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Banks Advance N21.3tn Loans in 10 Months

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Central Bank of Nigeria

The total domestic credit from the banking sector to the economy dropped by 0.8 per cent to N21.3tn as of the end of October 2015, statistics obtained from the Central Bank of Nigeria have revealed.

The CBN in its economic report for October stated that the drop in credit to the economy was a reflection of the 18.9 per cent decline in net claims on the Federal Government.

The report, a copy of which was obtained by our correspondent in Abuja on Friday, said while the total credit to the private sector experienced an increase of 1.9 per cent to N19.07tn, the credit to the Federal Government dropped by 18.9 per cent to N2.26tn.

It attributed the decline in credit to the government to a drop in bank’s holding of the government securities particularly the Nigerian Treasury Bills which fell by 10.3 per cent during the period.

It said, “At N21.34tn, aggregate credit to the domestic economy, on month-on-month basis, fell by 0.8 per cent at the end of October 2015 in contrast to the 0.6 and four per cent growth at the end of the preceding month and the corresponding period of 2014, respectively.

“The development reflected the 18.9 per cent decline in net claims on the Federal Government, which more than offset 1.9 per cent growth in claims on the private sector.

“Over the level at end of December 2014, net domestic credit, however, grew by 10.8 per cent at the end of the review period, compared with the growth of 11.7 per cent at the end of the preceding month.

“The development reflected the increase in net claims on both the Federal Government and private sector.”

The report did not provide details of where lending was channelled in the private sector but noted that growth in the key monetary aggregate decelerated during the period.

The CBN Governor, Mr. Godwin Emefiele, had while speaking after the recent Monetary Policy Committee meeting said the apex bank in November reduced the lending rate from 13 per cent to 11 per cent but stressed its objective of easing lending to the real sector of the economy had not been achieved.

He said the CBN would continue to adopt moral suasion to encourage the Deposit Money Banks to support financing for targeted lending to the real sector as well as agriculture, solid minerals and the Small and Medium Enterprises sectors of the economy.

He said, “The committee acknowledged the continuous liquidity surfeit in the system stemming partly from the recent growth-stimulating monetary policy measures, as well as the tendency of the banks to invest excess reserves in government securities, rather than extend credit to the needed sectors of the economy.

“To this end, the committee once again urged the deposit money banks to improve lending to the real sector, as part of their patriotic obligations to the country and enjoined the management of the bank to continue to explore ways of incentivising lending to employment and growth-generating sectors, particularly the SMEs.”

When asked if the CBN would consider forcing banks to lend to the real sector, the governor said inasmuch as the CBN would prefer that the DMBs increased their lending to the real sector, it would be practically impossible to force them to do so owing to the fact that banks were established to make profit.

He said, “Unfortunately, the DMBs are in business to make money and we cannot regulate their interest rate. And so it can be difficult to really force them to lend to a particular set of people.

“But what we can continue to do is to put in place policies that will encourage them to do so or we can continue to incentivise them by putting in place policies that will encourage them to do so.

“So it is a free market and we cannot really compel them as it is expected. We will continue to try.

“This is why at the last meeting, we reduced the Cash Reserve Requirement from 25 per cent to 20 per cent. And we then insisted that that liquidity that will be made available or that those banks can only enjoy the reduction if they introduce to the CBN projects that are targeted at the real sector such as manufacturing, agriculture and the SMEs.”

He said the apex bank remained optimistic that the banks would heed the advice and lend to the real sector.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

Ghana/Kenya: Eurobonds to Decouple as Fiscal Challenges Come to Fore

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Ghana and Kenya, two of the sub-Saharan African sovereigns with the highest amount of outstanding Eurobonds, could see a widening of their risk premiums over 2021, according to a Senior Credit Analyst at Redd Intelligence, Mark Bohlund.

Faced with fiscal challenges, the two African nations are expected to return to the Eurobond market in the first quarter of 2021, but this time with bigger risk premiums as investors are expected to incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.

Mark Bohlund said, “Ghana and Kenya are likely to return to the Eurobond market in 1Q21 but see a widening of their risk premiums over 2021 as investors incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.”

