NIGERIA: EXPERT HIGHLIGHTS LOOMING RISK IN BANKING SECTOR

The Managing Director, Afrinvest Securities Limited, Mr. Ike Chioke has expressed concern about the possibility of banks not being able to recoup their investment in the power sector and its likely consequence on the financial system.

Chioke noted that with the current revenue profile of the power companies, if they are not able to service their debts, the indebtedness would have severe consequence on the banking system.

Speaking at the launch of the ‘2014 Nigerian Banking Sector’ report by Afrinvest, Chioke said: “Our view, as you think about the issues in the industry, with the lending that the industry has done, particularly to the power sector, if there is a problem in the problem in the power sector and they are not able to service all these loans they have taken, we are definitely going to see a problem in the balance of the Central Bank of Nigeria (CBN).”

The CBN balance sheet, he added, “may not be able to accommodate another bailout because we just gone through one.”

NIGERIA: CBN MAY RAISE PRIVATE SECTOR CRR TO 18%

As inflation rate rose in the fifth consecutive month in July thereby posing a threat to price stability, the Monetary Policy Committee (MPC) may increase the cash reserve requirement (CRR) from 15 per cent to 18 per cent.

The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane predicted this in his latest monthly economic news and views presented at the Lagos Business School’s executive breakfast meeting, a copy of which was obtained by THISDAY at the weekend.

Headline inflation increased marginally to 8.3 per cent in July. Inflation has been on an upward trend since March this year.

Data gathered from the National Bureau of Statistics (NBS) showed that the Consumer Price Index (CPI), which stood at 7.80 per cent in March 2014, climbed to 7.90 per cent in April, eight per cent in May, 8.20 per cent in June and 8.30 per cent in July.

Therefore, Rewane argued that following the trend, the Central Bank of Nigeria’s (CBN’s) MPC which meets next week “could take another look at the CRR and increase private sector CRR from 15 per cent to 18 per cent.”

The CRR on private sector funds was increased to 15 per cent, from 12 per cent in the first quarter of the year. On the other hand, the CRR on public sector funds is presently at 75 per cent.

AKINTOLA WILLIAMS HAILS NSE’S QUEST FOR FRAUD FREE MARKET

The value of consumer credit in the country grew by 24.5 per cent to N782.6 billion as at December 2013, compared with a marginal growth of 0.8 per cent in the first half of 2013.

The Central Bank of Nigeria (CBN) disclosed this in its latest Financial Stability Report posted on its website at the weekend.
As a ratio of credit to the core private sector, consumer credit constituted five per cent, compared with the 4.2 per cent it stood at the end of June 2013, the report also stated.

Total bank loans and advances to the various sectors of the economy grew by 13.9 per cent to N10.043 trillion at the end of December 2013. The oil and gas sector recorded the highest growth rate, with a share of 24.4 per cent, followed by manufacturing (12.9 per cent) and the general sector (11.6 per cent).

Furthermore, the report showed that the share of the agricultural sector declined to 3.7 per cent, from 4.0 per cent in the first half of 2013.

According to the central bank, continued dominance of short-term deposits constrained the ability of banks to lend long term loans in the period under review, especially to the real sector.

Also, the quality of assets of the banking industry improved slightly in the second half of 2013, compared with the first half.
The ratio of non-performing loans (NPLs) to total loans also dropped by 0.5 per cent to 3.2 per cent as at the end of December last year, from 3.7 per cent as at June last year.
The improvement in asset quality was attributed to stricter adherence to credit risk management policies and standards by banks.

“Liquidity stress test was conducted at end-December 2013 to assess the resilience of the banking industry to liquidity and funding shocks, using the Implied Cash Flow Analysis (ICFA) and Maturity Mismatch/Rollover Risk approaches,” it disclosed.

According to the report, the banking industry remained competitive in bot

CBN TO AUCTION N135BN TREASURY BILLS

In line with its tight monetary stance, the Central Bank of Nigeria will on Wednesday sell N134.88bn in treasury bills.

The CBN sells treasury bills bi-monthly to manage the volume of money supply in the economy.

The maturities of the treasury bills on offer will range between three months and one year.

A breakdown shows that the bank will issue N34.88 billion in 3-month bills, N48 billion in 6-month bill and N52 billion in one-year bills.

The treasury bills market commenced last week flat but subsequently fed off the Wednesday's bond auction.

