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Nigerian Banks Still Cautious About Loan Disbursement

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  • Nigerian Banks Still Cautious About Loan Disbursement

As Nigerian banks continue to contend with high non-performing loans and more attractive yields from government securities, they have continued to remain averse to giving out fresh loans to their customers, a review of their financial results have shown.

The nine months unaudited results for the period ended September 30, 2017 of nine commercial banks compiled showed that their combined loans and advances stood at N11.665 trillion, lower than N11.959 trillion as of December 2016.

The bank results reviewed were those of Zenith Bank, Guaranty Trust Bank (GTBank), United Bank for Africa (UBA), FBN Holdings, Diamond Bank, Access Bank, Fidelity Bank, Stanbic IBTC and Sterling Bank.

Against the backdrop of low oil prices, dwindling oil revenue, foreign exchange scarcity and a crippling recession, the last two years saw a significant deterioration in the banks’ risk assets.

Owing to this, banking sector NPLs climbed to as high as 15 per cent, leading to a slow down in loans disbursement by Nigerian lenders.

This clearly manifested in some of the banks’ results for the nine months ending last September.

For instance, while Zenith Bank’s loans and advances dropped to N2.156 trillion as of September this year, from N2.289 trillion as at December 2016, GTBank also cut down its loans to customers from N1.589 trillion as of December 2016, to N1.428 trillion as of September 30, 2017.

Diamond Bank’s loans to customers also dropped to N976 billion in the period under review from N995 billion as of December 2016, just as FBN Holdings’ loans and advances dropped to N2.043 trillion from N2.083 trillion as of December 2016.

Access Bank gave out a total of N1.777 trillion as loans and advances to customers by September ending 2017, lower than the N1.809 trillion as of December 2016.

On the other hand, UBA, Fidelity Bank, Stanbic and Sterling all reported a slight improvement in their loans and advances.

Nevertheless, figures from the nine banks showed that they recorded total customer deposits of N15.706 trillion at the end of September 2017, lower than the N15.722 trillion in the corresponding period in 2016.

Afrinvest Securities Limited, in its latest banking sector report, pointed out that Nigerian lenders have demonstrated resilience within the last two years amid macroeconomic challenges which weighed on credit expansion, asset quality and capital adequacy, to record largely positive results for the year.

It noted that the financial performance of the sector was principally affected by monetary policy decisions tied to the management of the foreign exchange market which had a ripple effect on earnings across the industry.

“Despite forward guidance of banks to keep credit expansion minimal in 2017, we believe that the exposure of pre-existing loans to ‘high risk sectors’ will continue to pressure asset quality in the year.

“However, we expect asset quality metrics to improve in 2017 against the backdrop of steps being taken to restructure loans to challenged sectors as well as some of the noticeable improvements in the general commerce and manufacturing sectors which have been buoyed by developments in the FX market.

“Although forward guidance from majority of the banks indicates the reluctance to extend credit, we believe that the any moves to unify the FX market will lead to a nominal expansion in loans, given the proportion of foreign currency loans.

“The depreciation in the domestic currency resulted in higher Risk Weighted Assets on the books of the banks. Hence, capital adequacy ratios of some of the banks fell towards threateningly low levels. Consequently, we expect such banks to approach the market in order to raise capital to shore up capital buffers,” it added.

Eight Banks Downgraded

In a related development, the recent downgrade of Nigeria’s long-term issuer and senior unsecured debt rating by Moody’s Investors Service, one of the leading global rating agencies, has as a consequence led to the downgrade of eight Nigerian banks by the ratings agency.

It also downgraded the long-term local and foreign currency issuer ratings of Bank of Industry (BoI).
Moody’s downgraded the long-term local currency deposit and issuer ratings of four Nigerian banks – Access Bank, GTBank, UBA and Zenith Bank – to ‘B2’ from ‘B1’, as well as that of the long-term local and foreign currency issuer rating of BoI.

Moody’s also downgraded from ‘B2’ to ‘B3’ the long-term foreign currency deposit ratings of Access, GTBank, UBA and Zenith, Union Bank of Nigeria, FirstBank of Nigeria Limited and Sterling Bank.

A statement obtained from the ratings agency’s website Sunday, showed that it also downgraded the baseline credit assessments (BCAs) of Zenith and GTBank to ‘b2’ from ‘b1.’

It explained that its rating action followed its downgrade of Nigeria’s government bond ratings to B2, with stable outlook, from B1, with stable outlook.

Furthermore, it stated that its action reflected government’s reduced capacity to provide support for Nigerian banks in times of stress and the banks’ significant holdings of government securities linking their credit profiles to that of the government.

“The decision to downgrade banks’ long-term foreign currency deposit ratings follows the downgrade of the relevant country ceiling for foreign currency deposits to B3 from B2,” it added.

According to Moody’s, “Access Bank and UBA’s long-term local currency deposit ratings and Bank of Industry’s long-term issuer ratings no longer benefit from a one-notch uplift from their b2 BCAs (or standalone credit profile, as is the case for Bank of Industry) as these are now at the same level as the government bond rating.

