- Bad Debts: CBN Plans Tougher Bank Capital Rules
The Central Bank of Nigeria plans to introduce fresh capital rules in the second quarter of this year, threatening to heap pressure on banks already weighed down by bad loans.
Non-performing loans in the banking sector rose to N2.245tn in the third quarter of last year from N1.939tn in the second quarter, according to data from the National Bureau of Statistics.
The NBS data showed that the NPL ratio – a key metric for banks’ health – rose to 14.16 per cent in the third quarter from 12.45 per cent in the previous quarter, compared to a regulatory limit of five per cent.
Bloomberg quoted the CBN as saying in an emailed response to questions that the new requirements would be stricter in terms of what funding qualified as capital and would also require lenders to create “capital conservation” and “counter-cyclical” buffers.
According to the apex bank, the rule seeks to protect the nation’s banks “against shocks emanating locally and from abroad” by increasing the level of regulatory capital and the quality of the assets.
The central bank said it would “apply a leverage ratio to supplement existing capital ratios” for lenders as well as “additional loss-absorbency requirements for domestic-systemically important banks.”
“Country and cross-border risk guidelines are being developed for the assessment of risks arising from across border operations of Nigerian banks,” it added.
The regulator is aligning itself with a global accord known as Basel III three years after a contraction in Nigeria’s economy spurred authorities to delay the implementation of tougher capital rules. It also comes after policymakers in 2013 spurned some requirements drawn up by the Basel Committee on Banking Supervision.
Nigerian authorities migrated banks to a new accounting standard known as IFRS 9 last year to improve disclosure by forcing lenders to provide for existing losses as well as those that might occur in the future.
While the average capital-adequacy ratio for the industry rose to 12.1 per cent in June from 10.2 per cent at the end of 2017, some banks said the transition shaved as much as 200 basis points off their capital bases.
Lenders are struggling to contend with non-performing loans equal to 12.5 per cent of total credit. While these have improved from almost 15 per cent in 2017, many small- to medium-sized banks are battling to raise capital.
Worried about the declining health of Skye Bank, the Central Bank of Nigeria sacked its board of directors in 2016 and constituted a new board, saying the moves had become unavoidable in view of the persistent failure of the bank to meet minimum thresholds in critical prudential and adequacy ratios.
In September this year, the apex bank revoked the operating licence of Skye Bank and created a bridge bank, Polaris, to take over its assets and liabilities.
Access Bank Plc is in the process of taking over Diamond Bank Plc.
The Monetary Policy Committee of the CBN said at its meeting in September 2018 that it was concerned with “the rising level of non-performing loans in the banking system, traced mainly to the oil sector” and urged the CBN to closely monitor and address the situation.
In November, several members of the MPC again voiced concerns over the share of the nation’s oil and gas industry in the large volume of NPLs in banks.
Unity Bank MD Advocates Policy Actions to Stem Gender-Based Violence in Nigeria
The Managing Director of Unity Bank Plc, Mrs. Tomi Somefun has called for comprehensive policy actions that will dismantle the structures that enable gender-based violence in Nigeria.
At the Ebony Life Cinema, the venue of the film screening in Lagos, Unity Bank supported the BECKMA movie premiere by ARDA Development Commuications Inc. which was held to highlight issues of Gender-Based violence and driving positive change in society.
Making the call, Somefun stated that the Bank committed to partnering with the movie premiere and putting the power of the brand behind BECKMA as the event brings sustainability and gender equality to the front burner.
Represented by Unity Bank’s Group Head of Compliance, Mrs. Patricia Ahunanya, Somefun noted that “9 percent of women aged 15 to 49 had suffered sexual assault at least once in their lifetime and 31% had experienced physical violence,” citing a recent study by UNDP in Nigeria.
Speaking further, Somefun said “Gender-based violence is not just a women’s issue, but a societal ill that demands our collective attention. It is high time for us to step forward and advocate for comprehensive policy actions that will dismantle the structures allowing such atrocities to persist”.