The short end of the curve experienced sell-offs driving rates higher as institutional investors looked to position ahead of this week's primary market auction.

Meanwhile, the Nigerian Interbank Offered Rates (NIBOR) was unchanged for the second straight week as it closed at an average of 10.50 per cent last Friday.

The interbank money market commenced the week tightly due to funding for last Wednesday's Retail Dutch Auction System (RDAS), NNPC's withdrawals and muted inflows.

STRATEGICALLY IMPORTANT BANKS GROSS LOANS HIT N7.1 TRILLION

As at December 31, 2013, the gross loans of the eight strategically important banks (SIBs) in Nigeria amounted to ₦7.1 trillion, representing 74 per cent of the entire industry’s loan book, a report by Agusto & Co. has revealed.

The Central Bank of Nigeria (CBN) had in 2013, designated eight banks as strategically important banks. By virtue of their size and systemic importance to the Nigerian banking industry, the apex bank deemed these banks as “too big to fail”. This implies the regulator has placed stricter control and enforcements on these banks.

The banks are: First Bank Limited, Zenith Bank Plc, United Bank for Africa Plc, Guaranty Trust Bank Plc, Access Bank Plc, Ecobank Plc, Diamond Bank Plc and Skye Bank Plc.

Tagged, “2014 Industry Reports,” the report exposed several challenges facing the banking, telecommunication, agric and other important sectors of the Nigerian economy and examined the financial condition of the eight banks vis-a-vis the industry.

According to the report, the total assets and contingents of the eight SIBs amounted to ₦19 trillion. This represents an 18 per cent growth over prior year and accounts for 72 per cent of the industry’s total assets (2012: 69%).

The portfolio of loans, the report revealed, was the largest earning asset class, forming 36.5 per cent of total assets and contingents.

BANK CREDIT: CBN BARS LOAN DEFAULTERS OF OVER N500M

The Central Bank of Nigeria (CBN) yesterday warned that no deposit money bank (DMB) should without its prior approval grant facilities to potential borrowers that are in default of any existing facilities to the tune of N500 million and above.

The banking sector regulator also warned development banks and banks in liquidation not to grant facilities of N250 million and above to the same set of bank customers.

The central bank stated this in a letter signed by its Director of Banking Supervision, Mrs. Tokunbo Martins, a copy of which was posted on its website.

The letter addressed to all DMBs, development finance institutions (DFIs) and the Asset Management Corporation of Nigeria (AMCON) was titled: “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Nigerian Banking System.”

It stated that it took the decision because it was disturbed by the level of impunity with which some borrowers default on their loans in some institutions and yet are availed further credit facilities by other institutions under the same or sometimes different identity.
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This, it pointed out could have the effect of triggering serial defaults and a build-up of non-performing loans which could negatively impact liquidity in the financial sector and ultimately hamper its stability.>
Consequently, in order to proactively avert the menace of resurgence of non-performing loans and in furtherance of the CBN’s mandate of maintaining a safe and sound financial system, the regulator also stated that no institution shall, except with its prior written approval grant a facility to any potential borrower who has a delinquent facility of any amount whatsoever that had been taken over by AMCON.

CASHLESS POLICY GOES NATIONWIDE TODAY

The cashless policy, an initiative of the Central Bank of Nigeria (CBN) and the Bankers’ Committee aimed at reducing the amount of cash in the system will be extended to 30 more states in the country from today.

The policy which commenced in Lagos state in 2012 was last year extended to Abia, Anambra, Ogun, Kano, Rivers States and the FCT.

However, just like in the states where the policy had been implemented, the central bank last week announced the deferment of charges for individuals and corporate account holders who wish to withdraw cash above the prescribed limits in the 30 states.

The charges on withdrawals for both individual and corporate account holders will now take effect in the remaining 30 States from July 1, 2015.
The waiver is to allow ample time for the deployment of adequate infrastructure needed to support the policy.

Under the cashless policy, the CBN had pegged the daily cumulative cash withdrawal/deposit limit for individual accounts at N500,000 per day and N3 million per day for corporate accounts.

DEVALUATION OF NAIRA IS NOT AN OPTION – EMEFIELE

Incoming central bank Governor Godwin Emefiele said a devaluation of the naira would be “devastating” for the economy.

