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FMPWH Gets Lion’s Share as 2018 Capital Spending Hits N1.9tn

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  • FMPWH Gets Lion’s Share as 2018 Capital Spending Hits N1.9tn

The Ministry of Power, Works, and Housing has got N347.52bn, which is the highest amount so far released to any ministry as the 2018 capital spending hit N1.9tn, reports Ifeanyi Onuba

Between June 20, 2018, when the 2018 budget was signed into law by President Muhammadu Buhari and March 29, 2019, the Federal Government has released a total of N1.9tn to finance the capital components of the 2018 budget.

The details of the amount which was released to Ministries, Departments and Agencies of government was contained in a document submitted by the Ministry of Finance to the National Assembly.

A copy of the document was obtained by our correspondent on Sunday in Abuja.

The 2018 budget, signed by President Muhammadu Buhari on June 20 last year, had total spending of N9.1tn.

The capital expenditure was to gulp 31.5 per cent of the total expenditure at N2.87tn, while recurrent non-debt spending was put at N3.51tn.

There was also a provision of N2.01tn for debt servicing which is 21 per cent of the total budget while a provision of N177bn to retire maturing bond to local contractors was made by the government.

The Ministry of Power, Works and Housing had the highest allocation with N715bn for both recurrent and capital expenditure, the Ministry of Interior was to get N577bn while N576bn was allocated to the Ministry of Defence.

The Ministry of Education was allocated N542bn; Health, N356bn; Transportation, N267bn; and Agriculture, N203bn.

In the document submitted to the lawmakers, the ministry stated that the N1.9tn included the N277bn which was released to agencies of government at the end of March, 2019.

The government stated that capital spending had been prioritised in favour of critical ongoing infrastructure projects in the power, roads, rail and agriculture sectors of the economy.

The Federal Government, according to the document, stated that the implementation of the capital component of the 2018 budget would continue until the 2019 budget was eventually passed into law by the National Assembly.

The 2019 budget, which is still undergoing legislative scrutiny, has an estimate of N8.83tn made up of N4.04tn for recurrent expenditure, N2.03tn for capital expenditure and N2.14tn for debt servicing, among others.

The document stated, “Of the total appropriation of N9.12tn, N6.99tn had been spent by December 31, 2018. This represents 77 per cent performance.

“Debt service and the implementation of non-debt recurrent expenditure, notably payment of workers’ salaries and pensions, were on track.

“Capital releases only commenced after the signing of the 2018 budget on June 20, 2018. As of March 29, 2019, a total of N1.91tn had been released for capital projects which include N277bn just released at the end of March.

“Spending on capital projects has been prioritised in favour of critical ongoing infrastructure projects in the power, roads, rail and agriculture sectors.

“Implementation of the 2018 capital budget will continue into 2019 until the 2019 budget is passed into law.”

A breakdown of the N1.91tn released for capital projects showed that the ministry of Power, Works and Housing got the highest amount of N347.52bn.

This is about 42.95 per cent of the N809.05bn which was allocated to the ministry in the 2018 budget.

This is followed by defence and security which got N205.89bn. The amount received by the sector is about 66.85 per cent of its N308bn allocation in 2018.

The document put the amount released to the agriculture and water resources sector at N152.5bn which is about 51.45 per cent of its N296.39bn allocation

In the same vein, out of the N251.42bn allocated to the transportation sector in the 2018 budget, about N127.68bn which is 50.79 per cent of the sector’s budget had been released.

For the health and education sectors, the document stated that N115.43bn had been released out of the N189.39bn allocated to the sector in the 2018 budget.

It said the sum of N186.05bn out of N323.3bn allocated to other sectors had been released by the Ministry of Finance.

Further analysis of the document showed that about N70bn out of the N100bn allocated for zonal intervention projects had been released by the Ministry of Finance.

In the same vein, N456.5bn which is 86.07 per cent of the N530.42bn allocated for statutory transfers had been released by the government.

The document also stated that the sum of N254.27bn had been released for capital supplementation. This is about 33.54 per cent of the N758.12bn allocated for the expenditure sub-head in the 2018 budget.

