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Trouble in Nation’s Mortgage Banks Over Liquidity Squeeze

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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.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Oando Targets 100,000 Barrels Per Day Production by 2028

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Oando Plc

Nigerian energy company Oando is targeting a production of 100,000 barrels per day by 2028, following its acquisition of Eni’s Nigerian Agip Oil Company (NAOC) earlier this year.

This was disclosed by Oando Executive Director Alex Irune during an exclusive Fireside Chat at the ongoing African Energy Week: Invest in African Energies conference with Bloomberg News Correspondent Jennifer Zabasajja.

He shared the company’s future expansion plans and role in Nigeria’s energy transition and plans by the company to contribute to the 2 million barrels per day.

Mr Irune also highlighted the growing role of indigenous firms in the sector, particularly as international oil companies (IOCs) divest from onshore and shallow water assets.

“In the space of 24 months, you’re going to see about 60 percent-70 percent [of Nigeria’s production] by indigenous players, just based on the transition of IOCs to the deep offshore and the acquisitions we have seen, whether it’s Seplat, our deal or the ongoing Renaissance deal,” he said.

He also revealed that Oando is focused on maximizing the development of assets acquired through its deal, which increased its stake in OMLs 60, 61, 62 and 63 to 40 percent and nearly doubled its reserves to one billion barrels of oil equivalent.

The company’s ownership in NAOC’s joint venture assets will also grow, including 40 oil and gas fields, 12 production stations, and key infrastructure including pipelines, processing plants and the Brass River Oil Terminal.

He also noted that Oando remains open to future mergers and acquisitions across the continent.

“We’re always looking to do a deal. We stay where we have a comparative advantage, but we don’t rule out any markets. Nigeria is the first place we look – we have an immense amount of potential. As a leading energy company, we owe it to the country to reach that potential.”

Mr Irune also discussed the role of Nigeria’s Petroleum Industry Act (PIA) in strengthening the investment case, particularly for gas in Nigeria and fostering industry synergies.

The Oando-NAOC deal was the first M&A transaction following the PIA’s implementation and the company plans to leverage the deal to boost oil and gas production, with a view to supporting Nigeria’s energy transition in the future.

“In the immediate term, our focus is on producing every drop of oil we can to be able to fund that transition journey. We will use gas as a transition fuel – our assets are largely gas assets as a company, and Nigeria is largely a gas province as a country.”

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Alleged Bankruptcy: AMCON Withdrawals Case Against Dapo Abiodun’s Petroleum Company

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Asset Management Corporation of Nigeria (AMCON) has said it has withdrawn the case it instituted against Heyden Petroleum Limited.

The Corporation had approached the Lagos Division of the Federal High Court and prayed for the court’s approval to takeover Heyden Petroleum Limited owned by the Ogun State Governor, Dapo Abiodun.

AMCON had accused the company of bankruptcy, saying it was moving to acquire it in order to save it from further risk.

The presiding judge of the Federal High Court, Justice Ambrose Lewis-Allagoa had, after reviewing AMCON’s motion and supporting documents, agreed with it and ordered an interim takeover of the petroleum company.

Meanwhile, in a swift reversal, AMCON, in a statement issued by its Head of Corporate Communications, Jude Nwauzor, disclosed that the Asset Management Corporation had discontinued the matter, noting that “AMCON is not in dispute with Heyden Petroleum.”

Nwauzor said, “Our attention has been drawn to a publication in the media regarding to the pending litigation between the Asset Management Corporation of Nigeria (AMCON) and Heyden Petroleum Limited

“We hereby notify the general public that AMCON and Heyden Petroleum Limited have settled all issues between them amicably, and Heyden Petroleum Limited has demonstrated commitment to meeting their obligations and has been making payments accordingly.

“Given this latest development, AMCON has formally discontinued its pending litigation against Heyden Petroleum Limited, particularly Suit No. FHC/AMC/67/2024.

“As a responsible debt recovery agency of the Federal Government of Nigeria, it is not the practice of AMCON to engage in a media trial of obligors who are meeting their obligation. Accordingly, the general public is urged to disregard any negative commentaries on the relationship between AMCON and Heyden Petroleum Limited.”

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N1.3bn Fraud Allegation: Court Orders Arrest of Dana Air MD For Not Showing Up For Arraignment

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Mr. Hathiramani Ranesh

A Federal High Court in Abuja has ordered the arrest of the Managing Director of Dana Air, Mr. Hathiramani Ranesh for failing to appear in court for his arraignment in the alleged N1.3 billion fraud preferred against him by the Office of the Attorney-General of Federation (AGF).

The Federal Government had on October 10, 2024, asked the court to issue a bench warrant for the arrest of Dana Air after failing to honour invitation for his arraignment.

The AGF had filed a six-count charge against Ranesh and two others and marked Dana Group PLC and Dana Steel Ltd as the 2nd and 3rd defendants, respectively.

The prosecution argued that Ranesh and the two companies, along with others still at large, committed a felony between September and December 2018 at the DANA Steel Rolling Factory in Katsina.

They were accused of conspiring to remove, convert, and sell four units of industrial generators—three units Ht of 9,000 KVA and one unit of 1,000 KVA—valued at over N450 million. These assets were reportedly part of the Deed of Asset Debenture used as collateral for a bond, which remains valid.

The defendants and others at large were said to have conspired to fraudulently divert N864 million between April 7th and 8th, 2014, at House No. 116, Oshodi-Apapa Expressway, Isolo-Lagos.

This sum, reportedly part of the bond proceeds from Ecobank intended for revitalizing production at Dana Steel Rolling Factory in Katsina, was allegedly diverted for unauthorized purposes.

They were also accused of conspiring to transfer N60,300,000 to an Atlantic Shrimpers account (No: 0001633175) at Access Bank, fraudulently diverting funds earmarked as part of the Ecobank bond proceeds for resuming production at the Katsina factory.

The cumulative amount involved in the charge totals N1,374,300,000. Each offense is said to be contrary to and punishable under Section 516 of the Criminal Code Act, Laws of the Federation of Nigeria, 2004.

After Mojisola-Okeya Esho, counsel to the Federal Government, had requested for bench warrant to be issued against Ranesh, the defence lawyer, B. Ademola-Bello, disagreed with Esho, saying that they had filed a preliminary objection challenging the jurisdiction of the court to hear the matter and that the prosecution had already been served.

Delivering ruling on the application, Justice Obiora Egwuatu, agreed with Esho that Ranesh’s arrest was necessary due to his failure to appear in court despite being served with the charge and several proceedings having taken place.

Justice Egwuatu held that, according to Section 184 of the Administration of Criminal Justice Act (ACJA), 2015, the court has the authority to issue an arrest warrant against any defendant who fails to attend court sessions.

Egwuatu ordered that Ranesh must appear before the court on January 13, 2025, before any objections can be raised.

Consequently, he adjourned the matter till January 13, 2025, for hearing.

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