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Trouble in Nation’s Mortgage Banks Over Liquidity Squeeze



Nigeria Mortgage Refinance Company NMRC
  • Trouble in Nation’s Mortgage Banks Over Liquidity Squeeze

A Crisis looms in the nation’s financial system as lack of funds hits the Primary Mortgage Banking (PMB) segment.

It was learnt that the situation which has become critical for one of the mortgage banks, as it no longer honours depositors’ claims, may soon result in its collapse and affect the sub-sector. As each depositor is only insured to the tune of N500,000, the collapse of PMBs would spell disaster for their customers.

The development could undermine confidence in the operations of the banks, set the national housing policy backward and lead to the collapse of some of the mortgage institutions.

The critically ill mortgagee found itself in the situation because it ignored the liquidity ratios, as it invested all depositors’ funds in assets that are now not easily convertible.

The inability of about 15 mortgage companies to pay premium contributions in 2016 is an indication of operational challenges in the sub-sector.

The Nigeria Deposit Insurance Corporation (NDIC) affirmed that about 15 of the 35 PMBs did not pay the insurance premium as at December 2016, a situation that put the customers at higher risk.

The Managing Director of NDIC, Umaru Ibrahim said the commission’s capacity to sustain its efforts in ensuring that insured institutions are put on the part of sustainable growth and development depends largely on the premium contribution, which is an amount paid periodically to the insurer (NDIC) by the insured (mortgage banks) for covering their risk.

Frontline economist and Chief Executive Officer of Financial Derivatives Limited, Bismarck Rewane, said the challenge could be a corporate governance issue in one or two institutions, but not in the entire industry. According to him, the possibility of having one or two issues would be there, but as a quoted company, the regulators would handle matters right.

But Rewane said there might be crisis if more than 40 per cent of the operators could not pay their premium contributions to the deposit insurer. “It means they are not in business and the situation is no longer a challenge, but a crisis. It means some are just being there until the whole crisis manifests,” he said.

The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, described the failure of any deposit-taking institution, particularly a mortgage bank, to honour its obligations as partly a case of liquidity management, which boils down to corporate governance.

“Although the sub-sector is the weakest in the financial system, with total deposit liability that can easily be written off by the regulator, any shakeout will lead to losses in cash and perception.

“Every financial institution will become suspect if there is a distressed bank now. First, the sub-sector will be deserted. Second, even conventional banks will experience a cold response from customers. This is because not many know the differences. The mortgage refinancing company must be made to work more now,” he said.

He said that government’s policy of high interest rate on its risk-free securities at between 16 per cent and 18 per cent would not allow investments into the mortgage sub-sector, just as conventional banks would soon face the same effect.

NDIC spokesman, Hadi Birchi, reiterated that the commission’s mandate is to settle every depositor of failed financial institutions, first with the insured amount and second with as much as the assets of the company can provide.

While acknowledging that the commission is aware of the challenges in the mortgage banks and is currently looking for solutions, he said customers and other stakeholders should not panic.

Efforts to reach the spokesman of the Central Bank of Nigeria, Isaac Okorafor, through text message and calls were not successful.

At the weekend, an industry source told The Guardian that the number of defaulters on the premium contributions had decreased to 13, but affirmed that most of their investments (understandably housing projects) did not bring about the estimated returns.

“The economy is harder now and some who are expected to buy the houses are not forthcoming. The houses are there, but we cannot get money since they are not taken up,” the source said.

The chief executive officer of the mortgagee told The Guardian that the situation was tough, but that the company was doing its best to turn things around.

“The condition of the economy is also compounding the matter. There is no money and people are not meeting up to their obligations to the bank. The assets are there but you cannot easily convert them now because of the recession.

“I must admit that the projections of the bank did not turn up well. Yes, the liquidity ratios were well overshot, but I think the calculation was that the investments will turn up,” the bank boss said.

Also, the situation, which started about three years ago, has become so serious that the company failed to honour some customers’ demand in the last one year.

As at third quarter of 2016, the Nigerian Bureau of Statistics (NBS) could only report the sub-sector’s first quarter (Q1) activities on deposits, loans and interest rates, an indication of failing corporate governance structure.

Even with incomplete disclosures, the NBS said the sub-sector, made up of 35 institutions, had N78.1 billion in loans and leases; domestic debts of N65.6 billion; and National Housing Fund contribution of N9.7 billion in its books as at Q1.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17




Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17

Tony Elumelu owned Heir Holdings Limited and its related company Transnational Corporation of Nigeria Plc on Friday announced it has completed the purchase of 45 percent stake in Oil Mining Lease (OML 17) through TNOG Oil and Gas Limited.

