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CBN Conducts Special Examination on Banks

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CBN-headquarters-Investors King

In order to ascertain the actual well-being of banks owing to the nation’s macroeconomic challenges and rising non-performing loans (NPLs), the Central Bank of Nigeria (CBN) is currently carrying out examination on banks.

At the end of the exercise, the banking sector regulator said, it would determine how best the industry should be supported.

The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, disclosed this in response to enquiries.

Banking sector NPLs have been predicted to jump to 12.5 per cent of the total loans of the banks this year, up from the central bank’s target level of five per cent at the end of last year, according to Agusto & Co, Nigeria’s main rating agency.
This is even worsened by the weakening consumer confidence and slide in the country’s Gross Domestic Product (GDP).

In view of the current macro-economic challenges in the country, the CBN last week announced that it had granted a one-off forbearance to banks this year to write-off their fully provided NPLs without waiting for the mandatory one year.

The CBN had explained that it acknowledged the request by banks to amend the requirements of Section.3.21 (a) of the Prudential Guidelines, which mandates banks to retain in their records, fully provided NPLs for a period of one year before they are written off.

“The CBN has no intention of repealing the provision of the above mentioned section of the guidelines. In view of the current macro-economic challenges, however, the CBN hereby grants a one-off forbearance this year 2016 to banks, to write-off fully provided for NPLs without waiting for the mandatory one year,” Martins stated in the circular addressed to all banks.

In a related development, in view of what it described as the abuse of access to its Standing Lending Facility (SLF) by banks and other authorised dealers, the CBN has also directed all authorised dealers to refrain from accessing the discount window on the settlement date for government securities’ auctions.

The securities referred to are CBN bills, Nigerian Treasury Bills and Federal Government of Nigeria bonds. It stressed that any violation of the directive would result in the denial of access to the SLF.

Responding to question on the need to conduct special examination on the banks to mitigate systemic risk in the industry, Martins stated: “I totally agree. We are currently carrying out examinations in that regard and also conducting stress test. At the end of it, we will determine how best the industry should be supported.”

Meanwhile, as the tenure of the Chief Executive Officer of the National Bureau of Statistics (NBS), Mr. Yemi Kale, ends today, financial market analysts have commended his contribution to the transformation of the country’s data system since his appointment in 2011.

The NBS has since 2011 grown as a reliable statistics body whose data have continued to be relied on nationally and internationally for effective planning.

Speaking on the achievement of the NBS boss since his appointment, Head of Research, SCM Capital Limited, Mr. Sewa Wusu, told THISDAY: “Kale has done significantly well. In terms of statistics on the Nigerian economy, such as inflation, GDP, and others that have really helped the economy in terms of planning and understanding the level at which the economy is performing, he has done very well.

“Today, we have series of data on the macro economy and that has helped in policy formulation and planning. Before Kale came, we didn’t have the robustness of most of the reports we are seeing now. To a large extent, the NBS has been living up to its expectation under Kale. That is what you enjoy when you have a round peg in a round hole. They know what to do at every point in time.

“More can still be done and he can still do more, that is why I am advising that his tenure be renewed. Lots of foreign investments banking firms now do proper analysis on the Nigerian economy because of the structured NBS data release timetable,” he stated.

One of Kale’s greatest achievements was seeing through the rebasing of Nigeria’s GDP which, in 2014 saw Nigeria emerge as the largest economy in Africa, a position, which it lost to South Africa recently. Among several other achievements including the unveiling of the Enhanced General Data Dissemination System (e-GDDS), which would help Nigeria attract the much needed Foreign Direct Investments (FDIs) into the country.

The e-GDDS is the data standards initiatives by the International Monetary Fund (IMF) which aims at enhancing member countries’ data transparency and promoting development of sound statistical systems. The page particularly serves as a one-stop publication vehicle for essential macroeconomic data.

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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Loans

Loan Default: AMCON Takes Over IBEDC

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AMCON

Further to the judgment of the Federal High Court on the 8th of September 2021, the Asset Management Corporation of Nigeria (AMCON) has announced its takeover of the Ibadan Electricity Distribution Company (IBEDC).

This is following the electricity distribution company’s default in a loan servicing agree­ment executed with Polar­is Bank.

“AMCON has been ap­pointed receiver/manager over all the Assets of In­tegrated Energy Distribu­tion and Marketing Lim­ited as stipulated in the instruments executed in favour of AMCON by vir­tue of the Loan Purchase and Limited Servicing Agreement executed with Polaris Bank Limited dat­ed 30th November 2018 and a Notice of Appointment of the Receiver/Manager dated August 6th, 2021, which was duly stamped by the Commissioner for Stamp Duties”, a statement from AMCON reads.

