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MPR: Banks Raise Interest Rates on Existing Loans

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Bank customers with existing loan obligations must brace for higher levels of indebtedness as the Deposit Money Banks have begun an upward review of the interest rates on all outstanding loans.

The development followed Tuesday’s increase of the Monetary Policy Rate from 12 per cent to 14 per cent by the Central Bank of Nigeria’s Monetary Policy Committee.

Multiple banking sources told one of our correspondents on Thursday that the lenders would as early as next week begin to dispatch letters to their customers, informing them of the upward review of the interest rates on their loans.

“Banks don’t waste time on matters like this. The increase in the MPR means interest rates on loans have to go up. We have started writing letters to our customers. A few may go this week, while more will go next week. Customers will get the letters in emails and hard copy,” a top executive of a tier-1 bank told one of our correspondents under condition of anonymity on Thursday.

Other top bank officials, who confirmed the development, did not state the rate of increase in the interest rates on the outstanding loans.

They said the upward reviews of the rates were being done with keen consideration for certain conditions relating to each bank customer.

“What applies to customer A may not apply to customer B. We take keen look at each customer and their peculiar situation, including their loan history with us, before making the review. But the fact is that an increase is inevitable with the hike in the CBN’s MPR,” another top bank official said.

Banking experts say the MPR, often called the benchmark interest rate, is the yardstick for other interest rates bank charges on loans advanced to their customers.

The MPC had after its bi-monthly meeting on Tuesday increased the MPR from 12 per cent to 14 per cent. The measure was meant to reduce the amount of cash in circulation and thus fight inflation, which hit 16.5 per cent in June.

A financial analyst at BGL Plc, a research and investment advisory firm, Mr. Femi Ademola, said banks usually reviewed interest rates on loans whenever the CBN raised or lowered the MPR.

This, he said, was why banks usually included the clause: ‘Subject to prevailing interest rate’ on their offer letters for loans.

Officials said the latest review by the banks might move the interest rate on some loans from between 25 per cent and 27 per cent to around 30 per cent.

Ademola said while the banks would enjoy more interest income from the upward review, a small part of this amount would be paid to savings account customers as interest on their deposits.

In line with the CBN regulations, savings account customers are paid 30 per cent of the MPR as interest on their deposits. With the increase in the MPR, about 0.6 per cent of each customer’s savings account deposit will be credited to their account as accrued interest on their savings.

Analysts described this as negligible compared to what the banks would earn from the additional interest rate imposed on loans.

Meanwhile, manufacturers said the decision of the CBN to raise the MPR was a deadly blow to an already comatose manufacturing sector, adding that more sector operators were bound to close shops.

A local manufacturer of envelopes and Managing Director, FAE Limited, Princess Layo Okeowo, said, “I just pray that we do not all close our doors. The foreign exchange situation is already becoming unbearable with manufacturers having to wait for ages after bidding to get dollars. The increase in interest rate is a bitter pill to swallow and it has made an already bad situation worse.

“It is certain that the banks will readjust their interest rates even for people who have outstanding loans. It is certain that within the next one week, the banks will start writing letters to their debtors notifying them of increased interest rates on loans.

“Manufacturers will have to increase prices and already, the purchasing power is very low and the number of our customers has reduced drastically.”

An executive director in one of the leading aerosol firms in the country, Mr. Kingsley Oni, said because of the scarcity of dollars, his company had to lay off workers for the first time in its more than 20 years’ of existence.

Oni said, “We have over 2,000 workers; because we are not getting dollars, for the first time, we are retrenching. The point is, when they keep raising these interest rates, the impact on the manufacturing sector is very negative.

“The CBN cannot control inflation, but a situation where a country is in this situation and you still find a lot of private jets all over Abuja is what baffles me. One of those jets can be sold and the money ploughed back into the real sector to create jobs if the government is really serious.”

The Chairman, Qualitek Industries, Chief Olayinka Kufile, said although the CBN was trying to control inflation, the reality was that many industries in the country had become comatose.

He said, “Most activities in the manufacturing ector have been grounded. In the basic metal industry where I operate, everything is flat, because while we were trying to get out of the problem of the dollar increasing from N158 to a dollar to N200 to a dollar, we lost a lot of money. Before we could even get out of that, the dollar kept increasing and now it is more than N300 and the people who took loans at the exchange rate of N197 to a dollar are in heavy debts.

“If the government is hoping to earn money in taxes from the non-oil sector, they cannot get those taxes where companies are not producing and making money. Most industries today are not producing and they have reduced their staff strength to near zero.”

For the Director-General, Manufacturers Association of Nigeria, Mr. Remi Ogunmefun, within the concept of economics, the CBN was right to increase the benchmark rate in order to spur savings and investment as well as control inflation.

He said, “The implication of the increase for manufacturers is that the cost of borrowing will rise higher than it is already. It is quite unfortunate because over the years, we have been clamouring for a single digit interest rate.”

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.

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Finance

FG to Earn N462 Billion from Electronic Money Transfer Levy in 2021 – World Bank

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The World Bank has said the Federal Government of Nigeria will earn an estimated N462 billion from electronic money transfer levy in 2021.

The leading multilateral financial institution disclosed in its ‘Resilience through Reforms’ report.

The Federal Government had introduced a levy on electronic money transfer in the Finance Act 2020 to take advantage of the growing electronic transfer in the country and up revenue generation.

