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Banks’ Non-performing Loans Hit N2tn – CBN

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  • Banks’ Non-performing Loans Hit N2tn – CBN

The challenging economic situation in the country made the banking industry’s non-performing loans ratio to rise from N1.678bn in June to N2.084tn in December 2016, the latest Central Bank of Nigeria’s Financial System Stability Report revealed on Wednesday.

The financial soundness indicators used to appraise the stability of the financial system included asset quality, capital and income-expense, the report stated.

The FSS report stated that the ratios of non-performing loans to gross loans increased from 11.7 per cent in June to 14 per cent in December 2016.

The report read in part, “Commercial banks in the country experienced deterioration in assets quality at end-December 2016. The deterioration in asset quality was largely attributed to the rising inflationary trend, negative GDP growth, and the depreciation of the naira.

“The ratio of regulatory capital to risk weighted assets decreased by 0.8 percentage points to 13.9 per cent at end-December 2016, compared to 14.7 per cent at end-June 2016.

“Similarly, the ratio of Tier-1 capital to risk weighted assets declined by 0.9 percentage points to 12.9 per cent at end-December 2016 from 13.8 per cent at end-June 2016. Despite the marginal decrease, the ratios remained above the Basel minimum threshold.”

It added, “The return on assets declined by 1.0 percentage points to 1.3 per cent at end-December 2016 from 2.3 per cent recorded at end-June 2016, while the ratio of non-interest expenses to gross income increased to 63.8 per cent at end-December 2016 from 54.6 per cent recorded in the preceding half of the year.”

The CBN also conducted routine and special examinations of foreign exchange activities of banks during the review period.

The examinations revealed a number of infractions which included: breaches in net open position, foreign currency trading position limits, failure to repatriate export proceeds on time, and inappropriate involvement of banks in international money transfer

The report stated that other breaches observed were non-compliance with forward trading rules, late/non-submission of foreign exchange transaction documents by importers, and non-compliance of authorised dealers with the CBN directives on the specified sectoral disbursements.

The CBN said appropriate regulatory measures, including sanctions were taken on the banks without specifying the nature of the penalties.

The report showed that the CBN recovered a total sum of N21.27bn from banks in 2016, being excess charges illegally deducted from the account of their customers.

The amount, it said, was recovered following complaints received from a total of 2,656 bank customers in the period under review.

The CBN explained that apart from the N21.27bn, the sum of $3.35m and €19,263.62 were recovered and refunded to customers during the period.

The complaints were on Automated Teller Machines and electronic payment-related issues, excess charges, dishonoured guarantees, dishonoured cheques, fraudulent withdrawals and deposit irregularities.

The CBN report said the banking sector’s credit to the private sector grew by 19.37 per cent to N22.34trn as at the end of December 2016, compared with the growth of 14.44 per cent and 3.29 per cent recorded at end of June 2016 and the corresponding period of 2015, respectively.

It said total exposure of the top 50 obligors stood at N5.59trn, representing 34 per cent of total industry credit exposure of N16.29trn.

As at the end of December 2016, loans to the oil and gas sector constituted 30.02 per cent of the gross loan portfolio of the banking system as credit to that sector grew from N4.51trn, to N4.89trn.

The CBN report said loans to state governments declined marginally to N1.37trn from N1.38trn at end of June 2016.

It said the period witnessed increased funding to the states through a Federal Government refund totalling N522bn in excess debt service deductions (Paris Club Debt Refund).

In addition, the report said a N90bn bail-out facility at nine per cent interest rate was provided to enable states reduce the backlog of salaries.

Overall, the report explained that credit risk remained tangible in 2017 as obligors remained constrained in servicing both naira and foreign currency denominated loans owing to the low level of economic activities, low international oil prices and the depreciation of the naira.

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.

Banking Sector

Wema Bank, MOD Launch Scheme For International Students

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Wema Bank has launched an advisory and loan scheme, the Education Advisory Service, in partnership with MOD Education for young Nigerians wishing to study abroad.

Following foreign exchange control measures introduced by the government, parents and guardians have experienced difficulties paying tuition fees for their children and wards studying abroad. Some who have the money don’t know the requirements for foreign admission and waste lots of time and resources in fruitless searches.

But to help them surmount these challenges, Wema Bank has partnered with MOD Education, a professional student advisory, marketing, recruitment and placement company for the advisory services and school fees advance facility. The partnership, which was launched on Friday, April 9 at Eko Hotels, Victoria Island, will see both organizations providing innovative education advisory services and funds for international students.

Speaking about the partnership, Divisional Head, Retail Business, Wema Bank, Dotun Ifebogun, explained that the initiative would aid hundreds of thousands of Nigerians requiring advisory and financial support to pay for their wards in foreign schools.

He explained that Wema Bank does not want the aspirations of Nigerians desirous of foreign education truncated, hence the support.

