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FG’s Huge Debts Crippling Financial System – CBN

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Emefiele
  • FG’s Huge Debts Crippling Financial System

The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday called on the Federal Government to urgently evaluate the level of its domestic indebtedness and develop a framework for settling these debts.

The committee, in a communique issued at the end of its two-day meeting held at the headquarters of the CBN in Abuja, warned that the huge government indebtedness to economic agents had slowed down business activities.

In the communique, which was read by the CBN Governor, Mr. Godwin Emefiele, the committee noted that the development was not good for the economy as it was compromising the integrity of the financial system.

While reiterating that monetary policy alone could not address the current economic crisis, the CBN governor noted that the committee called for an enrichment of fiscal and other sector initiatives and interventions towards resolving the growth challenges in the economy.

He said these interventions were vital in order to promptly revive confidence in the economy.

Emefiele said, “Members stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations.

“The MPC urged the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitising the debts in order to settle its outstanding domestic contractual obligations, which cut across all sectors of the economy.

“These accumulated debts have slowed the business activities of economic agents, most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the bank (CBN) to commit to greater surveillance and deployment of early warning systems in managing the banking system.”

The CBN governor said the committee called on security agencies to sustain their checks on the activities of illegal foreign exchange operators in order to bring sanity to that segment of the market.

He said, “The extant foreign exchange regulation outlaws the trafficking of currency on the streets as some unlicensed operators currently do.

“Thus, to evolve an appropriate naira exchange rate that stabilises the foreign exchange market, Bureau De Change operators must strictly observe the terms and conditions of their licences.”

On whether the CBN was supporting jail terms for people hoarding dollars, Emefiele said the apex bank would not support any such move.

He said while the current foreign exchange regulations of the CBN did not in any way support jail term for people who hoard dollars, he was aware that the Nigerian Law Reform Commission was working towards reviewing the regulations.

The apex bank boss, however, added that the CBN would not support any move to prescribe jail terms for people who hoard dollars.

He said, “Let me use this opportunity to reiterate that it is not in our foreign exchange regulations that people should be jailed or their dollars confiscated. But I am aware because just today (Tuesday), I was told that the Nigerian Law Reform Commission is looking at reviewing the exchange regulations, just like it normally will from time to time depending on the exigency of the time.

“We have not been contacted regarding whether or not some of the clauses that are involved are included in the review to be conducted by the Law Reform Commission.

“But I am saying here categorically that if we are contacted, or whenever it becomes an issue for discussion, we will advise against a clause that forbids people from keeping their dollars if they chose to, or a law that says people should be jailed for keeping foreign currencies.”

When asked if the apex bank was concerned about some of the risks facing the banking system owing to the current economic crisis, the CBN governor admitted that while all players in the financial system were facing “tremendous risks,” the central bank would ensure that they would not crystalise to a point where depositors’ funds would be lost.

He said, “As a result of the current challenges being faced by the global economy, all agents in the financial system, such as banks and other players, are facing tremendous risks.

“When there is a slowdown or recession, naturally banks will face certain risks such as non-performing loans rising and different other risks, and this imposes on the regulator a greater challenge to ensure that it strengthens its prudential guidelines to ensure that the banks and particularly depositors are protected.

“Nigerian banks, like other banks in other climes, are facing risks. But those risks are surmountable, and the central bank is doing all its best to ensure those risks don’t crystalise to a point where we will begin to talk about depositors losing their deposits. So for that reason, the rumour about banking sector risks is overtly elevated.”

On whether the apex bank was considering reducing the number of BDC operators so as to better regulate their activities, the governor said the CBN might consider that option at the appropriate time.

He said, “We believe that everybody (BDC) is entitled (to have a licence) once the regulations are set; there is no need to preclude you if you meet the conditions. But of course, naturally, the regulator, which is the CBN, has a right to put in place policies that limit entry. If we want to limit entry, we know what to do.

“I can assure you we will do it anytime we decide to limit entry or even exacerbate exit from the market, and that is something we will look into at the appropriate time.”

On the foreign exchange inflow through the CBN, the governor said the country recorded a decline of $447.5m or 31.85 per cent from $1.4bn in September to $957.37m in October.

He attributed the decrease to lower crude oil and other government revenues in the period under review, lamenting that despite the resumed Joint Venture payments in October, the total outflows also continued to decrease.

Foreign exchange outflows, according to him, dropped significantly by 58.68 per cent from $2.25bn to $1.01bn during the period.

Emefiele said the committee implored the CBN to continue to direct more focus at making foreign exchange available to the agriculture and manufacturing sectors of the economy.

This, according to him, can be achieved by enforcing its policy directing Deposit Money Banks to allocate 60 per cent of the available foreign exchange to these sectors.

On the Monetary Policy Rate, the CBN governor said the committee decided to leave it unchanged at 14 per cent.

He explained that all the 10 members who attended the MPC meeting agreed to maintain the current monetary policy stance.

Apart from the MPR that was retained at 14 per cent, the governor said the committee also voted to retain the Cash Reserves Ratio at 22.5 per cent.

Also retained were the liquidity ratio, which was left at 30 per cent; and the asymmetric window, which was left at +200 and -500 basis points around the MPR.

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

Increase in Banks’ Bad Loans Caused by Construction Sector

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The banking industry saw a 13.6 percent MoM (month on month) increase in bad loans to N2.76 trillion in August 2021, and the Central Bank of Nigeria attributed the increase to the rising loan defaults in the country’s construction sector.