The Central Bank of Nigeria’s exchange-rate policy is correct and the regulator needs to ensure Africa’s largest oil producer has a strong currency, Emefiele said in his first public comments since being nominated by President Goodluck Jonathan to the position.

“This is an import dependent economy,” Emefiele, 52, told a Senate hearing today in the capital, Abuja, before the upper house of parliament approved his appointment. “Devaluation is not an option.”

Emefiele, chief executive officer of Zenith Bank Plc, will succeed Lamido Sanusi, 52, whose suspension by Jonathan last month prompted the currency to drop to a record low as investors worried that the independence of the central bank will be compromised. That increased speculation policy makers will devalue the currency by lowering the midpoint of the naira peg from 155 per dollar in the face of dwindling foreign-currency reserves.

Nigeria’s reserves have declined 13 percent this year to $37.9 billion as of March 24. The naira has dropped 2.8 percent against the dollar on the interbank market in the period.

The decline in foreign-exchange reserves is due to a “speculative attack,” Emefiele said.

Emefiele will need to control inflation and steer the economy of Africa’s most populous nation through next year’s presidential election amid pressure to boost government spending, bolster the currency and convince investors of the independence of the central bank.

In its first meeting since Sanusi’s departure, the Monetary Policy Committee, led by acting GovernorSarah Alade, yesterday held its key interest rate at a record 12 percent and increased the cash reserve requirements on private sector deposits to 15 percent from 12 percent, citing the continued need for a tight monetary stance.

Jonathan suspended Sanusi for “financial recklessness and misconduct,” allegations he denied. His removal came after he alleged that billions of dollars of government oil revenue were unaccounted for.

A banker with 26 years of experience, Emefiele became the managing director of Zenith Bank, Nigeria’s second-largest lender by assets, in August 2010 after serving as deputy managing director from 2001.

He has a MBA degree from the University of Nigeria in Nsukka and lectured at the University of Port Harcourt, the institution where Jonathan taught before he entered politics.

Source | Bloomberg

AKINGBOLA PLEADS SUBJUDICE AS FRC PROBES INTERCONTINENTAL SALE

Erastus Akingbola

A mild drama ensued yesterday when the former Managing Director/CEO of the defunct Intercontinental Bank, Mr. Erastus Akingbola; the immediate past Managing Director/CEO of Access Bank Plc, Mr. Aigboje Aig-Imokhuede; and his successor, Mr. Herbert Wigwe, honoured the Financial Reporting Council of Nigeria’s (FRC) invitation for questioning on the 2011 and 2102 financial accounts of the Central Bank of Nigeria (CBN).

Others present at the probe included Akingbola’s lawyers and Access Bank’s lawyers – the UK-based Berwin Leighton Paisner (BLP) and Nigerian law firm, Usoro & Usoro.
A reliable FRC source informed THISDAY that at the first session of the two-day hearing, which commenced at exactly 11 am at the head office of FRC in Lagos, Akingbola declined to make his presentation when invited by the investigating panel, saying the matter was subjudice.

THISDAY learnt that when called upon after the introduction of the parties at the hearing, which had audio-visual equipment for ease of presentation by those invited, Akingbola informed the panel that he could not make any statement because the matter was currently before a court of competent jurisdiction, adding that based on the advice of his lawyers, it would be wrong for him to comment on the matter.

However, after repeated attempts by officials of FRC to make him talk, the former bank chief executive had a change of mind and decided to submit and sign a petition he had in his possession on the takeover of his bank by the CBN in 2009 and its subsequent acquisition by Access Bank in 2011.
According to the FRC source, the submission of the petition by Akingbola was the first time the former back CEO would make a copy of the document available to the council.

He disclosed that Akingbola’s decision to remain silent on the grounds that the matter was subjudice might have been informed by the presence of Access Bank’s international lawyers, as it was the same UK law firm that had represented the bank and secured a judgment against Akingbola from a London court in 2012.
“Akingbola submitted his petition to the FRC for the first time today (Wednesday). In fact, he started signing the petition and copies were submitted to the panel.

NEW CBN GOVERNOR: SENATE CONFIRMS EMEFIELE

• New CBN gov promises stability, growth and employment

• Bulkachuwa cleared also

The Managing Director/CEO of Zenith Bank Plc, Mr. Godwin Emefiele, Wednesday vowed to ensure economic stability to create jobs and boost growth, as the Senate unanimously approved his appointment to replace Mallam Sanusi Lamido Sanusi as the Governor of the Central Bank of Nigeria (CBN).

