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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/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Computer Village Traders Demand Refunds as Lagos State Cancels Katangowa Project

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Traders at the renowned Computer Village in Lagos find themselves in a state of uncertainty following the abrupt termination of the multibillion-naira Katangowa project by the Lagos State Government.

The project, which was aimed at relocating the bustling tech market from its current site in Ikeja to the Agbado/Oke-Odo area of the state, has left traders in a state of limbo.

Despite the cancellation of the project reportedly occurring two years ago, traders claim they were not informed by either the government or the developers, Bridgeways Limited.

This lack of communication has left them in a precarious position, particularly concerning the substantial upfront payments made by some traders to the developers.

Chairman of the Computer Village Market Board, Chief Adebowale Soyebo, expressed dismay at the lack of communication from the authorities regarding the project’s termination.

He explained that neither the government nor the contractors had officially informed them of the decision, leaving traders in the dark about the fate of their investments.

Traders who had made payments to Bridgeways Limited now seek clarity on the refund process. The absence of official communication has compounded their concerns, with many uncertain about the fate of their investments.

While acknowledging the payments made by traders, Lagos State Governor’s Adviser on e-GIS and Urban Development, Dr. Olajide Babatunde, assured that the government would facilitate refunds.

He, however, said there is a need for proper identification and verification to ensure that affected traders receive their refunds accordingly.

The termination of the Katangowa project has reignited debates about the relocation of Computer Village.

Traders assert that the issue of relocation should not be raised until the new site is at least 70% completed, as per their agreement with the government.

The cancellation of the Katangowa project underscores the challenges associated with large-scale urban development projects and the importance of transparent communication between stakeholders to avoid such situations in the future.

As traders await further directives from the government, they remain hopeful for a resolution that safeguards their interests and ensures the continuity of one of Nigeria’s most prominent tech markets.

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Government Begins Disbursement of N200bn Support Fund to Manufacturers and Businesses

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The Ministry of Industry, Trade and Investment has initiated the disbursement of the long-awaited N200 billion Presidential Conditional Grant Scheme.

This is the beginning of a vital phase in the government’s strategy to provide financial assistance to manufacturers and businesses across Nigeria.

The scheme, which is being administered through the Bank of Industry (BOI), has been divided into three categories of funding, totaling N200 billion.

The disbursement process comes after an exhaustive selection process and verification of applicants to ensure transparency and accountability in the allocation of funds.

Doris Aniete, spokesperson for the Ministry of Industry, Trade and Investment, announced the progress in a statement posted on the trade minister’s official X (formerly Twitter) handle.

Aniete highlighted that verified beneficiaries have already started receiving their grants, signaling the beginning of the phased disbursement strategy.

“We are pleased to inform you that the disbursement process for the Presidential Conditional Grant Programme has officially commenced. Some beneficiaries have already received their grants, marking the beginning of our phased disbursement strategy,” stated Aniete.

She further disclosed that by Friday, April 19, a substantial number of verified applicants are set to receive significant disbursements.

However, Aniete emphasized that disbursements are ongoing, and not all applicants will receive their grants immediately, assuring that all verified applicants will eventually receive their grants in subsequent phases.

The initiation of the disbursement process comes after more than eight months since President Bola Tinubu announced the grant for manufacturers and small businesses.

The scheme aims to mitigate the adverse effects of recent economic reforms and foster sustainable economic growth by empowering businesses with financial support.

President Tinubu had outlined the government’s commitment to strengthening the manufacturing sector and creating job opportunities through the disbursement of N200 billion over a specified period.

The funding is intended to provide credit to 75 enterprises, each able to access up to N1 billion at a low-interest rate of 9% per annum.

However, the implementation of the programme has faced challenges, including delays and criticisms regarding the registration process.

Femi Egbesola, President of the Association of Small Business Owners, expressed concerns over the slow pace of data collation and suggested that genuine businesses were being discouraged from accessing the loans.

Despite the hurdles, the commencement of the disbursement process signifies a significant step forward in the government’s efforts to provide vital support to manufacturers and businesses, potentially revitalizing economic activities and driving growth across various sectors.

As beneficiaries begin to receive their grants, the impact of this initiative on the nation’s economic landscape is eagerly anticipated.

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MicroStrategy Rally Crushes Short Sellers, Wiping Out $1.92 Billion

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MicroStrategy- Investors King

Short sellers betting against MicroStrategy found themselves facing significant losses as the company’s rally wiped out $1.92 billion since March.

This development comes amidst a rally that has seen MicroStrategy’s stock outperform bitcoin, causing a considerable hit to those who had taken a bearish stance on the tech firm.

According to data from S3 Partners, short sellers have been on the losing end since March, as MicroStrategy’s stock surged, highlighting the impact of the rally on those betting against the company’s success.

This loss underscores the challenges faced by short sellers in a market where certain stocks experience rapid and unexpected price increases.

The rally in MicroStrategy’s stock is attributed to several factors, including the approval of several spot bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) earlier in the year.

This move by the SEC brought bitcoin, a once-nascent asset class, closer to the mainstream and fueled investor interest in companies like MicroStrategy, known for their significant holdings of the cryptocurrency.

MicroStrategy, which held nearly 190,000 bitcoin on its balance sheet as of the end of 2023, has indicated its intention to continue increasing its exposure to the digital currency.

The company’s decision to sell convertible debt to raise money for additional bitcoin purchases further bolstered investor confidence and contributed to the stock’s rally.

Analysts at BTIG noted that the premium for MicroStrategy’s stock reflects investors’ desire to gain exposure to bitcoin indirectly, especially those who may not have the means to invest directly in the cryptocurrency or ETFs.

The company’s ability to raise capital for bitcoin purchases is seen as a positive sign for shareholders, adding to the optimism surrounding its stock.

However, despite the recent rally and optimism surrounding MicroStrategy, the crypto industry as a whole continues to be heavily shorted.

Short interest in nine of the most-watched companies in the crypto space remains high, standing at 16.73% of the total number of outstanding shares, more than three times the average in the United States.

Moreover, concerns persist regarding the SEC’s stance on cryptocurrencies, with some experts suggesting that the approval of spot bitcoin ETFs may not necessarily indicate a broader acceptance of other similar products, such as spot ethereum ETFs.

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