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FG, states, LGs Record N1.1tn Shortfall in Allocation

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  • FG, states, LGs Record N1.1tn Shortfall in Allocation

The three tiers of government received a total of N4.95tn instead of N6.1tn projected to be distributed to them in the 2016 fiscal year from the Federation Account Allocation Committee, investigation has shown.

This created a shortfall of about N1.1tn within the 12-month period based on the analysis by our correspondent.

The committee, headed by the Minister of Finance, Mrs. Kemi Adeosun, is made up of commissioners of finance from the 36 states of the federation.

Other members are representatives from the Federal Inland Revenue Service; the Nigeria Customs Service; Revenue Mobilisation, Allocation and Fiscal Commission as well as the Central Bank of Nigeria.

The federation account is currently being managed on a legal framework that allows funds to be shared under three major components – statutory allocation, Value Added Tax distribution; and allocation made under the derivation principle.

Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments, 20.60 per cent.

The framework also provides that Value Added Tax revenue be shared thus: the Federal Government, 15 per cent; states, 50 per cent; and local governments, 35 per cent.

Similarly, extra allocation is given to the nine oil producing states based on the 13 per cent derivation principle.

Findings also revealed that the inability of the revenue generating agencies to meet up with their revenue targets owing to the challenges facing the economy was largely responsible for the dip in revenue, which impacted negatively on the allocations to the three tiers of government.

Figures of statutory allocations obtained from FAAC revealed that while the government had projected to distribute N509.1bn monthly among the three tiers of government, the shutdown of oil installation facilities, which led to a drop in crude oil production, made it difficult to generate enough revenue to achieve that target.

For instance, within the 12-month period of last year, the government could only surpass the monthly budgeted allocation to the three tiers of government thrice.

The months are August, where the highest amount of N691bn was shared; July, which had a total allocation of N559.03bn; and September, which had N510.27bn.

A further analysis showed that the sum of N387.77bn was allocated in January; February had N370.38bn; while March, April and May had N345.09bn, N299.74bn and N281. 5bn, respectively.

For the months of June, October, November and December, the committee distributed N305.12bn, N420bn, N386.87bn and N400bn in that order.

The Chairman, Forum of Finance Commissioners of FAAC, Mahmoud Yunusa, while speaking during an interview in Abuja on the sidelines of this month’s FAAC meeting, said the scarcity of resources to implement the programmes of government owing to the economic recession had made it imperative for states to be prudent and transparent in financial management.

He said, “The resources are no longer there and so whatever resources that we have must be effectively, transparently and judiciously used for the benefit of the people.

“The expectations of the people are very high and the resources are very lean day by day and so we have to add value to the people. People are clamouring for change and we have to look for a way to ensure that the lives of people are changed.”

He said the states would work with the Federal Government to address the current recession in the country.

Yunusa, who is also Commissioner for Finance in Adamawa State, said that the target of the states was to generate enough revenue internally to pay salaries.

He stressed that once this was done, whatever allocation received from the federation account would be used by the states for capital projects.

He said, “The recession is a problem but we should see it as a blessing in disguise because before now, all the states relied solely on the Federal Government but now because the money is no longer there, we are forced to look inwards for the opportunities and potential in our respective states and how to exploit them.

“We have to reduce the cost of governance and plug all the loopholes in our expenditure.”

He added that the challenge had helped the states to look at their revenues and restructure their expenditures to fit into the realities on the ground.

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

Unity Bank Forecasts N380.815 Million Profit for Q3 2021

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Unity bank - Investors King

Unity Bank Plc on Friday predicted profit after tax of N380.815 million for the third quarter (Q3) ending September 30, 2021.

This represents a decrease of N162.3 million year-on-year when compared to the N543.14 million recorded in the same quarter of 2020.

The lender projected gross earnings of N10.890 billion for the quarter while interest income was expected to hit N7.204 billion.

Interest expense was estimated at N5.351 billion for the period. Unity Bank puts net revenue from funds at N1.853 billion in Q3 2021.

Other incomes were expected at N3.686 billion and impairment for credit loss was projected at N885.663 million in the quarter under review.

The bank forecasts net operating income at N4.653 billion and puts operating expenses at N4.237 billion.

Profit before tax was projected to hit N416.191 million in the quarter, below the N590.4 million achieved in the same quarter of 2020.

Unity Bank’s Cashflow Projections for the Third Quarter Ending September 30, 2021 (₦)

Net cash provided by operating activities 1,720,815,055

Net cash flow provided by/(used) in investing activities (260,034,996,531)

Net cash flow from operating and investing activities (258,314,181,476)

Net cash used in financing activities 258,694,996,531

Net increase/(decrease) in cash and cash equivalents 380,815,055

Cash and cash equivalents, beginning of period 107,494,314,017

Cash and cash equivalents, end of period 107,875,129,072

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Finance

Ecobank Raises US$350 Million Tier 2 Sustainability Notes

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Ecobank - Investors King

Ecobank Transnational Incorporated (“ETI”), a Lomé based parent company of the Ecobank Group listed on Nigerian Exchange Limited, announced it has successful raised US$350 million Tier 2 Sustainability Notes.

This represents the first ever Tier 2 Sustainability Notes by any financial institution in Africa.

