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Dump Multiple Exchange Rates, Forex Curbs, IMF tells FG

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IMF
  • Dump Multiple Exchange Rates, Forex Curbs, IMF tells FG

The International Monetary Fund on Thursday urged the Federal Government to lift the remaining foreign exchange restrictions and scrap the system of multiple exchange rates in order to revive the Nigerian economy.

The recommendation came in the Washington-based fund’s regular assessment of Nigeria’s economy.

The report came on the heels of a recent visit by a team of the IMF officials to Nigeria to assess the economy.

In a statement released on its website and titled: ‘IMF Executive Board concludes 2017 Article IV consultation with Nigeria’, the fund emphasised that stronger macroeconomic policies were urgently needed to rebuild confidence and foster economic recovery in the country.

It read in part, “Directors underscored that external adjustment is necessary to protect foreign currency buffers and reduce vulnerabilities. They commended the recent easing of some exchange restrictions and urged the authorities to remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence.

“Directors emphasised that these policies should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations and to limit the risk of exchange rate overshooting, as well as structural reforms to improve competitiveness.”

While commending the Central Bank of Nigeria’s efforts to keep the country’s banks afloat, the IMF stated that the issue of declining asset quality in the financial services industry must be urgently addressed.

It stated, “Directors welcomed the steps to strengthen banking sector’s resilience through stronger prudential requirements. With asset quality declining, they recommended further intensifying bank monitoring, enhancing contingency planning, and strengthening resolution frameworks.

“Directors encouraged quickly increasing the capital of undercapitalised banks and putting a time limit on regulatory forbearance.”

The IMF said it recognised that the Nigerian economy had been negatively impacted by low oil prices and production.

It commended the efforts already made by the Federal Government to reduce vulnerabilities and enhance resilience, including increasing fuel prices, raising the Monetary Policy Rate, and allowing the exchange rate to depreciate.

However, in the light of the persisting internal and external challenges, the fund emphasised that stronger macroeconomic policies were urgently needed to rebuild confidence and foster economic recovery.

It said, “Directors welcomed the authorities’ Economic Recovery and Growth Plan, which focuses on economic diversification driven by the private sector, and government initiatives to strengthen infrastructure, including the recently adopted power sector recovery plan. However, they underlined that without stronger policies, these objectives may not be achieved.

“Directors generally emphasised the need for a front-loaded, revenue-based fiscal consolidation starting in 2017, to reduce the Federal Government’s interest payments-to-revenue ratio to sustainable levels. They underscored that priority should be given to increasing non-oil revenue, including through raising VAT and excise rates, strengthening compliance, and closing loopholes and exemptions.”

It added, “Administering an independent fuel price-setting mechanism to eliminate fuel subsidies, strengthening public financial management, and developing a well-targeted social safety net would also support the adjustment. Directors stressed the need to contain the fiscal deficit of state and local governments, including through improved transparency and monitoring.

“Directors emphasised that ambitious structural reforms are key to achieving a competitive, investment-driven economy that is less dependent on oil. Priority should be given to improving infrastructure, enhancing the business environment, improving access to financing for small enterprises, and strengthening governance and anti-corruption efforts. Timely and effective implementation of these measures would promote sustainable and inclusive growth.”

A staff report, an accompanying document seen by Reuters and addressed to the IMF’s executive board, outlined a raft of failings in Nigeria’s handling of its economy.

The World Bank has been in talks with the Federal Government for more than a year over an application for a loan of at least $1bn and the African Development Bank has $400m on offer. But talks have stalled over economic reforms.

Nigeria’s economy contracted by 1.5 per cent last year.

“Under unchanged policies, the outlook remains challenging,” the report stated, adding that growth would “pick up only slightly” to 0.8 per cent this year, mostly reflecting some recovery in oil production.

The fund noted that the country’s fiscal deficit increased to 4.7 per cent of the Gross Domestic Product in 2016, up from 3.5 per cent in 2015, due to revenue shocks.

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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Banking Sector

Zenith Bank Achieves Historic Milestones in 2023 With Stellar Triple-Digit Topline And Bottom-Line Growth

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Zenith Bank - Investors King

Zenith Bank Plc has announced its audited results for the year ended December 31, 2023, achieving a remarkable triple-digit growth of 125% in gross earnings from NGN945.6 billion reported in 2022 to NGN2.132 trillion in 2023.

According to the audited financial results for the 2023 financial year presented to the Nigerian Exchange (NGX), this impressive triple-digit growth in gross earnings resulted in a Year-on-Year (YoY) increase of 180% in Profit Before Tax (PBT) from NGN284.7 billion in 2022 to NGN796 billion in 2023.