Some finance and economic experts said that there was a need for the Federal Government to put in place mechanisms that would help check the delay in the passage of the budget as it was affecting the rate of capital projects execution.

They said that at a time when the government was working on how to sustain the growth momentum in the economy, it was critical for funds to be released for capital projects on time.

The Lead Director, Centre for Social Justice, Eze Onyekpere, stated that the practice where the annual Federal Government budget was signed into law in the second quarter of each year was inimical to its effective implementation.

He called on the Federal Government to commence the process of enacting a new Public Finance Management Act to address the incessant delays that had characterised the country’s budget process.

The new law, according to him, would also define the framework for the engagement of stakeholders in the budget preparation as well as approval processes.

He said, “Lessons need to be learnt from this budget fiasco and this challenge will now be converted into an opportunity.

“There is a need for effective legislative collaboration in the preparation and approval of the budget, which may necessitate the amendment of section 81 of the 1999 Constitution, enactment of a new public finance management Act which sets the rules for budgeting time frames.

“In the legislature, it is also imperative that the ground rules for the approval of budgets be streamlined and modified so that no set of members of the National Assembly should be in a position to alter the consensus of the majority.”

In his comment, a Developmental Economist, Odilim Enwagbara, said there was the need for the review of the Fiscal Responsibility Act to make it define properly the timeline for the preparation of the budget.

He said with well-defined timelines for the budget process which must stipulate penalties in case of default, both the executive and the legislature would be forced to work assiduously to meet with such deadlines.

He said the delay in the passage of the budget had serious negative implications for the economy as it would affect both fiscal and monetary policies.

For instance, he said in the area of fiscal policy, the government could not release funds for the implementation of capital projects, adding that with a huge infrastructure deficit of $350bn, it would be difficult to address such infrastructure gap with a delayed budget.

He said, “To delay budget is to delay investments. If you don’t have a new budget ready to take off, how do you spend for capital projects and pay salaries and even run the government?”

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Finance

Currency Outside Banks Increases By 66.2% As Nigerians Shun Formal Banking Channels

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A recent data has revealed that currency outside banks increased by 66.2 percent in September 2024.

To this end, money outside traditional banking channels rose to N4.02 trillion compared to N2.42 trillion reported in September 2023.

This represents an increase of N1.60 trillion in just one year.

This was revealed in the Money and Credit Statistics data of the Central Bank of Nigeria.

According to the data, on a month-on-month basis, currency outside banks grew by 3.8 percent in September 2024 from August’s figure of N3.87 trillion, translating to an increase of N147.9 billion.

The trend suggests a growing inclination among the public to retain cash outside formal banking channels, a shift that could impact banks’ liquidity and shape monetary policy dynamics.

The CBN data further shows that a considerable proportion of Nigeria’s currency is held outside the banking system.

In September 2024, approximately 93.1 percent of currency in circulation was outside banks, a rise from 87.5 percent recorded in September 2023.

This shift may reflect limited trust in banking services, inflationary pressures, or a structural dependence on cash in Nigeria’s largely informal economy.

Such a high percentage of currency outside banks poses potential challenges for channelling funds into productive investments, potentially hindering economic growth.

The CBN report also highlights a parallel rise in overall currency in circulation, which encompasses both bank-held and outside cash.

In September 2024, currency in circulation rose beyond 56.1 percent year-on-year to reach N4.31trn, up from N2.76trn in September 2023, reflecting an increase of N1.55trn.

This indicates that the volume of currency retained outside the banking sector outpaced the total released for circulation within the past year.

Compared to August 2024, currency in circulation rose by 4.0 percent month-on-month, adding N166.2bn from the previous figure of N4.14trn.

Earlier in September, the CBN announced plans to sanction banks that fail to dispense cash through their automated teller machines, as part of efforts to improve cash availability in circulation.

The CBN also revealed plans to release an additional N1.4 trillion into circulation over the next three months to ease cash flow within the banking system.

This strategy aims to ensure that ATMs and bank branches have sufficient cash, addressing ongoing challenges faced by customers over cash shortages.