The electronic money transfer levy is a single one-off charge of N50 on electronic fund transfer in any deposit money bank or financial institution on any type of account on sums of N10,000 or more.

Akpan Ekpo, the Chairman of the Foundation for Economic Research and Training, who spoke in a telephone interview voiced his concerns on the levy.

He said, “The levy is remitted to the government, which is fine. But I think the savers, the people who use the transfer channels, are over-levied. You pay maintenance fee, transfer fee, and I think if this level of levying continues, it will discourage people from using electronic channels.

“Personally, I think the EMT levy should be out of the Finance Act. There is too much burden on the citizens, although the government is making great money from it. Let us hope they use the money wisely, but it shouldn’t have been put there in the first place.

“It is a law now; there is nothing that can be done about it. But I hope it is used wisely, and they would be transparent about how the money is being used.”

Akpan said the EMT levy would discourage individuals outside the formal banking net.

He said, “With the EMT levy, more people are discouraged from using the banks and its services. A lot of Nigerians sell in rural areas, and are outside the financial system net.

“With the EMT, more people are further excluded. There really was no need to introduce the EMT; it will discourage those who are not already in the formal banking sector from even coming into it. It is likely to further deepen the financial exclusion of many Nigerians.”

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Banking Sector

Hope PSBANK Collaborates With FG To Create 100 Jobs In Each Local Government

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Hope PSBank- Investors King

Hope Payment Service Bank, a subsidiary of Unified Payment Services Limited and Nigeria’s premier digital bank is collaborating with the Federal Government through the Ministry of Labour and Productivity to create jobs for no fewer than 77,400 people across the country.

The employment opportunity is part of the exit strategy of the Federal Government’s Special Public Works Programme being executed alongside the bank by empowering 100 Nigerians in each of the 774 local governments.

Speaking at the official kick-off of the collaboration, the Managing Director, Hope Payment Service Bank, Mr. Ayotunde Kuponiyi noted that the digital bank serves as an enabling platform that would interface with 77,400 beneficiaries selected from the Special Works Programme of the FG to exit them into self-employment.

Kuponiyi stressed that the focus of the collaboration is geared towards empowering beneficiaries through the agency banking platform in carrying out financial services such as account opening, bills payments, fund transfer, cash in/cash for Nigerians while they earn commission in return with just the use of their smartphones.

According to him, this initiative comes at no cost to the beneficiaries as they can use their phones to carry out agency banking activities for which they earn commissions on each activity carried out. “Once on board, these beneficiaries will become HOPE PSBANK agents. They will undergo training on the various activities by the bank at no cost to them”, he added.

“We are very excited about this collaboration with the Ministry, which is in line with the thrust of the social objectives of Hope Payment Service Bank – poverty reduction through financial inclusion and diffusion of digital financial services”, he said.

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Insurance

Airtel Partners AXA Mansard, Unveils Mobile Health Insurance via USSD

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AXA Mansard USSD Code-Investors King

Airtel Nigeria and AXA Mansard, have entered a strategic partnership to deepen access, participation and enrolment in health insurance for more Nigerians.

The partnership by Airtel and AXA Mansard is in response to the Federal Government’s goal, through the National Health Insurance Scheme, to provide easy access to healthcare for all Nigerians by leveraging on the USSD channel, an easy-to-use and interactive platform.

By dialing the shortcode, *987*7#, Airtel customers can now conveniently enroll for affordable and robust health insurance plans from AXA Mansard, with access to over 1,000 hospitals nationwide for quality healthcare services.

Commenting on Airtel’s partnership with AXA Mansard on the Mobile Health Insurance, the Head Mobile Financial Services, Airtel Nigeria, Muyiwa Ebitanmi, said the mobile health insurance initiative demonstrates Airtel’s commitment to providing innovative and relevant solutions that will empower more Nigerians to conveniently access best-in-class health insurance value offerings.

“Airtel Nigeria is always exploring innovative ways and platforms that will make life easier, more meaningful and more enjoyable for Nigerians. With this initiative, we are not just delivering bespoke health insurance services to the doorstep of more people, we are also leading a quiet revolution that will drive and deepen health insurance inclusion by removing the many barriers that have hitherto excluded many well-meaning Nigerians from participating in the sector.”

Speaking about the Mobile Health Insurance initiative, the Head, Emerging Customers and Digital Partnerships Group at AXA Mansard, Mr. Alfred Egbai, stated that “our research has shown the value and importance of having a health insurance plan to the public especially for the emerging customers in the country, but for many reasons, the uptake of insurance products has been low”.

He continued, “In order to mitigate these challenges and satisfy the health needs of the retail consumer whilst also encouraging the uptake of health insurance in the country, we have partnered with Airtel Nigeria to provide a solution that gives users a convenient way to purchase and manage their AXA Mansard micro-insurance plans.”

Malaria Cover, Inpatient, Outpatient, Specialist medical consultations, Immunizations, Family planning, Ambulance services, Dental care and more are some of the covers provided in the AXA Mansard Health plans.

“The challenges to the implementation of health insurance schemes hitherto include a low level of awareness, affordability, ineffective distribution systems and inefficient payment models.

“The partnership between Airtel Nigeria and AXA Mansard is aimed at solving these challenges and assisting Nigerians to access a viable Health Insurance Scheme,” he said

Airtel Nigeria, as a socially responsible organization, will continue to partner with industry leaders to bring products and services that will touch the lives of its subscribers in very positive ways.

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