The construction industry is touted to be under intense pressure due to the rise in the prices of building materials.

The Central Bank of Nigeria said this in its August Economic Report, stating that the NPL (Non-Performing Loans) ratio of the banking industry went up to six percent in August, one percentage point more than the five percent regulatory limit.

According to data from the apex bank, the total credit to the domestic economy went up by 2.2 percent to reach N46 trillion in August, from the N44.99 trillion recorded in July. This suggests that the NPL (bad loans) went up to N2.76 trillion in August from N2.43 trillion seen in July, a N330 billion or 13.6 percent increase.

The big rise in NPLs was explained by the CBN as a result of increased loan defaults in the construction sector, which accounted for about 4.7 percent or N905 billion of credit owed to other sectors in August, going up from 4.6 percent of N879 billion back in July.

The apex bank said the increase in the construction sector’s non-performing loans was due to the increase in process of building materials, which made it more difficult for contractors to meet their debt obligations.

Regarding this development, the Managing Director of Built2Suit Limited – a firm of architects – Ibukun Odu, said that apart from the increase in loan defaults, construction firms may have to turn to layoffs in order to reduce overhead cost.

Odu lauded the correctness of the CBN report, stating that a lot of contractors were finding the period extremely difficult. Odu stated that all the main components have witnessed increases of between 75 – 90 percent. He mentioned cement, which used to be sold at N2500 but is now sold between N4000 and N4200.

 

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Banking Sector

FirstBank DecemberIssaVybe: Showing Kindness as You Vybe

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The roof is already getting raised with #FirstBankIssaVybe, #DecemberIssaVybe campaigns. With FirstBank, it is always a total experience of being woven into the fabric of society from banking at its finest, to music, fashion, arts, and sports. Across the spectrum of human endeavour, FirstBank stands tall behind its over 32 million customers and counting. 

As FirstBank makes every day a vybe every December, it is also passionate about ensuring that everyone vybes with kindness. This is in sync with the words of Maurice Elias, Professor of Psychology, “without kindness, our communities, families, schools, and classrooms become places of incivility.” As we get the blast of the season, the 127 years strong banking brand in furtherance of its kindness campaign has created a simple calendar to ease your ability to create a SPARK in the lives of people around you.

At FirstBank, SPARK stands for Start Performing Acts of Random Kindness. The SPARK initiative was launched 4 years ago to make a difference in the nation by seeking to inspire and institutionalize kindness. By encouraging kindness, empathy and consideration for others, SPARK is placing FirstBank at the forefront of the social impact space. The unique way FirstBank is amplifying kindness is through its different directorates and departments. This way the Bank is reaching more communities, touching more lives, and spreading kindness.

The FirstBank kindness drive stands on three (3) pillars of compassion, civility, and charity. Compassion and charity readily come tops when we think about kindness, and FirstBank is championing the cause to also promote civility through the SPARK initiative. Civility covers the aspects of kindness that does not cost you anything to use in igniting the world around you. Imagine as you get to the venue of the next FirstBank’s DecemberIssaVybe show, and you give up a parking lot closer to the event hall to the car behind you?

The global head of marketing and corporate communication of FirstBank, Folake Ani-Mumuney says “At FirstBank, we spend every waking moment working to create meaning in the lives of our customers and publics. We are inspiring kindness because it brings meaning to lives and creates a happier society. So, as you vybe this Yuletide, vybe with kindness.”

Kindness does not have to cost you a kobo, so click here to download and share your kindness calendar for those simple tips to start performing acts of random kindness every day this December.

The need to promote kindness in our homes, schools, fun places, and the society at large cannot be over-emphasized especially with the increased incidence of bullying prevalent around us. In promoting the need for kindness in education and ‘cyber kindness’, FirstBank sponsored two impactful webinars during its corporate responsibility & sustainability week in July 2021. You can click here to access the Zoom recordings of the webinars.

Kindness should be a way of life, and FirstBank is at the forefront. Join the kindness train, vybe with kindness this Yuletide and always!

 

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Banking Sector

Stanbic IBTC Emerges Most Outstanding Commercial Bank Brand in Nigeria

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Stanbic IBTC Bank PLC, a subsidiary of Stanbic IBTC Holdings PLC, was named the “Most Outstanding Commercial Bank Brand in Nigeria” at the 2021 edition of the BrandCom Awards which was held recently.

The awards, organised by Brand Communicator Magazine recognised brands, organisations and personalities. It took cognisance of their outstanding contributions to the growth and development of the Nigerian economy.

Wole Adeniyi, Chief Executive, Stanbic IBTC Bank, appreciated the organisers for the award, and noted that Stanbic IBTC Bank has over the years provided unparalleled services and designed products tailored explicitly towards meeting the needs of its customers. 

Wole noted that the award would spur the organisation to continue providing excellent services to its clients. The awards reaffirm the organisation’s commitment to providing world-class financial services to its network of clients.

The Stanbic IBTC Bank Chief Executive said: “We are delighted to have emerged the Most Outstanding Commercial Bank Brand” at the BrandCom Awards. This award confirms that we prioritise our customers’ interests because they are the reason we are in business. We pledge to continue developing innovative products and services that are customer-centric, just as we are committed in our quest to continue fulfilling the financial needs of our customers at all times.”

Wole added that Stanbic IBTC would strive to continue exceeding its customers’ expectations.

Stanbic IBTC remains committed to providing a simplified customer-friendly experience that enhances customer satisfaction and exposes them to new trends in the financial services industry.

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