In related developments, it was observed that Nigeria’s money supply grew significantly by 62.8 percent year-on-year in September 2024, despite the Monetary Policy Committee’s tightening stance intended to manage excess liquidity to control inflation.

According to CBN data, M3 reached N108.95 trillion in September 2024, up from N66.94 trillion in the same period last year.

On a month-on-month basis, money supply rose by 1.6 percent, increasing from N107.19trn in August 2024.

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Banking Sector

Zenith Bank Achieves Triple-Digit Growth, Revenue Surges 118% to N2.9 Trillion

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Zenith Bank Plc has announced its unaudited results for the third quarter ended 30 September 2024, recording a remarkable triple-digit growth of 118% from N1.33 trillion reported in Q3 2023 to N2.9 trillion in Q3 2024.

This performance underscores the Group’s resilience and market leadership in spite of the challenging macroeconomic environment.

According to the Bank’s unaudited third quarter financial results presented to the Nigerian Exchange (NGX), the triple-digit growth in the topline also led to an increase in the bottom line, as the Group recorded a 99% Year on Year (YoY) increase in profit before tax, growing from N505 billion in Q3 2023 to N1.0 trillion in Q3 2024.  Profit after tax equally grew by 91% from N434.2 billion to N827 billion in the same period.

The growth in the topline was driven by the expansion of both interest income and non-interest income. Interest income saw a notable 190% rise to N1.95 trillion, attributed to the high-yield environment.

Non-interest income rose by 41% to N856 billion, bolstered by substantial growth in fees and commissions, which highlights the strength of Zenith Bank’s retail growth and the robust performance of its digital channels during the reporting period.

The robust increase in profitability reflects the Bank’s focus on operational efficiency and strong risk management practices. Earnings per share (EPS) nearly doubled, rising to N26.34 from N13.82 in Q3 2023, underscoring Zenith Bank’s strong value creation for shareholders.

The Bank’s balance sheet grew significantly, with total assets growing by 49% to N30.4 trillion, largely supported by customer deposits, which rose by 42% to N21.6 trillion.

This growth in deposits was broad-based across corporate and retail segments, highlighting the Bank’s deepening reach and customer loyalty.

Gross loans increased by 46% to N10.3 trillion, underscoring the commitment to supporting strategic sectors in the economy.

Capital adequacy ratio remained strong, improving to 21.9%, well above regulatory requirements. The return on average equity (ROAE) stood at 37.8%, up from 35.1%, while return on average assets (ROAA) also improved to 4.3% as Zenith Bank maximized its asset base.

Cost of funds increased to 4.3%, reflecting the broader market trend of rising interest rates, while the cost of risk was maintained at 7.3%, underscoring the Bank’s proactive approach in provisioning for credit risk.

The Bank’s cost-to-income ratio rose to 39.5%, reflecting the impact of strategic investments in technology and capacity building aimed at supporting long-term growth, even as it continues to strive for greater operational efficiency.

Zenith Bank’s asset quality remains a cornerstone of its strength, with a non-performing loan (NPL) ratio of 4.5%, within regulatory limits. A high coverage ratio of 198.4% underscores the Bank’s disciplined approach to risk management, positioning it for resilience in the face of market volatility while supporting stable loan growth.

Zenith Bank remains steadfast in its commitment to sustainable growth and value creation. The Bank launched a capital raise program on August 1, 2024, consisting of a combined Rights Issue and Public Offer.

This capital raise was driven by the Central Bank of Nigeria (CBN)’s recapitalization directive for commercial banks issued in March 2024. While the Bank awaits final capital verification approvals from authorities, the fundraising exercise was successful, reflecting strong confidence in Zenith Bank’s brand.

The additional capital will enhance the Bank’s ability to expand its product offerings, deepen its penetration in strategic sectors, boost lending to the real sector and pursue its African and global expansion plan.

In furtherance of this, the Bank in September 2024 received regulatory approval for the establishment of a Zenith Bank branch in Paris, France, which is fully operational and will enhance the Bank’s product offerings in international markets.