Profit After Tax (PAT) also recorded triple-digit growth of 202% from NGN223.9 billion to NGN676.9 billion in the period ended December 31, 2023.

The increase in gross earnings is primarily due to growth in interest and non-interest income. Interest income increased by 112% from NGN540 billion in 2022 to NGN1.1 trillion in 2023. Non-interest income grew by 141% from NGN381 billion to NGN918.9 billion in the same period.

The increase in interest income is attributed to the growth in the size of risk assets and their effective repricing, alongside the rise in the yield of other interest-bearing instruments over the year. Growth in non-interest income was driven by significant trading gains and an increase in gains from the revaluation of foreign currencies.

The cost of funds grew from 1.9% in 2022 to 3.0% in 2023 due to the high interest rate environment while interest expense increased by 135% from NGN173.5 billion in 2022 to NGN408.5 billion in 2023. Notwithstanding the 32% growth in operating expenses in 2023, the Group’s cost-to-income ratio improved significantly from 54.4% in 2022 to 36.1% in 2023 due to improved top-line performance.

Return on Average Equity (ROAE) increased by 118% from 16.8% in 2022 to 36.6% in 2023, underpinned by improved gross earnings, as the Group sought to deliver better shareholder returns. Return on Average Assets (ROAA) also grew by 95% from 2.1% to 4.1% in the same period.

The Group has continued to deepen its market leadership in key corporate and retail deposit segments as customer deposits increased by 69% from NGN9.0 trillion to NGN15.2 trillion in 2023.

Its retail drive continues to yield dividends as retail deposits now constitute 46% of total deposits (compared to 44% in 2022) and grew by 77% from NGN3.97 trillion in 2022 to NGN7.04 trillion in 2023, also reinforcing increased customer confidence in the Zenith brand.

Total assets increased by 66% from NGN12.3 trillion in 2022 to NGN20.4 trillion in 2023, largely due to growth in total deposits and the revaluation of foreign currency deposits.

Gross loans grew by 71% from NGN4.1 trillion in 2022 to NGN7.1 trillion in 2023 due to the revaluation of foreign currency loans and the growth in local currency risk assets.

As a result of the disciplined and diligent approach to risk assets creation and management, the loan growth did not significantly impact the Non-Performing Loans (NPL) ratio, which increased marginally from 4.3% to 4.4% despite the heightened risk environment and challenging operating environment, an attestation to the Group’s resilience despite headwinds and a challenging macroeconomic environment.

Also, the prudential ratios remain within regulatory thresholds, with the Capital Adequacy Ratio (CAR) and liquidity ratio at 21.7% and 71.0%, respectively, at the close of 2023.

As a demonstration of its commitment to shareholders, the bank has announced a proposed final dividend payout of NGN3.50 per share, bringing the total dividend to NGN4.00 per share.

In 2024, the Group will complete the transition to a holding company structure, which is anticipated to position it advantageously for exploring emerging opportunities in the Fintech space while bolstering its digital and retail banking initiatives.

Furthermore, the Group is undertaking urgent necessary actions to meet the new minimum NGN500 billion equity capital requirement to maintain its international authorisation within the timeframe stipulated by the Central Bank of Nigeria (CBN).

This will strengthen its presence in key markets to continue positioning for sustainable growth and value addition for stakeholders.

Zenith Bank’s track record of excellent performance has continued to earn the brand numerous awards, including being recognised as Best Bank in Nigeria, for the fourth time in five years, from 2020 to 2022 and in 2024, in the Global Finance World’s Best Banks Awards; the Best Bank for Digital Solutions in Nigeria in the Euromoney Awards 2023, being listed in the World Finance Top 100 Global Companies in 2023; being recognised as the Number One Bank in Nigeria by Tier-1 Capital, for the 14th consecutive year, in the 2023 Top 1000 World Banks Ranking published by The Banker Magazine; Best Commercial Bank, Nigeria, for three consecutive years from 2021 to 2023, in the World Finance Banking Awards; Best Corporate Governance Bank, Nigeria in the World Finance Corporate Governance Awards 2022 and 2023; Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards 2020 and 2022; Best in Corporate Governance’ Financial Services’ Africa, for four successive years from 2020 to 2023, by the Ethical Boardroom; Most Sustainable Bank, Nigeria in the International Banker 2023 Banking Awards; Best Commercial Bank, Nigeria and Best Innovation in Retail Banking, Nigeria in the International Banker 2022 Banking Awards.

