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N8.1tn Bad Loans: MPC Urges CBN to Develop Recovery Framework



  • N8.1tn Bad Loans: MPC Urges CBN to Develop Recovery Framework

The Monetary Policy Committee of the Central Bank of Nigeria has directed the apex bank to develop a comprehensive administrative, legal and regulatory framework to speed up the recovery of delinquent loan facilities in the banking system.

It called on the CBN to engage relevant stakeholders and authorities in order to mitigate credit risk and ultimately open up the credit delivery space in the Nigeria economy.

The CBN Governor, Mr Godwin Emefiele, disclosed this on Tuesday while addressing journalists shortly after the two day committee’s meeting, which was held at the apex bank’s headquarters in Abuja.

Based on figures released by the National Bureau of Statistics, the banking sector recorded a total amount of N8.17tn as non-performing loans in the 2018 fiscal period.

The banking sector’s N8.17tn NPLs for 2018 decreased by N1.38tn when compared to the N9.54tn, which the banking sector recorded as NPLs in the 2017 fiscal period.

Emefiele explained that while the NPL ratio in banks had moderated, it remained above the prudential benchmark.

He said, “The MPC welcomed the improvement in financial soundness indicators, but noted that although the non-performing loan ratio moderated, it remained above the prudential benchmark.

“Consequently, the committee considered and recommended to the CBN a proposal to develop a comprehensive administrative, legal and regulatory framework to speed up the recovery of delinquent loan facilities of the banking system, which would involve structured engagement with relevant stakeholders and authorities in order to mitigate credit risk and ultimately open up the credit delivery space in the Nigerian economy.”

He added, “If you recall, the prudential is that banks must not have more than five per cent in NPL.

“But I must say that at this time, it’s about nine to ten per cent on the average, which is a significant improvement from where it was a year or two ago.

“About a year or two ago, it was close to 15 per cent and moderated to ten per cent and we say it’s a substantial and an encouraging improvement in a the level of NPL.

“And I do think that with the steps that would be taken by the CBN to support the banks through administrative, legal and regulatory framework, certainly, we would see to it that NPLs are brought down so that DMBs are encouraged to go back and begin to lend money more aggressively to those sectors that they considered to be risky.”

Emefiele said the committee also directed the management of the apex bank to provide a mechanism for limiting Deposit Money Banks’ access to government securities.

The CBN governor said the move would help to redirect the lending focus of banks to the private sector and boost the much needed growth in the economy.

He said the abundant opportunities available to banks for unfettered access to government securities was crowding out private sector lending, adding that there was a need for banks to start lending to employment-creating and growth-stimulating sectors of the economy.

He said although output growth in the first quarter was slower than 2.38 per cent recorded in the preceding quarter, there was existence of spare capacity for non-inflationary growth in the economy.

This opportunity, he noted, should be explored through increased credit delivery to the private sector.

Emefiele said that the committee urged the relevant authorities to stiffen efforts to address the security challenges and improve food production.

The committee, according to him, also encouraged financial intermediating institutions to ensure that loans to the agricultural sector were channelled effectively to end users.

Not impressed by the flow of credit from Deposit Money Banks to the private sector, Emefiele said the committee called on the CBN management to urgently put in place modalities to promote consumer and mortgage lending in the Nigerian economy.

He said the MPC had given the management the mandate to promote consumer lending, adding that the apex bank would hold very informed and strategic engagement with DMBs to achieve this objective.

He noted that boosting the level of consumer credit would greatly and positively impact on the flow of credit and ultimately result in output growth.

He said, “In view of the abundant opportunities available to banks for unfettered access to government securities, which tends to crowd out private sector lending, the Committee called on the CBN to provide a mechanism for limiting DMBs’ access to government securities so as to redirect bank’s lending focus to the private sector. This will spur the much needed growth in the economy.

“The truth is that, according to our own regulations, there is a particular minimum percentage of treasury bills or government securities that the bank must invest in order to remain liquid.

“But again, we have observed and unfortunately too and increasingly so that the banks rather than focusing on granting credit to the private sector, they tend to direct their focus to mainly in buying government securities.

“The MPC has frowned upon that and has directed the management of the CBN to put in place policies or regulations that will restrict the banks from limited access to government securities.

“It is important and expedient that the MPC gives this directive to the management of the CBN because this country badly needs growth.

“For us to achieve growth, those whose primary responsibilities it is to provide credit, who act as intermediaries in providing credit, and are the catalyst to the economy, must be seen to perform that responsibility.

“And that they (Money Deposit Banks) would rather than performing that responsibility to the private sector that is the engine growth of an economy, they would be directing their liquidity to other sectors of the economy is what the MPC frowns upon and, therefore, given the management of Central Bank the power to limit their propensity or their appetite for just going for government securities rather than directing credit to private sector of the economy.”

In the area of fiscal policy, the apex bank boss said the committee called on the Federal Government to urgently build fiscal buffers through a more realistic benchmark oil price for the Federal budget.

He said, “The oil benchmark is about $60 per barrel that has been budgeted for at 2.3 million barrels per day.

“Now that price is almost at $70, what we are saying is that there is no need to begin to say let us spend if we make more money and so increase the budget benchmark maybe from $60 per barrel to $69 per barrel because you believe that price is good.

