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CBN Sanctions 14 Banks for Crowding out SMEs in FX Market

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  • CBN Sanctions 14 Banks for Crowding out SMEs in FX Market

Following persistent complaints that some Deposit Money Banks (DMBs) have deliberately frustrated efforts by many Small and Medium Enterprises (SMEs) to access FX from the window created for small businesses in the country, the Central Bank of Nigeria (CBN) has barred all but eight banks from participating in the weekly SME wholesale spot and forwards interventions effective Tuesday.

Sources at the CBN disclosed that the banking system regulator took the decision to bar the erring banks based on field reports, which revealed that only eight banks had sold FX to the SME segment since the inception of the window.

According to a source, the CBN frowned on the action of the banks that declined to sell FX to SMEs to enable them import eligible finished and semi-finished items despite the availability of FX from the CBN wholesale intervention window.

Confirming the sanction, CBN spokesman, Isaac Okorafor, said the CBN’s management decided to bar banks that were yet to utilise any portion of the funds allocated by the CBN under the SME window, since its inception last month.

The affected banks will be barred from participating in the weekly wholesale spot and forwards interventions, he said.

He listed the banks not barred to include Access Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, Heritage Bank, Jaiz Bank, Sterling Bank Plc, Unity Bank Plc and Zenith Bank Plc, warning that the CBN would not sit back and allow any form of instability in the interbank FX market through the actions of institutions or individuals.

He, however, disclosed that the action will be lifted immediately any of the affected banks show evidence of significant utilisation of the funds allocated to them under the SME window.

As an incentive, Okorafor said banks that had utilised their SME funds were allocated all of the $100 million sold at Tuesday’s wholesale auction.

He urged all stakeholders to play by the rules for the benefit of the country and the economy.

The CBN also sustained its intervention by injecting $196.2 million into the various segments of the FX market on Tuesday.

According to Okorafor, the central bank offered $100 million to authorised dealers during the wholesale auction.

A breakdown of the other interventions showed that the CBN made available $52 million to the SME segment, while invisibles such as personal and basic travel allowances, medicals and tuition got $44.2 million.

Okorafor also announced interventions in the retail auction window, which he said would be computed when the CBN receives requests made by customers to the CBN through their respective banks.

He also disclosed that the central bank would continue its weekly sale of $20,000 to dealers in the Bureau de Change (BDC) segment this week.

The spokesman expressed confidence that the interventions will continue to guarantee stability in the market and ensure availability to individuals and business concerns.

But as the CBN slammed the hammer on 14 lenders, Bloomberg reported on Tuesday that foreign investors had begun to key in to the new FX window opened by the CBN last week to ease a severe shortage of dollars.

The naira’s depreciation in the window to almost the same level as the parallel rate means that the new market is already “nearing equilibrium,” Bloomberg quoted the chief executive of FMDQ OTC Securities Exchange, Mr. Bola ‘Koko’ Onadele as stating.

The central bank is ready to supply dollars to bond and stock investors, even for trades of as much as $100 million, he said.

“There’s already been interest from portfolio investors because they can see that the new window will have buyers and sellers determining the rate,” Onadele said in an emailed response to questions.

“The banks are talking to portfolio investors. Volumes will build up.”

The Investors’ and Exporters’ FX window, which started on April 24, is the central bank’s latest attempt to lure back investors who fled in the past two years, exacerbating a crisis that caused Nigeria’s economy to shrink in 2016 for the first time in a quarter of a century.

The idea is that by creating a market for some types of investment transactions, policy makers can satisfy calls to float the currency without risking an inflationary spiral that may come from a formal devaluation.

The naira opened on Monday at 380.31 per dollar in the window. That’s about 17 per cent weaker than the interbank rate of N315 and close to the rate of N391 on the parallel market, which many Nigerian businesses were forced to utilise as hard-currency supplies through official channels dried up.

Eligible transactions in the window include those for loan repayments, interest payments, capital repatriation and remittances.

While Nigeria devalued the naira on the interbank market last June, it stopped short of allowing a free float and intervened to prop up the exchange rate.

Investors, concerned that the currency was overvalued, have stayed on the sidelines: Nigerian stocks declined 33 per cent in dollar terms in the past year, the worst performance globally, according to data compiled by Bloomberg.

Onadele, a former chief trader at Citigroup Inc.’s Nigerian unit who criticized the central bank last October for leaning on dealers not to let the currency fall, said this time around CBN Governor Godwin Emefiele was relaxed about the weaker rate.

“The governor isn’t calling up, worrying about the rate,” Onadele said. “The central bank is ready to sell into this window, via the commercial banks. Any foreign portfolio investor that wants to leave Nigeria will get its money.

“If a foreign portfolio investor wants $100 million tomorrow, its bank should present the trade to the central bank. As long as the investor’s satisfied paying the rate, it will be done.”

The implication is that bond and stock investors would have to disregard the other exchange rates that now exist in Nigeria, with the central bank charging businesses different prices for foreign exchange depending on their needs.

