and social activities) towards transforming the longer term interest of environmental preservation and societal balancing into key parameters for allocation of capital.

     

    Oil sector funding

    The CBN said if the oil companies that degrade the environment and their cohorts in other sectors are starved of funds from both local and international banks, they will have no choice than to comply.

    It called for an urgent need for a policy ensuring that people who do not carry on their businesses in environmentally unfriendly manner and get away with it. It  said the agenda would be presented to the Bankers’ Committee to agree on the way it can be realised. The reason is that as an industry, banks cannot continue to take savings and deposits from Nigerians and then, lend to companies that are destroying the environment.

    “Why must Nigeria bring multinational oil companies to destroy our environment? How do we feel about it? They can get the funds and still use it in a responsible manner. I want to see more banks coming to identify with issues of sustainability and protection of the environment,” it said.

    It said banks should not just look at profitability of lending decisions, but should also consider contributions of the borrower to the environment.

    The apex bank however, admitted that such might be an uphill task in a highly competitive banking sector ‘where dog eats dog’. “How can banks do that when they are competing for accounts? Banks should stop looking at size of balance sheet but on how to build sustainable finance,” it said.

    For the regulator, competition in the sector has drastically risen, compared with what was obtainable in the 80s. It therefore admitted that the policy may be stalled by banks not wanting to lose businesses to competitors that care less about the environment, where a borrower has not adhered to set standards.

    Besides, the global environmental impact of businesses, which are largely financed by the banking industry, suggests that the sector has not given adequate attention to environmental impact of their funding activities. It said the tendency to view banking as an environment friendly business is commonplace as it seemed, on the surface, not to be harming the environment and society directly.