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CBN Predicts Boost in Credit with Moveable Collateral

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  • CBN Predicts Boost in Credit with Moveable Collateral

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday stated that given that the inherent risks in granting loans to Micro Small and Medium Enterprises (MSMEs) by banks is now reduced tremendously through the introduction of the National Collateral Registry (NCR), small businesses will now be able not only to access credit but also access such at reasonable rates.

This is coming as acting Chief Justice of Nigeria (CJN), Justice Tanko Muhammad, has assured that the judiciary will on its part continue to ensure that disputes arising from moveable assets lending are resolved speedily in line with constitutional provisions.
Emefiele assured that MSMEs in the country would be able to access credit at reasonable interest rates through the implementation of the NCR, which allows them to present moveable assets as collateral, for bank loans.

Emefiele spoke at the opening of the first national workshop for judicial officers on Secured Transactions in Moveable Assets Act (STMA) and National Collateral Registry with the theme: “Leveraging Moveable Assets for Credit Delivery in Nigeria: Legal and Regulatory Framework.”
He observed that small businesses had practically been denied access to credit as well as subjected to high interest charges by commercial banks largely as a result of their inability to provide acceptable collateral.

The governor, however, said given that the risks inherent in granting loans to MSMEs by banks had now been reduced tremendously through the introduction of the NCR, small businesses “will be able not only to access credit but also access credit at reasonable rates.”

The CBN is already moving towards the enforcement of the Secured Transactions in Moveable Assets Act (STMA) across all financial entities.

Highlighting some of the achievements of the NCR since its creation in 2015, Emefiele said as at January 31, 2019, 628 financial institutions comprising 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies had been registered on the Registry’s portal.

He said lending banks had also registered interest on movable assets worth N1.23 trillion, $1.14 billion and €6.08 million through 41,408 financing statements.

He added that within about 18 months, over 41,000 moveable assets with values of over N1.4 trillion, including those in dollar and Euro denominations had been registered in registry.

“This underscores the potential of movable assets as collateral to enhance access to credit and, hence, our resolve to drive its effective implementation,” Emefiele added.

On the rationale for the NCR, Emefiele said: “You will all recall that one of the biggest problem that the MSMEs face in Nigeria given the fact that we recognise their contribution to economic growth and development in any economy- the biggest constraints they have often gone through is their inability to provide acceptable collateral for the loans they seek to obtain from the banks.

“Banks and financial institutions themselves have often used their inability of these MSMEs to provide collateral as the reasons why they cannot lend to them.

“So, at the CBN, we thought that we must break this jinx and so we said access to finance must be a thing of the past in Nigeria for small businesses.”

He said: “And that was how we thought about the fact that if you are a hairdresser and the equipment you have is your hairdressing equipment, if you are a tailor and what you have is a sewing machine, if you are a barber and the barber equipment is your machine; these are moveable assets which banks say they cannot accept as collateral.

“We thought there is a need to set up a secured transaction and movable assets registry, that is the National Collateral Registry, wherever these assets are registered with the Bank Verification Number (BVN) of these potential borrowers that it is possible for banks to accept these collaterals for loans.”
The apex bank boss further stated that despite the importance of MSMEs to economic development they continued to face structural drawbacks, particularly due to their peculiar nature.

He said MSMEs are typically deemed risk-laden, plagued with high mortality rate, and often lacking adequate collaterals acceptable for conventional credit.
According to Emefiele, MSMEs in the country are characterised by about $158 billion or N48.3 trillion financing gap, reflecting the risk-driven apathy of financial intermediaries to MSME lending.

Essentially, he noted that the workshop was informed by the realisation that the judiciary was key to the enforcement of the provisions of the STMA Act especially as the use of moveable assets for collateral gains more acceptance.
According to him: “Banking is a relationship based on trust and it is our belief that bankers will respond more positively to the financing yearnings of MSMEs given the assurances that their legitimate interests will be protected under the enabling laws of the land.

“The CBN is moving towards enforcement of the STMA Act across all financial entities. In this regard, it is pertinent that we solicit and get the full support of the judiciary and law enforcement agencies towards providing a robust and resilient financial infrastructure.
“This will deepen credit delivery to our productive sectors, especially among the MSMEs, and foster sustainable and inclusive growth

CJN Assures on Speedy Resolution of Associated Disputes

Meanwhile, the acting CJN, Justice Tanko Muhammad, assured that the judiciary will on its part continue to ensure that disputes arising from moveable assets lending are resolved speedily in line with constitutional provisions.
Noting that access to finance remained vital to the development of any economy, Muhammad lauded the CBN for the establishment of the NCR, describing it as a clear indication that government is ready to grow the economy.

Also, the Managing Director/Chief Executive, Bank of Agriculture (BoA), Dr. Kabiru Adamu described the NCR as one of the programmes that had made funds available to the MSMEs subsector of the economy as well as currently impacting on MSMEs lending in the country.
He said BoA had between November 2016 to date registered about 36.9 billion assets including over 15,000 small holders.

“Apart from providing alternative to traditional collateral in Nigerian banking industry, the registry is equally generating database for credit history for micro enterprises which was a problem for the banks.

“We cannot thank the CBN enough for the establishment of NCR and that goes to tell you that clearly, the current CBN governor has left indelible mark in the sands of history, we are eminently proud of him as a bank,” he said.

He recommended the establishment of a special court to handle cases of NCR, noting that this “will encourage the banking industry in Nigeria to deploy micro credit to MSMEs”.
Nonetheless, the acting CJN stressed that one of the functions of judiciary is the interpretation and application of laws, adding that all laws will have to be properly digested by judicial officers in preparation for adjudication regarding loans attached to moveable assets.

