The Managing Director/CEO, Fidelity Bank Plc, Nnamdi Okonkwo has said the short term nature of banks deposits is one of the major reasons borrowers cannot access long-term loans in Nigeria.
Speaking at the 2016 annual conference of the Finance Correspondents Association of Nigeria (FICAN) in Lagos, at the weekend, Okonkwo said although banks would want the economy to grow by lending to farmers and other productive sectors of the economy, they are constrained by the nature of their deposits.
“When there is a run in the system, the owners of the short term funds will come for their money and you have to pay them. And if you pay them, the people you gave long-term loans cannot pay up. Then you begin to have distress in the system,” Okonkwo stated.
Speaking on the theme: ‘Nigeria Beyond Oil: Financing Options for Non-Oil Exports’, he said: “A whole lot of people do not realize that banks’ business is to buy and sell money. So, I come to the market to purchase my raw material, which is cash and my finished goods are also cash. Every other thing banks do are added services. Banks get a lot of bashing for not lending long-term. Then I ask you, if as a banker, I know that secret place, where I can find long-term funds, we will be the number one bank in Nigeria today, because I can lend long-term.”
Okonkwo noted that most depositors who have huge amounts to save, invest in short term basis and collect huge interest on such deposits.
“I want borrow N100 million, then bring me one depositor who will place N100 million with me at 10 per cent and I will lend at 15 per cent. Remember that in calculating those 10 per cent of N100 million, what you have actually given me is N75 million because N25 million will be placed with the CBN as Cash Reserve Ratio (CRR). And for me to access N5 million out of the N25 million CRR cash, I have to lend the money for use in industrial production. Then what are your risk assessment criteria if the industrial sector you want to lend to is fighting for breath, “ he asked.
Okonkwo added apart from the CRR, the bank has to also pay five per cent of the N100 million initial deposit to Nigeria Deposit Insurance Corporation (NDIC) premium.
The Fidelity Bank boss also listed lack of right framework as discouraging local banks from lending long term to Small and Medium Scale Enterprises(SMEs). Okonkwo equally decried the problem of lack of infrastructure, such as lack of power, adding that his bank with about 248 branches generate private electricity to power its operations, the level of power that can serve many cities.
He said the Nigerian Export Import Bank (NEXIM Bank) and his bank are taking measures to enhance non-oil export and create wealth for Nigerians. Both lenders, he said, want exporters to explore opportunities presented by the N500 billion non-oil Export Stimulation Facility as well as the expansion of the export credit Re-discounting and Refinancing Facilities (RRF) to develop the economy, stimulate their operations, and create jobs for the people.
According to him, Fidelity Bank is always at the forefront of financial services solutions and lending, stressing that supporting SMEs goes beyond funding.
Oil Posts 2% Gain for the Week Despite India Virus Surge
Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.
Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.
Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.
In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.
However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.
In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.
The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.
“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.
The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.
“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.
“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”
Lagos Commodities and Futures Exchange to Commence Gold Trading
With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.
According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.
Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.
He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.
“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”
“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.
Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.
Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook
Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.
Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.
Both contracts hit the highest level since mid-March in intra-day trade.
“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.
“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.
Crude prices were also supported by a large fall in U.S. inventories.
The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.
Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.
“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.
The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.
Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.
“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.
This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.
“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.
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