“The long-term local currency deposit ratings of Sterling, Union and FBN have been affirmed at B2, as their b3 BCAs continue benefiting from one notch of government support uplift.”

It also stated that the secondary driver of its rating action was the banks’ significant holdings of government securities, “which generally exceed 100 per cent of their core capital, linking their credit profile to that of the government”.

Moody’s explained: “In view of the correlation between sovereign and bank credit risk, the banks’ standalone credit profiles and ratings are constrained by the rating of the government.

“As a result, the BCAs for Zenith and GTBank have been downgraded to b2 from b1, in line with the downgrade of the government issuer rating, despite the resilient financial performance witnessed by both banks over the last 24 months.

“The BCAs of the other rated Nigerian banks have been affirmed as they already captured risks emanating from their sovereign exposures.”

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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Transcorp Hotels Expand into Marketplace, Launches Aura to Connect People, Hoteliers, Others

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Transcorp Hotels Plc, on Thursday, announced it has launched a new digital platform, Aura, through which people can book accommodation, restaurants and experiences.

Aura, Transcorp’s first in the alternative accommodation segment, is part of the company’s asset-light model, leveraging technology to deliver true hospitality, exciting experiences, and drive shareholder value.

It’s a new dawn in the hospitality industry! I am thrilled to introduce you to Aura by Transcorp, the digital platform we are using to connect people to quality accommodation, great food, and awesome experiences,” Managing Director and Chief Executive Officer of Transcorp Hotels Plc. Dupe Olusola said.

For more than 30 years, Transcorp Hotels Plc has been at the forefront of creating a superior guest experience at our locations. Today, our commitment to innovation has offered us an opportunity to extend this beyond the hotel premises,” Olusola added.

The launch of Aura by Transcorp is one of the most significant developments in the company’s history as it seeks to transform the travel and tourism industry in Africa by focusing on three important components of travel, whether for leisure or business — where you stay, what you eat and how you spend your time. With its people-driven hospitality model, Aura is set to revolutionise travel and help remind Africans of our deep history of hospitality.

Speaking on the launch of Aura, Obong Idiong, Chief Executive Officer at Africa Prudential Plc, Aura’s technology partners, expressed his excitement. “Finding the right accommodation when you travel can be incredibly complex. Options available for the right prices are often limited, and travellers sometimes end up with accommodation that taints the travel experience. Transcorp Hotels Plc has been able to fix that with Aura and we are proud to be associated with them.”

To ensure topnotch user experience, we built a solution to drive digital transformation through the adoption of shared living spaces for the Aura business. With an advanced search algorithm powered by artificial intelligence, Aura determines the relevance of locations taking into consideration, the customers’ preferences and requirements to meet them at the point of their needs,” Idiong added.

Priscilla Adeboye, a travel enthusiast and early adopter of Aura, said the global pandemic has pushed international travel down her list. “But I still want to be able to take some time off work or spend a weekend away from home with the family. I have found incredible homes on Aura that meet my need for space and privacy.

 

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Siemens Energy Nigeria Appoints Seun Suleiman as Managing Director

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Seun Suleiman is the New Managing Director of Siemens Energy Nigeria

Mr. Seun Suleiman is the new managing director of Siemens Energy Nigeria, the company announced on Wednesday.

According to the statement released by the energy company, Suleiman will be responsible for the entire management of operations and decisions on business policies and corporate strategy.

Commenting on his appointment, Suleiman said, “It is an absolute honor to lead the business for Siemens Energy Nigeria and I look forward to delivering on the brand’s promise of excellence.

Suleiman joined Siemens Energy in 2014, bringing over 15 years’ experience and deep expertise in the private sector across Europe and West Africa.

The statement said, “He is an accomplished business strategist and success-driven leader with strong business acumen. Suleiman has also been a core member of the executive management team at Siemens Energy serving in roles as Sales Director West Africa – Service Distributed Generation Oil & Gas and Vice President Service & Digital.

“Prior to this, he also held various functional and managerial positions with ABB Ltd UK, ABBNG Nigeria, Schneider Electric Nigeria and Dresser-Rand Nigeria Ltd.

It added that Suleiman was experienced in establishing operational excellence with specific competence in the power, oil and gas sectors.

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FG Reopens Osubi Airport Warri for Daylight Operations

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FG Reopens Osubi Airport Warri for Daylight Operations

The Federal Government on Monday said the Osubi Airport in Warri has been reopened for daylight operations.

The Minister of Aviation, Hadi Siriki, disclosed this in a tweet.

The airport was closed in February 2020 over mismanagement and debt allegation involving aviation service providers and airport management.

However, Oberuakpefe Afe, a lawmaker representing Okpe/Sapeie/vaie federal constituency, recently moved a motion for the Federal Government through the ministry of aviation and relevant authorities to reopen the airport for flight operations.

On Monday, Hadi Siriki said “I have just approved the reopening of Osubi Airport Warri, for daylight operations in VFR conditions, subject to all procedures, practices and protocols, including COVID-19, strictly being observed. There will not be need for local approvals henceforth.

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