He said the passage of the STMA made it possible for moveable assets to be used as collateral to access credit from banks in an effort to protect the creditors.
He commended the CBN for recognising role of judiciary in ensuring financial system stability in the economy.

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

Ecobank Partners NiDCOM to Mobilise Nigerians Abroad for National Development

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In a bid to fulfill it’s objectives and mandate, the Pan African Bank has promised to support Nigerians living and working abroad through it’s partnership with NiDCOM.

The Managing Director, Ecobank Nigeria, Patrick Akinwuntan has stated that the bank is privileged to work closely with the Nigerians in Diaspora Commission, (NiDCOM) and will continue to pursue one of its key mandates of helping to enhance the economic development and integration of Africa through its support to Nigerians living and working abroad.

Speaking at the maiden edition of the Diaspora Quarterly Lecture Series with Ecobank as the sole banking partner which took place on Saturday, 8th May 2021, he noted that Ecobank remains a critical bridge for Nigerians abroad, as it has made huge investments in the necessary platforms to enable them connect with home seamlessly. The event held online and had over 2000 participants from across all the continents in attendance.

“Nigerians in the diaspora play a major role in nation building, their contribution goes a long way to catalyse economic development. For us at Ecobank, we are a pan-African institution positioned to foster the economic growth and integration of our continent, so we are particularly pleased to work closely with the Nigerians in Diaspora Commission (NiDCOM), ably led by the Chairman/CEO, Hon Abike Dabiri-Erewa”.

“We are committed to ensuring that every Nigerian living abroad is able to remit home seamlessly and affordably, access viable investment opportunities and as the financial institution of choice for Nigerians abroad, we have deployed the necessary resources to actualise this.” He stated.

The Minister of Interior, Ogbeni Rauf Aregbesola, who was also present, reiterated the readiness of the government to collaborate with Nigerians in the diaspora, highlighting the new processes put in place to facilitate passport issuance, noting that all backlog of passport applications would be cleared by the end of May 2021.

Also speaking, the Hon. Minister of State, Foreign Affairs Amb. Zubairu Dada said harnessing the human capital and material resources of Nigerians in the diaspora towards the socio-economic, cultural, and political development of Nigeria can no longer be ignored. He pointed out that the Nigerian diaspora community is well educated, resourceful, skilled, and exposed to global best practices.

The NiDCOM Chairman/CEO, Hon. Abike Dabiri- Erewa explained that the Diaspora Quarterly Lecture Series is projected to be a major aspect of national discourse, where Nigerians abroad can be kept abreast of the government’s policies, programmes and projects.

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Finance

Increase in Price Boosts Revenue of Dangote Sugar by 41.5 Percent in Q1 2021

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Revenue of Dangote Sugar Refinery Plc rose by 41.5 percent to N67.394 billion in the first quarter (Q1) of 2021 from N47.643 billion recorded in the same quarter of 2020.

According to the leading sugar manufacturer, the increase in revenue was a result of the increase in the price of sugar in the first quarter. The company claimed price adjustment was necessary to mitigate the negative effect of inflation and depreciation on the company.

Volumes only rose by 5.7 percent during the quarter despite a 41.5 percent increase in revenue, meaning the increase in price was the main sales catalyst.

In the company’s unaudited financial statements, gross profit grew from N12.721 billion in Q1 2020 to N18.044 billion in Q1 2021.

Similarly, operating profit stood at N15.884 billion, up from N10.747 billion posted in Q1 2020.

Finance cost more than double from N1.353 billion in Q1 2020 to N3.412 billion in Q1 2021.

Dangote Sugar’s profit before tax rose from N9.509 billion recorded in the corresponding quarter to N11.949 billion in the quarter under review.

The company paid N3.646 billion in income tax, slightly higher than N3.137 paid in the same quarter of 2020.

Profit for the period grew from N6.372 billion in Q1 2020 to N8.302 billion in Q1 2021.

Commenting on the company’s performance, Dangote Sugar said “EBITDA increased by 34.7% to N17.02 billion (2020: N12.64 billion) on account of increased earnings. Group profit after taxation for the period increased by 30.3% to N8.30 billion (2020: N6.37 billion) reflecting management’s unrelenting drive to deliver consistent shareholder value.”

On price increase, the company hinged it on series of devaluation carried out in 2020 by the Central Bank of Nigeria (CBN), escalating inflation, port congestion and rising in price of global sugar. Dangote Sugar said its imported raw sugar from Brazil under Federal Government’s backward integration plan.

We have continued to witness high cost of raw materials, energy costs and other input costs due to rising inflation and FX rate fluctuation. Further cost escalation is anticipated in the year as inflationary pressure mounts,” the company said.

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FBN Holdings Suffers 39 Percent Drop in Profit to N15.6 Billion in Q1 2021

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FBN Holdings Plc profit after tax declined by 39 percent from N23.140 billion recorded in the first quarter (Q1) of 2020 to N15.6 billion in the first quarter of 2021.

In the leading financial institution’s unaudited financial statements released through the Nigerian Exchange Limited, gross earnings declined by 14.5 percent to N137 billion in the period under review, down from N160 billion filed in the previous quarter.

Similarly, net interest income declined from N60.253 billion achieved in Q1 2020 to N52.793 billion.

Net interest income after impairment charge for losses also dipped from N50.547 billion in Q1 2020 to N39.619 billion in Q1 20201. While net fee and commission income rose from N20.773 billion in Q1 2020 to N28.427 billion in Q1 2021.

Profit before tax declined by 34 percent to N18.906 billion in the quarter under review, down from N28.680 billion posted in the corresponding quarter of 2020.

FBN Holdings paid N3.285 billion in income tax in the first quarter of 2020.

Therefore, profit for the period stood at N15.621 billion. While Net Assets contracted from N765.2 billion to N764.8 billion.

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