Emefiele will take over in June from Sanusi, who was suspended last month by President Goodluck Jonathan on charges of “financial recklessness and misconduct”.
The Senate also unanimously confirmed Justice Zainab Bulkachuwa as the President of the Court of Appeal. Both of them were cleared after hours of grilling by the upper legislative chamber.
First to be confirmed was Bulkachuwa who was not subjected to intense scrutiny as was the case with Emefiele.

But upon entering the chamber, Senate President David Mark had told Emefiele not to expect to leave the chamber in a hurry, adding he would be subjected to special rounds of questioning because he would be leading a very important institution in the country.
Emefiele said in his first public comments since his nomination that he would make macroeconomic stability his watchword and the central bank would work to drive down inflation and interest rates.
According to AFP, he also vowed to maintain a strong exchange rate to build up healthy foreign reserves as well as formulate policies to address fears about unemployment, particularly among young people.

“We will ensure that during this period, if approved by the Senate, that whatever monetary policy decision we take will be those that will lead to improvement in the level of employment,” he said, warning the country was facing an ‘employment emergency’.”
Emefiele added: “Growing the economy of Nigeria is a very important assignment other than just a core mandate of ensuring that we have a stable environment.”
Emefiele also promised to use the development banking model to drive economic growth in the real sector of the economy to the benefit of all Nigerians.

MORE TROUBLES FOR SANUSI AS SHAREHOLDERS OF INTERCONTINENTAL BANK DRAG HIM TO COURT

There are more troubles for the suspended Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido, as three shareholders of the defunct Intercontinental Bank have dragged him before a Federal High Court alleging wrongdoing in the way the bank was sold.

The shareholders: Abdullahi Sani, Adaeze Onwuegbusi and Chijioke Ezeipke through their lawyers, Chief Chris Uche (SAN) are demanding the sum of N10 billion as special and general damages against Sanusi for  breaches culminating in the wrongful take over of Intercontinental Bank Plc by Access Bank.

Also joined in the suit are the CBN and the Securities and Exchange Commission (SEC) as 2nd and 3rd defendants respectively.

The plaintiffs also want the court to order CBN to immediately recover the sum of N25.1 billion together with interest still being owed by the trio of Mr. Aig-Aigboje Imokhuede, Mr. Herbert Wigwe and Senator Bukola Saraki.

When the matter came up yesterday, the plaintiffs counsel, Uche prayed the court for leave to serve Sanusi through a substituted means on the grounds that his present place of abode after his suspension was not known.

Uche further prayed the court to serve the application on Sanusi through his last office address at the CBN and that the application should be pasted on the notice board or be given to an adult in the bank.

CBN SUBMITS 2014 BUDGET TO NATIONAL ASSEMBLY FOR 1ST TIME IN 5 YEARS

The Central Bank of Nigeria (CBN) yesterday defended its 2014 budget proposal before the House of Representatives Committee on Banking and Finance, the first of such an exercise in about five years.

Under Mallam Sanusi Lamido Sanusi, the suspended CBN governor, the central bank had invoked its independence, as documented in the Banking and Other Financial Institutions Act (BOFIA) and the CBN Act, as a reason for it not to subject itself to the budget defence at the National Assembly. ‎

This is just as the Speaker of the House of Representatives, Hon. Aminu Waziri Tambuwal, ordered  all committees yet to complete their 2014 budget defence reports before the Committee on Appropriation to ensure that they do so latest today.
Deputy Governor in charge of Corporate Services at the CBN, Alhaji Suleiman Barau, who defended the CBN’s 2014 budget, put the projected revenue for the fiscal year at N553 billion, with expected income and projected expenditure of N377.9 billion.

He also gave a picture of its last year’s budget performance, under which the bank superseded its target on expenditure by more than N326 ‎billion.
The central bank also budgeted‎ N413. 374 billion for the same purpose but ended up spending a staggering N739. 640 billion, Barau said.
He explained that the bulk of the 2013 excess expenditure was spent on “liquidity management”‎ in the economy.

Equally, the bank, according to him, earmarked N180 billion for‎ liquidity management‎ but spent N536.6 billion. In the same period, the total income that accrued to it stood at N600.53 billion.