She added, “I urge policymakers to enact stringent laws against gender-based violence, ensuring swift and severe consequences for perpetrators. Our homes and various organisations must also be a catalyst for change, inspiring others to follow suit.”
While commending the ARDA Development Communications Inc. for their initiatives to promote gender equality and empowerment in line with SDG5, Somefun assured of the Bank’s commitment to sustainable initiatives and further collaborative initiatives and advocacy programmes for the elimination of gender-based violence.
Nigeria’s NIBSS Directs Banks to Disconnect Non-Deposit Financial Institutions from NIP System
Banks in Nigeria have received a directive from the Nigeria Inter-Bank Settlement System (NIBSS) to disconnect Switches, Payment Solution Service Providers (PSSPs), and Super Agents from the NIBSS Instant Payment Outwards System.
The circular, dated December 5, 2023, highlighted that including these non-deposit-taking financial institutions as beneficiaries on the NIP funds transfer channels violates the Central Bank of Nigeria (CBN) guideline on electronic payments.
The NIBSS emphasized that while Switches, PSSPs, and Super Agents might process outward transfers as inflows to banks, their licenses do not permit them to hold customers’ funds.
The circular referred to the CBN’s guidelines on electronic payment of salaries, pensions, suppliers, and taxes, dated February 2014, as the basis for this regulatory stance.
The directive also pointed to a circular dated May 11, 2018, titled “Permissible Services and Products of PSSP Operation in Nigeria,” reinforcing the need for compliance.
As a result, banks were urged to delist all Switches, PSSPs, and Super Agents from the NIP Outward Transfer channels while allowing their participation in inward transfers.
In Nigeria’s payment ecosystem, operators are required to obtain licenses such as Switching and Processing, Mobile Money Operations, Payment Solution Services, or Regulatory Sandbox from the CBN.
Only Mobile Money Operators (MMOs) have the authority to hold customer funds, according to the CBN’s regulatory framework.
Falcon Corporation Secures N19.41bn Debt Facility for State-of-the-Art LPG Facility in Port Harcourt
Falcon Corporation Limited, a prominent player in Nigeria’s energy sector, has successfully secured a N19.41 billion debt facility from the Chapel Hill Denham Nigeria-managed Infrastructure Debt Fund (NIDF).
The financing will be used for the development of a cutting-edge 15,000 metric ton Liquefied Petroleum Gas (LPG) storage facility and a dedicated jetty in Rumuolumeni, Saipem/Aker Base Road, Port Harcourt, Rivers State.
The Managing Director of Falcon Corporation, Prof. Joe Ezigbo, emphasized the company’s commitment to national service through investments in the gas industry.
He highlighted the strategic positioning of the LPG facility in proximity to major gas sources and navigable water routes, anticipating economic gains, job creation, income growth, health improvements, and environmental sustainability.
“We positioned our LPG facility strategically in proximity to major Gas sources and navigable water routes. The Project is set to facilitate and enhance more direct procurement and distribution of LPG, which will dramatically lower conventional delivery and storage costs,” said Prof. Joe Ezigbo.
The project has achieved significant milestones, reaching a completion rate of 65% as of October 2023. Various phases of development, including the completion of the jetty, shoreline protection, and engineering activities, have contributed to this progress.
The entire project is expected to be completed and commissioned by Q4 2024.
Falcon’s General Manager, Finance, Nelson Walter, expressed satisfaction with the partnership with NIDF, highlighting their reputation for providing reasonable terms for impactful infrastructure projects.
The flexible long-term loan repayment structure aligns with Falcon’s goals, making the collaboration instrumental in realizing this groundbreaking project.
Financial advisers Vetiva Capital Management Limited and Chapel Hill Denham Advisory, along with legal counsel Detail Commercial Solicitors, played crucial roles in facilitating this strategic debt facility for Falcon Corporation’s ambitious LPG infrastructure development in Rivers State.
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