The acquisition includes all assets of Shell Petroleum Development Company of Nigeria Limited (30 Percent), Total E&P Nigeria Ltd (10 percent) and ENI (five percent) — in the lease.

It was further stated that TNOG Oil and Gas Limited will also have the sole right to operate OML 17.

The field presently has a production capacity of 27,000 barrels per day. Also, there are estimated 2P reserves (proven and probable) of 1.2 billion barrels and an additional one billion barrels in possible reserves — all of oil equivalent.

A consortium of global and regional banks and investors provided a financing component of $1.1 billion for the largest oil and gas financing in Africa in over a decade.

In a statement released on Friday, Shell said the completion was after all the necessary approvals have were received from authorities.

“A total of $453m was paid at completion with the balance to be paid over an agreed period. SPDC will retain its interest in the Port Harcourt Industrial and Residential Areas, which fall within the lease area,” the SPDC said.

Speaking after the completion of the deal, Elumelu said “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.

“As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.

“I would like to thank Shell, Total and ENI, for the professionalism of the process, the Federal Government of Nigeria, the Ministry of Petroleum Resources, and the NNPC for the confidence they have placed in us.”

Tony Elumelu is the Chairman of Heirs Holdings Limited, Transcorp and United Bank for Africa Plc.

Also, read Transcorp Plc Acquires FGN’s 100% Equity in Afam Power for N105 Billion

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Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods



Institute of Chartered Shipbrokers

Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods

Exporters have said the recently introduced pre-export requirements by the Central Bank of Nigeria is creating unnecessary bottlenecks for exporters and the movement of goods out of the country.

Exporters, who spoke under the aegis of the Network of Practicing Non-oil Exporters of Nigeria (NPNEN), said the electronic Nigeria Export Proceed Form now required by financial institutions from exporters had come with so many challenges.

Ahmed Rabiu, the President, NPNEN, explained that the new policy had several requirements that often led to delays and loss of income on the part of exporters.

He said, “We acknowledge the CBN’s desire to ensure that all exports out of Nigeria are documented in order to ensure that the proceeds of such exports are repatriated.

“However, the reality on the field shows that the process is causing undue delays and consequently, encouraging corruption.

According to them, in the new pre-export requirements, the Central Bank of Nigeria wants an export transaction to be initiated through eNXP processing on the trade monitoring system.

After which exporters are expected to have a pre-shipment inspection agent, the Nigeria Customs Service and other designated government agencies carry out their pre-export inspections.

The exporters said the pre-shipment inspection agent was expected to issue a clean Certificate of Inspection while Customs would issue the Single Good Declaration. All these they said takes time and delay goods from leaving the country on time.

Pointing to a recent report, they said about N868 billion worth of goods bound for export were stuck at the ports due to the new policy.

Speaking further Rabiu said, “For example, for the PIA to issue the CCI, the exporter is required to upload a certificate of origin as one of the supporting documents for the eNXP.

“The PIA is also required to upload the CCI to the TRMS(M) and until this is done, the Customs service will not issue the Single Good Declaration.”

He added, “After issuing the SGD, the customs is further required to upload it into the TRMS before the goods are allowed to be gated into the port and loaded on the vessel by the shipping line.

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Ardova Plc in Talks to Acquire Enyo Retail and Supply Limited




Ardova Plc in Talks to Acquire Enyo Retail and Supply Limited

Ardova Plc, Nigeria’s leading integrated energy company, has commenced discussions to acquire Enyo Retail and Supply Limited.

According to the statement issued and signed by Oladehinde Nelson-Cole, Ag. Company Secretary/General Counsel, Ardova Plc, Enyo is one of the newest and fastest-growing retail and supply companies in the downstream sector.

It stated, “This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.”

“This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.

Speaking on the yet to be completed deal, Mr. Olumide Adeosun, CEO, Ardova Plc, said upon completion, Ardova will retain the Enyo branded stations which will operate side by side with the Ardova brand while simultaneously leveraging on the strengths of Ardova and its group companies.

He added that the two companies are determined to conclude the deal by the end of Q1 2021.

Enyo presently operates over 90 stations across the nation and attends to over 100,000 retail customers on a daily basis.

Ardova Plc and Enyo Retail & Supply Limited promised to furnish stakeholders with more information on the progress of the deal.

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