The lender disclosed in a statement signed by Adenike Laoye, Group Head Corporate Communications/Chief of Staff to the Group Chief Executive Officer, Ecobank.

According to the bank, the Tier 2 issuance is the first to have a Basel III-compliant 10NCS structure outside of South Africa in 144A/RegS format and will be listed on the main market of the London Stock Exchange. The bond, which matures in June 2031, has a call option in June 2026 and was issued with a coupon of 8.75 percent with interest payable semi-annually in arrears.

The lender said an equivalent amount of the net proceeds from the notes will be used by ETI to finance or re-finance, new or existing eligible assets as described in ETI’s Sustainable Finance Framework, available at https://ecobank.com/group/sustainability-financeframework on which DNV has issued a Second Party Opinion.

Speaking on the issuance, Ade Ayeyemi, Group Chief Executive Officer of ETI, stated: “This is a landmark issue for Ecobank, and indeed the success of this first Sustainable Tier 2 issuance is testament to our clear strategy, solid positioning across the pan-African banking space as well as our deliberate and long term focus on sustainable initiatives. We are particularly pleased with the diverse orderbook which reflects the confidence investors have in Ecobank to deliver on our commitment to sustainable financing.”

Investor interest for this Sophomore Eurobond issue was global, including United Kingdom, United States, Europe, the Middle East, Asia and Africa, achieving a 3.6x oversubscribed orderbook, of over US$1.3 billion at its peak.

The transaction was anchored at the start by Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (“FMO”), a Dutch development bank, with a committed US$50 million order. The notes saw significant demand from asset managers from Europe on opening (including the UK) demonstrated by a number of large tickets.

Overall, investor interest was global including accounts from the United States, the Middle East, Africa and Asia.

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Banking Sector

CBN Debunks Report on Planned Nationalisation of Unity Bank

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The Central Bank of Nigeria (CBN) has denied planning to nationalise Unity Bank Plc as alleged by an online news medium.

Reacting to the report, the Acting Director, Corporate Communications Department, CBN, Osita Nwanisobi, described it as, “fake news” and should be discarded in its entirety.

He said: “The report is fake news. There is no iota of truth in it.” He added that the public should disregard such news.

The report had claimed that the apex bank’s target examination of Unity Bank showed that the Tier 2 lender is in ”grave financial condition”, with Capital Adequacy Ratio (CAR) and Non- Performing Loans (NPL) ratio that breached prudential standards.

However, analysts note that just last month, the CBN’s Monetary Policy Committee ( MPC) noted in the communiqué it issued at the end of its meeting that the banking industry is in good health.

According to the communique: “the Capital Adequacy Ratio (CAR) and the Liquidity Ratio (LR) both remained above their prudential limits at 15.8 and 38.9 per cent, respectively. The Non-Performing Loans (NPLs) at 5.89 per cent in April 2021, showed progressive improvement compared with 6.6 per cent in April 2020.”

Unity Bank’s audited FY’ 2020 results showed improved performance in key parameters. For instance, the Bank’s gross loans portfolio increased by 92.9 per cent to N206.2 billion in 2020 from N106.9 billion in 2019.

The bank’s total assets rose by 67.90 per cent when compared with N293.05 billion achieved in the comparative period of 2019. Also, the lender posted gross earnings of N42.71 billion compared with N44.59 billion recorded in the comparative period of 2019, reflective of its business and economic realities of the time.

Its customer deposit portfolio grew by 34.4 per cent to N356.62 billion in 2020, up from N257.69 billion posted in the corresponding period of 2019. Profit after tax stood at N2.09 billion, while profit before tax was N2.22 billion during the year under review amidst the tough macroeconomic environment where it operated. Its net operating income rose to N25.46 billion from N23.21 billion in the corresponding period of 2019, representing a 9.71 per cent increase.

This is even as the net interest income recorded a significant jump, as it rose by 7.60 per cent to N17.75 billion from N16.49 billion in the corresponding period of 2019.

Furthermore, the bank sustained the growth momentum demonstrated in its 2020 full year earnings as it recorded an impressive performance of 43 per cent in both profit before and after tax in Q1 2021.

The Bank’s unaudited Q1 results show that the retail lender profit before tax (PBT) grew by 43 per cent to N784.3million from N550.1 million recorded in the corresponding period of 2020.

The profit after tax (PAT) for the period, which also grew by 43 per cent stood at N721.5million compared to the N506.1million recorded in Q1 2020.

As an outcome of increased focus on supporting local enterprises and industry, the asset portfolio also showed significant growth in loan book of 76 per cent as net loans and advances to customers increased to N223.2 billion, from N126.6 billion recorded in the corresponding period.

The total assets of the bank for the period showed an appreciable growth of 42 per cent to close at N521.5 billion, from N366.8 billion in the corresponding period of 2020.

The balance sheet of the bank had been considerably de-risked with the non-performing loan (NPL) ratio of near-zero per cent, which it has consistently maintained over time. With this, the bank ranks topmost in risk management assessment.

The bank recorded gross earnings of N11.5 billion, representing a marginal decline of three per cent when compared to N11.9billion posted in the corresponding period of 2020.

The bank has assuredly intensified its recapitalization efforts by the recent updates the lender provided to the supervisory authority and significant mileage is currently being recorded as part of its corporate transformation and renewal programmes.

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