With Ghana’s outstanding Eurobonds presently estimated at US$10.3 billion and Kenya’s outstanding Eurobonds put at US$6.1 billion, spreads on Ghana’s Eurobonds will increase over those of Kenya in 2021.

It is likely that spreads on Ghana’s eurobonds over those of Kenya will increase over 2021 as concerns rise over its weak fiscal position and high reliance on commercial overseas financing,” Bohlund stated.

Commenting on the countries’ fiscal positions, Bohlund said both countries are likely to post double-digit fiscal deficits this year, as contracting economies add to already faltering government revenue.

“With interest costs absorbing close to 50% of government revenue, Ghana will struggle to find sufficient cost- savings in other areas to reduce the fiscal deficit substantially in 2021.”

“In contrast to Kenya, Ghana has already cut back its capital expenditure to a bare minimum. The Bank of Ghana stepped up its purchases of government bonds sharply in September and we expect this to continue during 2021.

“In Kenya, part of the solution should be to encourage county governments to raise more revenue, but this will be challenging to implement before the August 2022 elections.

“Having shied away from bi- and multilateral creditors in favor of commercial borrowing, Ghana is likely to struggle to secure sufficient external financing in 2021. This makes increased central bank financing likely and poses downside risks to the cedi.

“Neither Ghana nor Kenya is likely to seek DSSI participation in 1H21 even if they deem that international bond issuance will not be possible.

“We have changed our view and now expect both Ghana and Kenya to issue Eurobonds in 1H21.

“Kenya is likely to continue to draw on funding from the IMF, the World Bank and other multilateral creditors, as well as bilateral financial support from China as the Standard Gauge Railway, continues to bleed funds.”

Bohlund added that the spreads between Ghana and Kenya Eurobonds are likely to widen further as a higher risk of a debt restructuring is priced into Ghanaian assets.

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Finance

Insider Dealing: Paul Miyonmide Gbededo Adds Another 612,326 Shares of Flour Mills to His Stake

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Paul Miyonmide Gbededo, the Group Managing Director, Flour Mills of Nigeria Plc bought an additional 612,326 shares of the company.

The management stated this in a disclosure statement sent to the Nigerian Stock Exchange on Monday.

The managing director purchased the shares at N27.75 per share on November 20, 2020 at the Nigerian Stock Exchange in Lagos, Nigeria. Meaning, Gbededo has invested another N16,992,046.5 into the company.

This was in addition to the 3,284,867 shares valued at N91,642,269 and 4,200,852 shares worth N117.62 million purchased by Gbededo earlier in the month of November. Bringing his recent purchases to 8,098,045 million shares worth N226,254,315.5. See the details of the latest transaction below.

 

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FCMB Reports 16.4 Percent Increase in Profit After Tax in Q3 2020

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FCMB

FCMB Group Plc, one of the leading financial institutions in Nigeria, reported a 16.4 percent increase in profit after tax for the third quarter of the year.

In the unaudited financial statements released through the Nigerian Stock Exchange (NSE), the lender’s profit before tax grew by 10.2 percent year-on-year to N4.8 billion while profit after tax increased by 16.4 percent to N4.2 billion.

FCBMB Group Plc expanded gross earnings by 4.8 percent to N48.3 billion during the period under review. Similarly, the bank’s net interest income rose by 30.03 percent year-on-year to N22.7 billion.

The strong performance continued across the board as net fee and commission income increased by 0.29 percent to N5.2 billion. Net trading income rose by 39.4 percent year-on-year to N1.82 billion.

Personnel expenses dropped by 7.9 percent to N6.9 billion during the quarter while general and administrative expenses declined by 7.52 percent year-on-year to N7.6 billion. Largely due to the COVID-19 lockdown.

Loans and advances to customers rose by 10.8 percent to N793.14 billion between December 2019 and September 2020. Total desposits from customers during the same period grew by 26.7 percent to N1.2 trillion.

The bank’s total assets increased by 22.12 percent to N2.04 trillion.

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