Also, the bank emerged as the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands 2020 and 2021; Bank of the Year 2023 and Retail Bank of the Year for three consecutive years from 2020 to 2022, at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards. Similarly, Zenith Bank was named Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Bank of the Year 2021 by Champion Newspaper, Bank of the Year 2022 by New Telegraph Newspaper, and Most Responsible Organisation in Africa 2021 by SERAS Awards.

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Banking Sector

UBA Reports 256.89% Rise in Profit After Tax, Hits N607.69bn in 2023

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UBA House Marina

United Bank for Africa Plc (UBA) has reported a 256.89% increase in profit after tax to N607.69 billion in the full year ended December 31, 2023 from N170.27 billion achieved in the previous year.

This outstanding performance underscores UBA’s resilience and strategic positioning in navigating the challenging economic landscape while capitalizing on emerging opportunities.

The audited financial results filed with the Nigerian Exchange Limited also revealed improvement across various financial metrics.

UBA’s gross earnings rose by 143% to N2.08 trillion compared to N853.2 billion recorded in 2022.

Similarly, the bank’s profit before tax surged by 277% to N758 billion, a significant leap from N201 billion in the prior year.

One of the most remarkable achievements for UBA was the doubling of its total assets, which crossed the N10 trillion mark to close at N20.65 trillion in December 2023. This exponential growth represents a 90.22% increase from N10.86 trillion in 2022.

UBA’s shareholders also witnessed a significant uptick in their funds, with the group’s shareholders’ funds increasing by 120.2% year-on-year to N2.0 trillion.

The group’s cost-to-income ratio dropped from 59.2% in 2022 to 37.2%, reflecting improved cost management and operational efficiency.

Also, UBA significantly bolstered its loan portfolios by 61.3% to N5.5 trillion, while deposits witnessed a substantial increase of 90.31% to N14.9 trillion, compared to N7.8 trillion recorded in 2022.

In line with its commitment to value creation and rewarding shareholders, UBA’s Chairman, Tony Elumelu, fulfilled the promise made at the last annual general meeting by proposing a final dividend of N2.30 kobo for every ordinary share of 50 kobo for the fiscal year 2023.

The proposed dividend, to be paid from retained earnings totaling N919.872 billion as of December 2023, underscores the bank’s commitment to delivering sustainable returns to its shareholders.

Commenting on the financial performance, UBA’s Group Managing Director/Chief Executive Officer, Oliver Alawuba, stated, “I am very pleased with the unprecedented results achieved by our group in 2023.”

“The group’s shareholder’s funds crossed N2 trillion from N922 billion in 2022. The group is well positioned for further business expansion in FY2024 having closed FY2023 with a capital adequacy ratio of 32.6 percent.”

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Banking Sector

FBN Holdings to Seek Shareholders’ Approval for N300bn Capital Raise

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FBN Holdings

FBN Holdings, one of Nigeria’s leading financial holding companies, has announced its intention to seek shareholders’ approval for a N300 billion capital raise.

The decision comes amidst efforts to bolster the company’s financial strength and support its growth objectives in the dynamic banking landscape.

In a notice of its extraordinary general meeting (EGM) filed with the Nigerian Exchange Limited on Monday, FBN Holdings revealed its plans to convene a virtual meeting by the end of the month to deliberate on the proposed capital raise.

Shareholders will consider and vote on the special business item, granting the company authorization to undertake a capital raise of up to N300 billion.

“The capital raise transaction shall be by the issuance of shares via a public offering, private placement, rights issue in the Nigerian or international capital markets, at price(s) to be determined by way of a book building process or any other valuation method or combination of methods,” stated the notice.

The decision to pursue such a significant capital raise aligns with the evolving dynamics of the banking sector.

The Central Bank of Nigeria recently revised upward the capital requirements for commercial, merchant, and non-interest banks, as well as promoters of new banks, in response to domestic and global economic challenges.

According to the apex bank’s directive, commercial banks with international authorization are mandated to increase their capital base to N500 billion, while national banks must achieve a capital floor of N200 billion.

Regional banks, on the other hand, are expected to maintain a capital base of N50 billion. Non-interest banks have also been directed to raise their capital to N20 billion and N10 billion for national and regional authorizations, respectively.

FBN Holdings’ move to seek additional capital follows earlier initiatives in this regard. In October, the company sought approval from the Nigerian Exchange Group to raise N139 billion through a rights issue, signaling its proactive approach to fortifying its financial position and supporting future expansion endeavors.

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