AMCON further revealed that it has appointed Osayaba Giwa-Osagie to take over the entire undertakings on the IBEDC, including the assets, shares and interests in related companies and entities, and also monies kept in any of the 25 banks in Nigeria.

Investors King gathered that AMCON’s takeover might also not be unconnected to some crisis inside the power company, a development which has reportedly affected its ser­vice delivery to customers.

IBEDC’s Chief Operating Officer (COO), Engineer John Ayodele however allayed the fears of the IBEDC staff.

“I hereby wish to inform all staff that there is no cause for alarm. We are assured of job security which entails our position/duties in the company, being entitlements to our salaries and other benefits etc.”, he said.

Investors King recalls that the IBEDC, during a stakeholders’ meeting in May 2021 had disclosed that it secured N4.2billion from the Central Bank of Nigeria (CBN) to improve power supply to its numerous customers in Ogun State.

According to Ayodele, the facility would be channelled into building lines to improve power/electricity supply to the communities. He had also revealed that 80 percent of the money collected by IBEDC goes for other services, adding that the company has lost over N3billion in estimated billing.

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Finance

Lawmakers Consider Capital Market Bill, Propose Ten-Year Jail Term For Ponzi Scheme Operators

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Ponzi schemes

Some Nigerians would still cringe at the mere mention of ‘Investment’. This is due to their exposure to the dubious schemes of fake investment platforms and Ponzi schemes.

Hence, as part of efforts in curbing this, a bill seeking the prohibition of Ponzi and Pyramid schemes has passed the second reading at the house of representatives. The bill also proposes a 10-year prison sentence for operators of the Ponzi and pyramid schemes.

The bill, which was sponsored by the Chairman, house committee on capital markets, Ibrahim Babangida, also seeks to repeal and re-enact the Nigerian Capital Market, Investments and Securities Act.

It is titled, ‘A Bill for an Act to Repeal the Investments and Securities Act, 2007 and Enact the Investments and Securities Bill to Establish Securities and Exchange Commission as the Apex Regulatory Authority for the Nigerian Capital Market as well as Regulation of the Market to Ensure Capital Formation, the Protection of the Market to Ensure Capital Formation, the Protection of Investors, Maintain Fair, Efficient and Transparent Market and Reduction of Systematic Risk; and for Related Matters.’

A Ponzi scheme is an investment fraud that pays existing investors with the money collected from new investors. The scheme generally leads victims to believe that their earnings are from genuine business investments, and therefore, can be sustained.

Regarded as one of the world’s largest Ponzi schemes of all time, the Mavrodi Mundial Moneybox (MMM) is a Russian-founded Ponzi scheme which left some Nigerians in despair at their lost “investments” after the company suddenly went into ‘extinction’ in 2017.

After MMM, a lot of other fake investment platforms have emerged and are still emerging, ripping Nigerians off their monies.

The bill, when passed into law, will enable SEC to properly regulate the capital market, ensure capital formation, protect the market to ensure capital formation, protect investors, maintain a fair, efficient and transparent market and reduce systematic risks.

According to Babangida, current trends in capital markets regulation have made it necessary to make major improvements to the Nigerian capital market, the Investments and Securities Act, Act No. 29 of 2007, which was initially signed into law by the late President Umar Musa Yar’adua in June 2007.

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Banking Sector

Parallex Bank Debuts As Newest Commercial Bank In Nigeria

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Parallex Bank

Parallex Bank, a licenced Microfinance Bank, has successfully transited to a commercial bank after 14 years of operations.

According to the bank’s chairman, Dr. Adeola Phillips, the bank is delving into the commercial banking space, to drive consumer-centric innovation that will propel the banking industry to greater heights.

The bank’s Managing Director, Mr. Olufemi Bakre, who spoke during the launch of the bank’s commercial operations, affirmed that the bank’s promise to its customers is to be an enabler of limitless banking. According to him, the vision of the bank is to be the preferred financial solution provider redefining customer experience through innovation.

The bank revealed its plan to disrupt the market and delight customers with very attractive offers. It noted that most transactions on Parallex mobile app are free but beyond that, customers will have the freedom to do much more with the app.

Parallex bank converted from Parallex Microfinance Bank (a National Microfinance Bank incorporated in 2008 as a Unit MFB) to a commercial bank duly licensed by the Central Bank of Nigeria to carry out commercial banking services. This is a first-of-its-kind achievement in the Nigerian banking space.

The bank noted that it is “poised to be the preferred financial solutions provider redefining customer experience through digital innovations.

“This we will achieve by leveraging the best talents and technology to deliver unparalleled value to our stakeholders. With a strong ecosystem anchored around the customer, we offer a superior product portfolio that is customer-focused and innovative, yet simple”.

With a vision to leverage the best talent and technology to deliver unparalleled value to all its stakeholders, the bank noted that it is open to working with various stake holders to amplify its impact and capability.

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