“Foreign portfolio investors should ignore the multiple exchange rates,” he said. “This new window is the relevant one that applies to them. The way the central bank has matched sources of inflows and applications appears unorthodox, but it has ensured a smooth take off.”

Meanwhile, the Manufacturing Purchasing Managers’ Index (PMI) improved by 51.1 index points in April 2017, indicating an expansion in the manufacturing sector after three months of contraction.

This was revealed in the PMI report for April 2017 that was released by the CBN on Tuesday.

The PMI is an indicator of the economic health of the manufacturing sector.
The central bank’s increased dollar sales to banks in late February to try and curb FX shortages have impacted positively on the manufacturing sector.

The latest PMI report showed that 10 of the 16 sub-sectors reported growth in April in the following order: appliances & components; food, beverage & tobacco products; textile, apparel, leather & footwear; chemical & pharmaceutical products; cement; nonmetallic mineral products; printing & related support activities; furniture & related products; electrical equipment and plastics & rubber products.

Paper products; primary metal; computer & electronic products; fabricated metal products; petroleum & coal products and transportation equipment sub-sectors, however, reported a decline in the reviewed period.

Also, the report showed that the production level index for the manufacturing sector expanded for the second consecutive month in April.

The index at 58.5 points indicated an increase in production at a faster rate, compared to the 50.8 points in the previous month.

Similarly, 13 manufacturing sub-sectors recorded an increase in production levels during the review month in the following order: chemical & pharmaceutical products; electrical equipment; transportation equipment; food, beverage & tobacco products; appliances & components; textile, apparel, leather & footwear; cement; nonmetallic mineral products; printing & related support activities; furniture & related products; plastics & rubber products; computer & electronic products and fabricated metal products.

But the petroleum and coal products sub-sectors remained unchanged, while the primary metal and paper products sub-sectors recorded declines in production in April 2017.

However, the employment level index in April 2017 stood at 46.6 points, indicating a slowing decline in employment level after 26 consecutive months of decline.

Of the 16 sub-sectors, 12 recorded declines in employment in the following order: computer & electronic products; electrical equipment; cement; fabricated metal products; petroleum & coal products; nonmetallic mineral products; printing & related support activities; textile, apparel, leather & footwear; chemical & pharmaceutical products; plastics & rubber products; food, beverage & tobacco products and paper products.

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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Thomson Reuters Announces New $100M “Future of Professionals” Venture Capital Fund

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Thomson Reuters today announced the creation of a new $100 million Corporate Venture Capital (CVC) fund to support and accelerate innovation for the “Future of Professionals.” The fund will operate under the name “Thomson Reuters Ventures” and concentrate on investments and portfolio support for companies building breakthrough innovations that will allow professionals to operate more productively and with greater insights.

As a leader in content-enabled technology across the Legal, Tax & Accounting, Risk, Fraud, Compliance, and News & Media markets, customers rely on Thomson Reuters to deliver trusted solutions to manage and grow their businesses. Thomson Reuters Ventures builds on this commitment by investing in and supporting the broader ecosystem focused on these same challenges.

“I’m delighted to add Thomson Reuters Ventures as another way that we are investing in innovation and serving our markets. Our customers are the most informed professionals in the world, and they need to be trusted, accurate, and effective solutions now more than ever. We’re excited to partner with founders and entrepreneurs who share these goals, and to continue to drive emerging solutions as the industry leader,” said Steve Hasker, President and CEO of Thomson Reuters.

“Thomson Reuters Ventures is ultimately about investing in innovation and serving customers. Whether it be AI and Machine Learning innovations that allow professionals to better predict outcomes, identify and act on trusted information, or automate processes for greater efficiency, the overall goal remains the same. We are focused on identifying and supporting innovative companies that can help our customers deliver more value to their customers,” said Pat Wilburn, Chief Strategy Officer of Thomson Reuters, and Executive Director of Thomson Reuters Ventures.

Thomson Reuters Ventures will invest primarily in earlier-stage companies via Series A and B rounds, with a broad lens across Legal, Tax & Accounting, Risk, Fraud, and Compliance, News and Media, Corporates and adjacent areas. Our market positions, relationships with customers and organizational resources make us an ideal partner for entrepreneurs building and scaling companies.

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Islamic Estate Planning: Protect your Family and Leave a Legacy – FBNQuest

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Islamic Estate Planning involves the distribution of your assets that serve to preserve, manage, and distribute them after death according to the principles of the Shari’ah. According to the Islamic ordinance, those principles are significant in planning for dependents and represent an investment in the afterlife.

Islamic inheritance laws organise your wealth ownership and assets to ensure fairness and justice after your passing. Instead of leaving the tough decisions to grieving family members, you can arrange the gifting of your assets in advance. This creates a streamlined process for the distribution of the inheritance to all family members.

Islamic estate planning is essential in the life of Muslim faithfuls. Indeed, if you pass away as a Muslim without a proper plan for your assets, you may be breaching the bequest guidance stated in the Holy Book, which serves as an instruction manual for a Muslim’s life. However, many are not concerned with making an inheritance plan, even though a failure to make one could trigger intense family debate and hinder the transfer of some assets to specific beneficiaries.