Other details indicated interest on foreign investments (N80.175 billion); interest on domestic investments (N388.208 billion); interest on domestic loans and advances (N13.540 billion), and others N118.61 billion.
The banks staff strength currently stands at 6,661. ‎

Meanwhile, during a plenary session, Tambuwal read a communication from Hon John Enoh, Chairman of the Appropriation Committee, stating that committees should submit their defence reports today or face exclusion from the 2014 budget.

Source | ThisDay

REPS ASK CBN TO STOP TRADING IN NAIRA

The House of Representatives on Thursday blamed the growing trading in new naira notes on members of staff of the Central Bank of Nigeria.

In a resolution in Abuja, the House alleged that there was a cartel made up of bank workers, who exchange the new naira notes for gratifications and later resell them to members of the public.

The lawmakers accused the cartel of ensuring that new notes were not in circulation, a factor that explained the mutilated notes in the economy.

The House directed the CBN to stop the “bribe for new naira notes” by investigating the cartel and punishing the members of staff involved.

A member, who moved the motion on the matter, Mr. Isaac Osahon, informed the House that the new notes were being sold to people to be used for “spraying” at social events.

He said the trading in the naira was being done in breach of the extant Section 21 (4) of the CBN Act, which prohibits the hawking of naira notes and coins.

Osahon added that lower denomination notes like N5, N10, N20 and N50 were scarce in the country, thereby “creating an avenue for illegal currency hawkers to make brisk business of selling the naira notes.”

Giving further insight into how the cartel operates, the lawmaker stated that hawkers around Dei-Dei Junction in Abuja were charging N200 commission on every N1,000 sold, and for “every N2,000, they get no less than N400.”

Besides investigating the cartel, the motion asked the Nigeria Police and the Department of State Security to arrest and prosecute bank workers involved in the illegal transaction.

A member from Anambra State, Mrs. Uche Uwkwunife, informed the House that the act was common in the Lagos area, where residents “sprayed” notes at social gatherings.

Mr. Fort Dike called on the CBN to ensure that it tracked all new notes released to the public through commercial banks.

“The CBN is to blame for this problem. It is the CBN that issues new notes to the public. If the notes find their way into the wrong hands, we should blame the CBN. The central bank is culpable, the commercial banks are culpable; but CBN is the regulator,” he added.

MONETARY POLICY COMMITTEE MEETS TO DISCUSS FALLING RESERVES, NAIRA

The nation’s fast depleting external reserves and the persistent pressure on the naira will top the agenda as the Central Bank of Nigeria’s Monetary Policy Committee begins its two-day meeting today (Monday).

Being the first MPC meeting after the suspension of Mr. Lamido Sanusi as the CBN governor, the financial markets are edgy about the likely outcome of the meeting due to the present high level of uncertainty.

Today’s meeting will be the first to be chaired by acting Governor of the CBN, Mrs. Sarah Alade.

While analysts are divided over the possible devaluation of the naira, there is a consensus of opinion that the post-Sanusi MPC will continue the monetary tightening stance of the suspended governor.

They argued that the current economic situation in the country supported the need to tighten the monetary policy further.

The analysts also believed that Alade, who until her appointment was the deputy governor in charge of economic policy, had always voted in support of monetary tightening.

The Financial Derivatives Company Limited, in its latest economic report, predicted that the MPC would increase the Cash Reserve Requirement on public sector deposits to 100 per cent, up from 75 per cent.

The FDC report stated, “We anticipate two possible scenarios alongside the hike in the CRR. The first scenario is a shift in the exchange rate midpoint from N155 to N165/$, which is an estimated three to five per cent depreciation in the naira. The rationale for this is the increased volatility recorded at the interbank and parallel markets, and the CBN’s continued support of the naira at a cost to the external reserves.

“The premium between the official and parallel market remains wide at N16.26 compared to N8.25 in October 2013. Our second scenario is an increase in the MPR to 13 per cent per annum to tighten liquidity conditions in the money market.”

SENATE CLEARS GODWIN EMEFIELE AS CENTRAL BANK GOVERNOR

The senate has on Wednesday, March 26, 2014 confirmed the appointment of Mr. Godwin Emefiele as the next governor of the Central Bank of Nigeria (CBN) barely two months after he was nominated by President Goodluck Jonathan.

Justice Zainab Bulkachuwa has also been cleared as the substantive President of Appeal Court.

Emefiele and Bulkachuwa were cleared after hours of questioning by the committee of the Whole Senate.

More to follow