“We are interested in everything that concerns our customers, and education is one of them. Some parents and guardians desire a certain quality of education for their wards outside the shores of Nigeria, and we would be able to assist them with this product. Our school fees advance loan results from the requests of parents and guardians who need to get short term financial support to meet the tuition obligation of their wards irrespective of the constant increase in fees.

“There’s nothing as heartbreaking as withdrawing a child already in a foreign university or being unable to raise the requisite forex for a child offered admission in a top-rated foreign institution of higher learning. But our school fees advance loan will take care of this problem and help secure the futures of such students – both undergraduates and postgraduates. The fact that you get counsel from the right sources at any particular time is another benefit of this product.

Also, the Managing Director, MOD Education, Michael Dosunmu, expressed gratitude to Wema Bank for the partnership. “Wema Bank has been supportive to us as a business and it was just a natural marriage. We trust the bank enough to bank with them, and our trust is enough to recommend it to others.”

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Finance

NAIC Pays N1.7bn Claims to Farmers

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The Nigerian Agricultural Insurance Corporation (NAIC) said it paid a total of N1.7 billion claims to over 5,000 farmers in the past two years.

NAIC, which is the only federal government owned insurance company authorised to offer agric insurance services to farmers at subsidised rate, said a breakdown of the paid claims showed that it paid N856 million to insured farmers in 2019 and N848 million in 2020.

Commenting on the development, NAIC Managing Director, Mrs. Folashade Joseph, said the claims were paid to the farmers to cover losses incurred in the course of doing business.

Joseph, enjoined agricultural investors and lending institutions to continue to partner NAIC by taking agricultural insurance cover that will enable them remain firm in business despite unforeseen circumstances from weather conditions and other risks in order to realise the food security agenda of President Muhammadu Buhari.

She said the above-mentioned amount was shared among five million farmers who suffered various setbacks in their farms as a result of natural course.

According to her, the NAIC Agric Insurance Scheme was launched in 1987 by federal government to restore the confidence and productivity of Nigerian farmers who suffered losses as a result of natural disaster such as flood, drought, pest and diseases.

The NAIC boss explained that the essence of the sensitisation campaign embarked by the corporation was to let the farmers know and understand exactly what NAIC does, the importance of insurance, and make them understand how insurance works, how they can access NAIC products and services, how to process their claims, as well as what insurance stands to do for them.

“Agribusiness is evolving fast and so many risks are being thrown up, many new participants are coming into the business of agriculture, and the risks are on the increase if you look at them across the value chain, there is no so many participants so we need to keep sensitising the farmers and let them know we are serving them, and we need to know from them how to serve them,” she explained.

Speaking further, she said, “our assurance to farmers is that when they are insured and they suffer losses covered by any of the policies they purchased, including natural disasters and whatever, they will get paid for their losses, and that is the purpose of insurance and setting up NAIC.

“Our motor is ‘Plowing the Farmer Back to Business, Plowing the Farmers into Prosperity’, and we settle claims.”

She said NAIC currently deals with thousands of farmers (Small, Medium, and Large scale farmers) across the country, adding that the corporation serves farmers with investment as little as N100, 000, and at the same time serves multinational farmers.

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Banking Sector

UBA Organises Capacity Building Forum

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As part of its commitment to support the growth and sustainability of micro, small and medium-scale enterprises (MSME) in the continent, the United Bank for Africa (UBA) Plc, is set to organise the next edition of its UBA Business Series.

The UBA Business Series which is a monthly event, is an MSME Workshop as well as a capacity building initiative of the bank where business leaders and professionals share well-researched insights on best practices for running successful businesses, especially in the face of the difficult operating environment that dominates the African business landscape.

Through this initiative, UBA has been assisting with essential tips to help businesses re-examine their models and strategies and ensure that they stay afloat and remain thriving, a statement from the bank explained.

The topic for the next edition of the series is, “Managing Performance for Business Growth,” and it will be held today, via Microsoft Teams.

At this session, the Managing Director, Secure ID Limited, Mrs Kofo Akinkugbe, will be sharing useful tips and insights on the key strategies of performance management to boost business growth.

Akinkugbe is the founder of SecureID Nigeria, a MasterCard, VISA and Verve certified Smartcard Personalization Bureau and Digital Technology company. She currently serves as the Managing Director/CEO, Secure Card Manufacturing, – a Smartcard manufacturing plant producing high security identity cards and documents for the Banking, Telecoms and Public sectors across Africa and beyond.

UBA’s Head, SME Banking, Sampson Aneke said of Akinkugbe, “with her vast experience garnered over the years from various sectors, she will help business owners understand how performance management strategies can be effectively implemented to ensure business growth.”

He emphasised UBA’s commitment and deep passion for small businesses, which according to him, remains the engine of any developing economy adding, “We know small businesses are the backbone of the economy in every country. In many climes, businesses with fewer than 100 employees account for 98.2 per cent of all businesses. This no doubt captures the importance of SMEs to a thriving economy which is why UBA is committed to seeing them flourish.”

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