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FG Moves Against Agencies Over Financial Abuse

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  • FG Moves Against Agencies Over Financial Abuse

The Federal Government has decided to come down hard on some its revenue-generating agencies accused of engaging in activities that are considered to be abuse of the revenues they generate.

Instead of remitting the revenues to the Federation Account, the agencies were said to be diverting them through several illegal means and ploys.

The Minister of Finance, Mrs. Kemi Adeosun, was said to have briefed a meeting of the National Economic Council presided over by Vice-President Yemi Osinbajo on the development.

Anambra State Governor, Willie Obiano; Bauchi State Governor, Muhammed Abubakar; and the Minister of State for Petroleum Resources, Ibe Kachikwu, briefed State House correspondents at the end of the meeting held inside the Presidential Villa, Abuja.

Obiano said the council was told that the Ministry of Finance and the Revenue Mobilisation Allocation and Fiscal Commission were working together to stop the financial abuse said to have been going on for a decade.

He, however, did not name the agencies involved in the said sharp practices.

Obiano said, “The Minister of Finance detailed to the council certain activities of some revenue-generating agencies that amounted to financial abuse of the revenues they generate, which are meant to have been remitted to the Federation Account, but diverted through several undue and illegal means and ploys.

“The activities include paying salaries above the specifications of the RMAFC; converting official cars to personal ownership under 48 hours of purchase; inappropriate and arbitrary monetisation of medical allowances; undue and excessive overseas travels, lavish training allowances and conference spending; and excessive and personal loan approvals, including unapproved mortgages, among others.”

The governor added, “The Ministry of Finance and the RMFAC are working together to rein in this abuse as these revenue agencies raise as much as N1.5tn yearly and spend almost 90 per cent of it on recurrent expenditure in clear violation of due process and the Constitution.

“The minister added that this financial abuse has been going on for a decade, whereby the agencies hide revenues that ought to go into the Federation Account, but assured the council that such activities will now be exposed and terminated as directed by the President.”

Although Obiano did not mention the names of the affected government agencies, a source who attended the meeting told our correspondent that the agencies were the same as those that were recently indicted for collecting revenues in foreign currencies but remitting to the Federation Account the naira equivalents.

He said, “This revelation is a continuation of the searchlight being beamed on the country’s revenue-generating agencies. You know there was a time some of them were accused of collecting revenues in foreign currencies but remitting to the Federation Account the naira equivalents.

“They are the same set of agencies. They include the Federal Inland Revenue Service, the Nigeria Customs Service and the Nigeria Ports Authority, among others.”

Another source, who also attended the meeting, said Adeosun mentioned federal hospitals and schools as others engaged in the act.

The source, however, said the minister was not specific on the federal hospitals and schools involved.

“The Minister of Finance specifically mentioned hospitals and schools in her presentation,” the source added.

Obiano also said Adeosun put the balance in the Excess Crude Account at the moment at $2.4bn.

On the budget support loan facility, the governor said N1.1bn was disbursed in October to 35 states and that a total of N6.3bn had now been disbursed to each of the 35 states.

He added that governors brought up the alleged N2bn ecological fund said to have been paid to some states by the last administration under unclear circumstances and criteria.

“There were complaints that state governments did not have equal access to the fund amid allegations of political preferences. Vice President Osinbajo assured the council that the matter would be properly investigated, broadly reviewed and that forthright counsel would be made to the President regarding the matter,” Obiano stated.

Abubakar said the council was also briefed on measures being put in place to energise Micro, Small and Medium-scale Enterprises to drive economic growth.

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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Banking Sector

Stanbic IBTC: Working Towards Net Zero Emissions

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As part of the Stanbic IBTC 2021 Sustainability Week event, Stanbic IBTC Holdings PLC, a member of Standard Bank Group, organised a sustainability webinar tagged “Working Towards Net Zero Emissions”.

The objective of the virtual event which was held on Monday, 20 September 2021 via the Group’s #Bluetalks platform, was to promote public awareness on the impact of climate change and provide practical methods towards reducing carbon footprints and achieving net zero emissions.

Delivering his opening remark at the event, Dr. Demola Sogunle, Chief Executive, Stanbic IBTC Holdings PLC said: “We all cannot continue to ignore our responsibility in the current changes to the climate. Through small adjustments leading to a more conscientious and sustainable lifestyle, each one of us can take part in the global climate protection project. As reflected in one of our strategic value drivers SEE (Social, Environmental and Economic) Impact, Stanbic IBTC is focused on ensuring it does business responsibly whilst positively impacting the society and environment where we operate. As such, the 2021 Stanbic IBTC Sustainability Week is an opportunity for us to advance awareness around practical steps we are taking, and more which we can take, to make our world a better place.”

The webinar featured seasoned experts including Temesoye Jack, Group Head, Sales, Banks, Gas Stations and SMEs, Starsight Energy; Professor Kenneth Amaeshi, Chair in Sustainable Finance and Governance at the European University Institute (EUI) and Oluwasegun Olajuwan, Group Chief Executive Officer, THLD Group.

Temesoye Jack stated that renewable energy sources like solar energy can help countries attain net zero emissions. She said, “Solar energy can help us move towards reducing greenhouse emissions. We need to have more energy efficient offices nationwide. However, this shift will not happen overnight as it is a gradual process.”

She explained that Nigeria has barely scratched the surface when it comes to renewable energy and emphasised that sustainable practices do not have to end in the office but must be observed in all areas of the country

Prof. Kenneth Amaeshi highlighted the importance of harmonising technology upgrades and sustainable growth to reduce carbon emissions. He explained that sustainability at the global level is targeted at mitigating the adverse effects of climate change.

