- FX Gains Will Boost Banks’ Earnings, Say Analysts
As more banks prepare to release their nine months results, financial analysts at FBN Quest have said many of them will record improved performance expected from forex (FX) related gains.
United Bank for Africa Plc last week became the first bank to release its nine months results, posting a growth of 7.3 per cent in profit before tax of N61.5 billion.
The analysts said second quarter (Q2) results showed that banks were able to capitalise on the naira’s weakness by being net long dollars (within regulatory limits), and book significant fx-related gains as a result.
“For our universe of banks, on average, fx-related gains accounted for at least 40 per cent of their half year (H1) 2016 pretax profits,” they said.
FBN Quest explained in Q2 the naira depreciated by 30 per cent while in Q3, it fell further by 11 per cent.
“All else being equal, it follows that banks are likely to report additional fx-related gains. On its Q2 2016 result conference call, GT Bank indicated that as at then (end-August), the additional fx gains the bank was sitting on was N40bn. For the tier 1 banks in particular, even if they have to book additional provisions due to loans going bad, the fx gains are likely to dwarf the impact of the former,” the analysts said.
They noted that Q3 2016 earnings season kicked off with UBA last week.
“The bank reported results that were generally encouraging, especially given the challenging macroeconomic backdrop. Pre-tax profits grew 16 per cent to N21 billion and puts the bank on track to meeting market expectations of a full year pretax profit of at least N75 billion, equivalent to a y/y growth of 10 per cent. We expect other tier 1 banks to follow UBA over the coming weeks. Their results are likely to show similar trends and in some cases better-than-expected results on the back of fx-related gains,” they said.
UBA had said that though partly driven by the depreciation in the value of the naira, it also recorded a significant 21 per cent year-to-date growth in deposits to N2.496 trillion and a similar 26 per cent growth in total assets to N3.478 trillion.
Commenting on the results the Group Managing Director/CEO of UBA, Mr.
Kennedy Uzoka, said: “I am pleased with our performance in the first nine months of the year. Notwithstanding the negative economic growth in Nigeria, we maintained growth in earnings and sustained our asset quality.
Increasingly, we are leveraging our unique pan-African platform to drive new customer acquisition and grow market share across our African subsidiaries.”
CBN Extends Letter of Credit Issuance Timeline Amid Forex Crisis
Move Aims to Address FX Scarcity Challenges and Enhance Customer Service
The Central Bank of Nigeria (CBN) has announced an extension of the timeline for issuing letters of credit from 24 hours to five working days, according to the newly approved 2023 service charter.
This adjustment comes as the country grapples with foreign exchange scarcity, impacting local and international trade.
The 2020 service charter initially stipulated a 24-hour timeline for the issuance and management of letters of credit, but the updated charter now reflects a timeline extension to five working days.
Also, the CBN has prolonged the timeline for the registration of Form M and NXP from 24 hours to two working days.
The move follows the CBN’s unification of all forex market segments in June 2023, aimed at promoting liquidity and stability.
However, this measure appears to have led to increased market instability, with the naira losing nearly a fifth of its value.
Reports indicate that foreign suppliers are now rejecting letters of credit from Nigerian businesses, affecting the importation of goods and services.
Letters of credit are crucial for the payment of visible goods imports, wherein a bank commits in writing to pay the exporter a specified sum within a defined timeframe upon receipt of proper documentation from the customer.
The extended timelines for letters of credit, Forms M, and NXP in the service charter are seen as measures to manage cash flow and instill confidence in the process amidst the ongoing forex crisis.
CBN Governor Yemi Cardoso stressed the commitment to responsive and citizen-friendly governance through efficient, responsible, and transparent service delivery in the revised service charter.
The move is part of the CBN’s effort to comply with the Business Facilitation Act 2022 and enhance ease of doing business in Nigeria.
Unity Bank MD Advocates Policy Actions to Stem Gender-Based Violence in Nigeria
The Managing Director of Unity Bank Plc, Mrs. Tomi Somefun has called for comprehensive policy actions that will dismantle the structures that enable gender-based violence in Nigeria.
At the Ebony Life Cinema, the venue of the film screening in Lagos, Unity Bank supported the BECKMA movie premiere by ARDA Development Commuications Inc. which was held to highlight issues of Gender-Based violence and driving positive change in society.
Making the call, Somefun stated that the Bank committed to partnering with the movie premiere and putting the power of the brand behind BECKMA as the event brings sustainability and gender equality to the front burner.
Represented by Unity Bank’s Group Head of Compliance, Mrs. Patricia Ahunanya, Somefun noted that “9 percent of women aged 15 to 49 had suffered sexual assault at least once in their lifetime and 31% had experienced physical violence,” citing a recent study by UNDP in Nigeria.
Speaking further, Somefun said “Gender-based violence is not just a women’s issue, but a societal ill that demands our collective attention. It is high time for us to step forward and advocate for comprehensive policy actions that will dismantle the structures allowing such atrocities to persist”.
She added, “I urge policymakers to enact stringent laws against gender-based violence, ensuring swift and severe consequences for perpetrators. Our homes and various organisations must also be a catalyst for change, inspiring others to follow suit.”
While commending the ARDA Development Communications Inc. for their initiatives to promote gender equality and empowerment in line with SDG5, Somefun assured of the Bank’s commitment to sustainable initiatives and further collaborative initiatives and advocacy programmes for the elimination of gender-based violence.
Nigeria’s NIBSS Directs Banks to Disconnect Non-Deposit Financial Institutions from NIP System
Banks in Nigeria have received a directive from the Nigeria Inter-Bank Settlement System (NIBSS) to disconnect Switches, Payment Solution Service Providers (PSSPs), and Super Agents from the NIBSS Instant Payment Outwards System.
The circular, dated December 5, 2023, highlighted that including these non-deposit-taking financial institutions as beneficiaries on the NIP funds transfer channels violates the Central Bank of Nigeria (CBN) guideline on electronic payments.
The NIBSS emphasized that while Switches, PSSPs, and Super Agents might process outward transfers as inflows to banks, their licenses do not permit them to hold customers’ funds.
The circular referred to the CBN’s guidelines on electronic payment of salaries, pensions, suppliers, and taxes, dated February 2014, as the basis for this regulatory stance.
The directive also pointed to a circular dated May 11, 2018, titled “Permissible Services and Products of PSSP Operation in Nigeria,” reinforcing the need for compliance.
As a result, banks were urged to delist all Switches, PSSPs, and Super Agents from the NIP Outward Transfer channels while allowing their participation in inward transfers.
In Nigeria’s payment ecosystem, operators are required to obtain licenses such as Switching and Processing, Mobile Money Operations, Payment Solution Services, or Regulatory Sandbox from the CBN.
Only Mobile Money Operators (MMOs) have the authority to hold customer funds, according to the CBN’s regulatory framework.
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