With a strengthened capital base, Zenith Bank is well-positioned to navigate the evolving economic landscape, while putting best-practice sustainability standards at the heart of its business.

The Bank will also continue to prioritize opportunities that enhance stakeholder value and a strong compliance and corporate governance culture, which will reinforce the its leadership position within Nigeria’s financial sector and drive long-term growth.

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Banking Sector

UBA Expands Footprint in the Middle East with New Subsidiary in Saudi Arabia

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UBA House Marina

Africa’s Global Bank, United Bank for Africa (UBA) Plc, has set the wheels in motion to expand its operations in the Middle East with plan ongoing to open a subsidiary in Saudi Arabia, its largest economy.

This move which is expected to happen within the next year will mark the bank’s second subsidiary in the Gulf Region, following the expansion of its business to the United Arab Emirates in 2022.

UBA’s Group Deputy Managing Director, Muyiwa Akinyemi, who disclosed this during a panel session during the 8th Edition of the Future Investment Initiative(FII) in Riyadh, Saudi Arabia and in an interview with Arise TV, underscored the bank’s strategic commitment towards fostering Africa’s growth through infrastructure development, youth empowerment, and sustainable partnerships across key global markets.

He said, “Opening a presence in Saudi Arabia represents the next step for us in connecting the Africa-Gulf region. We are excited to bring UBA’s expertise in financial services to Saudi Arabia, where we aim to facilitate knowledge transfer and create strong economic linkages. This venture will further enable us to access Saudi expertise in food security, energy transition, and sustainable practices, which are all critical for Africa’s continued development.”

While emphasising the importance of Africa as a strategic investment destination for long-term capital, he said, “Africa’s infrastructure deficit is an opportunity for investors worldwide. Our pitch to the Gulf and Southeast Asia emphasizes that Africa must be part of their investment horizon. Today, food security is paramount as our population expands.

Akinyemi also highlighted the bank’s dedication to nurturing Africa’s youth talent through entrepreneurship. “Guided by our Group Chairman’s efforts with the Tony Elumelu Foundation, UBA is committed to supporting young entrepreneurs in tech, agriculture, and entertainment, which are all burgeoning sectors in Africa. With such a young and dynamic population, we see enormous potential for innovation and growth.”

He also reiterated the bank’s continuous support for Small and Medium Enterprises (SMEs) in Africa and beyond as he outlined the bank’s commitment to these businesses, which he referred to as key players in the African economy and vehicles for employment and economic growth.

“SMEs are the backbone of economic development in Africa. They contribute significantly to job creation and value chains, particularly within Nigeria. Over the last year, UBA has committed billions to support SMEs across Africa, and our network of over 20 countries enables us to make a substantial impact.”

During the panel discussions, Akinyemi took time to emphasize UBA’s longstanding experience on the continent as it navigates an ever-evolving investment landscape, adding that “As investors, we focus on infrastructure and sustainable projects that encourage economic prosperity while addressing pressing issues such as talent migration. Our goal is to ensure that people can thrive in Africa without needing to relocate. By investing in local talent and fostering growth sectors, we contribute to building the next generation of global innovators right here in Africa.”

The DMD further articulated UBA’s approach to risk management on the continent, emphasizing that the bank’s 75-year history has uniquely equipped it with insights and strategies to navigate diverse markets.

“With over seven decades of experience, Africa is what we know, and that knowledge allows us to manage risks effectively. We see tremendous opportunities in various sectors across the continent, and our continued investments are driven by a commitment to bring economic empowerment to communities, increase GDP, and improve socioeconomic quality. Our anniversary is a celebration of UBA’s legacy of contributing to Africa’s progress. We look forward to leveraging this milestone to drive even greater impact across sectors and empower future generations,” he said.

United Bank for Africa Plc is a leading Pan-African financial institution, offering banking services to more than forty-five million customers, across 1,000 business offices and customer touch points in 20 African countries. With presence in New York, London, Paris and Dubai, UBA is connecting people and businesses across Africa through retail, commercial and corporate banking, innovative cross-border payments and remittances, trade finance and ancillary banking services.

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