According to Prof. Kenneth, “From recent surveys, it is clear individuals are ready to go green. The affordability of clean energy will determine if we will be able to reduce carbon emissions.”

Speaking on practical steps that can be adopted to help in achieving net zero emissions, Oluwasegun Olajuwan, Group Chief Executive Officer, THLD Group, said “Autogas has been around for 40 years, and Nigeria is not fully embracing it. It is safer, cleaner and more cost effective than fossil fuel and diesel. Vehicle conversion from fuel to Autogas is affordable. CNG (Compressed Natural Gas) is more efficient than fuel. The use of CNG in vehicles mitigates the emission of nitrous oxide and hydrocarbons by 40% and 90% respectively, compared to petrol.”

Omolola Fashesin, Head of Sustainability at Stanbic IBTC, thanked the panellists for the informative session, which helped create awareness of alternative sources that can help reduce carbon emissions. She urged the participants to apply learnings from the webinar to take practical steps to reduce their carbon footprint.

Finally, in his closing remarks, Kunle Adedeji, Executive Director Finance and Value Management stated that “at Stanbic IBTC, we are committed to facilitating a better and more sustainable future for all. We have already commenced various workstreams that will help us on the journey towards Net Zero emissions. Some of these include understanding our energy sources, consumption patterns and possible areas for efficiency; adoption of cleaner energy sources in our office locations (leveraging Autogas and Solar energy solutions); and adoption of Tree Planting programs which will help us with carbon sequestration.”

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Credit to Private Sector Rises to N33.26 Trillion in August 2021

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The Central Bank of Nigeria (CBN) has disclosed that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021.

The N33.36trillion figure announced by the CBN is a new record that was fuelled by banks, among others increased lending to real sector.

CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.

However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.

In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
Analysts believe banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).

An economist and Chief Executive Officer, BIC Consultancy Services, Dr Boniface Chizea said he is optimistic that banks credit to real sector, amid severe challenges are yielding positive results. According to him, “The volume of credit which seems humongous will deliver expected dividends despite perceived inhospitable investment environment. We should therefore remain confident and hopeful that desired impact must be felt if not immediately then in due course.

“We must also accept the fact that we would be challenged if we want to isolate the direct impact of the credit on the economy. So, we must remain assured that the credit is not money down the drain.”

On his part, Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable.

He noted that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.

Yusuf said: “My guess is that a significant percentage of this have been given to large corporates, multinationals and high end medium enterprises. The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.

“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity. The context in which businesses are operating is as important as the funding, if not even more important. The totality of the investment environment must be right for sustainable real sector development to be achieved.”

He added, “Therefore, to complement the credit to the private sector, the other factors that should reckoned with include infrastructure quality, especially power, roads and railways. There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation.

“These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems. Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers is critical to achieving sustainable development of the economy.”

The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.

According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”

He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.

“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.

“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.

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Banking Sector

Fitch Upgrades Bank Of Industry’s National Rating to ‘AAA(Nga)’

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Fitch Ratings has upgraded Bank of Industry’s (BoI) National Long-Term Rating to ‘AAA(nga)’ from ‘AA+(nga);’ and affirmed the Nigeria-based bank’s Long-Term Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.

It said the upgrade of BOI’s Long-Term National Rating of ‘AAA(nga)’ reflects the linkage between the bank and the sovereign has strengthened, as evident in the significant size of the CBN guarantees provided for BOI’s recent external funding.

The full list of rating actions shows that “BOI’s Long-Term IDR and SRF are equalised with the Long-Term IDR of the sovereign as we believe that the Nigerian authorities have a high propensity to support BOI.

Fitch said its assessment primarily reflects the following: The bank’s important and clearly defined policy role in funding economic growth in Nigeria; Its 99.9% state ownership, split between the Ministry of Finance (94.8%) and the Central Bank of Nigeria (CBN; 5.1%); and the entirety of the bank’s wholesale funding being either provided or guaranteed by the Nigerian state. However, Fitch also views the ability of the authorities to support BOI as limited by Nigeria’s ‘B’ Long-Term IDR.

BOI is Nigeria’s primary development bank, with the mandate of financing the country’s emerging industrial sector.

The bank plays an important role in supporting government policies and in providing counter-cyclical loans since the onset of the economic crisis resulting from the coronavirus pandemic.

According to the international rating agency, “BOI’s funding has increased substantially since March 2020, as the bank secured two large syndicated loan facilities of EUR1 billion and USD1 billion from syndicates of commercial banks and multilateral development banks, which are fully guaranteed by the CBN. The proceeds of the borrowings are swapped with the CBN, boosting its foreign-exchange (FX) reserves and providing BOI with Nigerian naira to support its developmental activities.”

“BOI’s management has indicated that this fundraising will serve to expand the bank’s lending to priority sectors. It might take BOI substantial time to channel the recently attracted funding to borrowers and as of end-1H21, 48% of BOI’s total assets were kept in liquid government bonds and cash, compared with 20% at end-2019.

Fitch says BOI maintains solid capitalisation and leverage metrics (end-1H21: equity-to-asset ratio of 19.4%), which is prudent for the bank’s exposure to the volatile operating environment.

“Profitability is not a key objective; however, BOI continues to generate reasonable returns on equity (1H21: 18% annualised) driven by healthy net interest margins and, so far, moderate loan impairment charges,” Fitch noted.

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