According to the guiding principles of Islamic estate planning, after covering the funeral expenses and debts owed by the deceased, a person may designate up to one-third of their wealth. This discretionary giving is known as the Wasiyyah. However, there are limitations to this discretionary giving. For example, Wasiyyah cannot be given to someone already receiving a share under the Islamic inheritance laws. The Wasiyyah is most commonly given to charity or to care for distant relatives who cannot provide for themselves.

The residual two-thirds is the Mirath and is reserved for the Islamic heirs as ordained in the Holy Book. Primary beneficiaries are those who will inherit some of your wealth, provided that they are alive and Muslim. These are your spouse, children, and parents, and they receive a fixed share of the wealth. Secondary beneficiaries are those whose share of the inheritance is contingent on whether other primary beneficiaries are still alive. These may include siblings, grandparents, grandchildren, aunts, uncles, and other relatives. It is vital to appreciate the rights and obligations relating to an estate.

In preparing to bequeath an inheritance, it is crucial to organise your wealth in a manner that will make assets acceptable for consideration in an Islamic estate plan. In this regard, investments should be screened for compliance with Islamic estate ethics, and investments in interest-bearing assets are disqualified. Instead, it would help if you endeavoured to invest in increasingly popular Sukuk bonds. You should consider Mudarabah Investment accounts as substitutes to fixed deposit accounts and subscribe to a family takaful policy instead of a life insurance policy in your saving plans. As for pension assets, you should opt for a multi-fund structure with an option to invest in Shari’ah-compliant instruments.

Zakat, the third pillar of Islam, is a compulsory giving required from every financially stable Muslim. Those who have acquired wealth are obligated to respond to people in need and give back to the community. This response could include sponsoring widows or the education students and organising in a charitable Trust as part of an Islamic estate plan. Therefore, you must consult a professional estate planner to assist with setting up a Trust arrangement where 2.5% of your assets/wealth is set aside annually for Zakat.

Several other tools can be used to organise the transfer of assets to a specific beneficiary. They include Hiba (making gifts), Waqf (setting up an endowment or trust), Wasiyya (transfers by donation), and it is appointing a Wasi or guardian for living dependents. Getting it right requires a thorough understanding of the principles of Islamic estate planning and the various assets available to achieve compliance. FBNQuest Trustees can guide you through creating an Islamic estate plan that makes life easier for your beneficiaries.

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Fidelity Bank Empowers Entrepreneurs to Play Big In The Non-Oil Export Market

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For developing countries such as Nigeria to accelerate economic growth, there needs to be greater private sector participation in their export sectors. This was made known by Isaiah Ndukwe, Divisional Head, Export and Agriculture, Fidelity Bank PLC, at the just concluded 11th edition of the Fidelity Bank Export Management Programme (EMP 11).

Held at the Lagos Business School, from the 4th to 8th of October 2021, the programme, covered a wide range of topics including export documentation and application of export development processes and was facilitated by leading faculty from Lagos Business School, staff of the Nigerian Export Promotion Council (NEPC) and experts in financial management and exports.

“Year-in, year-out, Fidelity Bank has demonstrated its resolve to help diversify the Nigerian economy and increase export earnings. One of the ways we are doing this is through the Export Management Programme which provides participants with the knowledge needed to navigate both the international non-oil export market and the larger export market,” explained Mrs. Nneka Onyeali-Ikpe, Managing Director, Fidelity Bank PLC when tasked on the rationale behind the programme.

The importance of exports has continually been emphasized by various bodies as it provides a means of increasing the markets for producers and especially in Nigeria’s case, an opportunity to attract much-needed foreign exchange earnings. In fact, Akinwunmi Adesina, President of the African Development Bank (AfDB), speaking recently at the Mid-term Ministerial Performance Review Meeting on the topic: ‘Nigeria’s Economic Resurgence: The African Experience’ expressed worry over disincentives to non-oil exports in the Nigerian economy. He, therefore, urged Nigerian fiscal authorities to remove bottlenecks in non-oil exports in order to promote economic resurgence.

One of the participants of the EMP 11, Mr. Kelechi Chukwukezirim, Chief Executive Officer of Dot Global Resources Nigeria Ltd said, “I am thankful to Fidelity Bank and Lagos Business School for this insightful and highly educative program. I came here with just an awareness of export management. However, my experience in the past five days has taken me from point zero to over 40% of quality knowledge on export management. I have enthused at the network and platform this program created that I could leverage going forward. I am excited at what the future holds in this regard”.

According to Mrs. Onyeali-Ikpe, “Previous editions of the EMP have recorded outstanding successes and made marked impacts in the lives and businesses of the participants. We are proud to say that the just-concluded eleventh edition is no exception. The feedback we have gotten from facilitators and participants alike has been nothing short of encouraging. The turnout was tremendous and we are certain that we will witness astonishing results as the participants put what they learned into practice.”

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