“What that does, for instance, the buffer between $72 or $74 that it is right now and the $60 budgeted, if you realised the money, save it and build a buffer for a rainy day when it does happen.”

Speaking on the outcome of the MPC meeting, the CBN governor said that the committee decided to leave the Monetary Policy Rate unchanged at 13.5 per cent.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Nasdaq Set To Launch Options Trading For Coinbase Global



Less than a week after the largest crypto exchange in the U.S. Coinbase was listed, Nasdaq is set to start trading options for Coinbase Global.

According to Reuters, a representative for Coinbase stated that the COIN.O options will start trading on Nasdaq on Tuesday, April 20.

The launch of equity options will offer a new way for investors to bet on the fortunes of Coinbase. Equity options represent the right, but not the obligation, to buy or sell a stock at a certain price, known as the strike price, on or before an expiration date.

The news follows Coinbase’s direct listing, which saw the firm’s stock fluctuate between a valuation of $429.54 and $310 on its first day of trading.

It was reported that the Chief Executive Officer of Coinbase, Brian Armstrong sold less than 2% of his holdings which worth about $292 million in shares on COIN’s first day of trading. According to filings made with the U.S. Securities and Exchange Commission, Armstrong sold 749,999 shares in three batches at prices ranging from $381 to $410.40 per share for total proceeds of $291.8 million.

It was also reported that insiders dumped nearly $5 billion in COIN stock shortly after it was listed. Filings on the Coinbase Investor Relations website showed a total of 12,965,079 shares were sold by insiders, worth over $4.6 billion at COIN’s $344 share price at close on Friday.

Yahoo Finance reported the stock has slumped 22.5% from a high of $429.54 on April 14 to a current after-hours trading price of $332.75 where it appears to have settled after Monday’s trading session.

On April 20, Coinbase Pro announced that will add support for new trading pairs for Basic Attention Token (BAT), Cardano (ADA), Decentraland (MANA), and USDC from April 20. The four assets will be paired with three fiat currencies (USD, EUR, GBP), BTC, and ETH, with limited trading functionality to be made available while market liquidity is assessed at launch.

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Banking Sector

Unity Bank Grows Asset by 67.90% to N492.02 Billion, As Gross Earnings Hit N42.71 Billion in FY 2020



Unity bank

Unity Bank Plc grew its assets base to N492.02billion representing a significant increase of 67.90% from the N293.05 billion of total assets value recorded in 2019. This is even as the agric-focused lender declared gross earnings of N42.71 billion within the period under review.

A review of the Bank’s audited results for full-year ended 31 December 2020, released to the Nigerian Stock Exchange, showed that the Bank improved its bottom line marginally as Profit After Tax, PAT stood at N2.09 billion. Profit Before Tax, PBT closed at N2.22 billion, in a year that was defined by the unmitigated impact of global pandemic characterized by disruptions in business activities and the general downturn that resulted in revenue/returns dip in major leading sectors globally.

The lender substantially grew its customers’ deposit portfolio to N356.62 billion, up from N257.69 billion in the corresponding period of 2019, representing a 38.4% growth. This affirms positive market uptake of the Bank’s product offerings, as well as the lender’s growing customer base to its recent aggressive push with agile customer-centric products, which has played a role in deepening financial services penetration, especially to a wider world, an underserved spectrum of the retail market.

Other major highlight of the audited financial statement relates to growth in its net operating income which rose to N25.46 billion from N23.21 billion in the corresponding period of 2019, representing a 9.71% increase. This is even as the net interest income recorded a significant jump, as it rose by 7.60% to N17.75 billion from N16.49 billion in the corresponding period of 2019. Earnings per Share closed at 17.85 Kobo.

The Bank’s gross loans portfolio increased by 92.9% to N206.2 billion in December 2020 from N106.9 billion in December 2019. The Bank’s lending strategy was specially tailored to support the nation’s food agenda. This had the added advantage of improving food security across the country, providing employment to thousands of youths and entrepreneurs, contributing to the conservation of FX stocks and mitigating security challenges by ensuring adequate empowerment of citizens and deepening skills acquisition across the value chain.

Commenting on the result, Unity Bank’s Managing Director/Chief Executive Officer, Mrs. Tomi Somefun stated that the results showed the resilience of the Bank during unprecedented times of uncertainties and our ability to innovate and focus on key balance sheet items that will enable us to maintain the growth trajectory.

She further opined that: “Consequently, for the year under review, the opportunities to significantly create more quality assets for the business, thought to have a sustainable impact, informed part of choices made and we have seen some encouraging market uptake in this regard, apart from the benefits to the enterprise bottom-line that have also started trickling in. Other key performance indicators especially on the liability side of the business were equally not left out. The Bank deployed new product features and augmentation supported by omni-channel, USSD promotions and other channels to enhance services delivery efficiency, drive income generation capacities and enhance steady balance sheet growth for the year”.

Looking ahead, Somefun stated: “we will latch on targeted strategies to deploy significant investment in technology in order to ride the waves of the COVID-19 pandemic. On the back of this, the Bank focuses on achieving major efficiency gains, deepening its retail footprints and penetrating identified cluster market segments, as bulwarks to tapping into various youth markets platforms, in addition to the mass market would get a further boost”.

While laying an outlook for the future, the Unity Bank’s Chief further stated: “The Bank is also looking to consolidate on the gains from its core business areas and niche in the agribusiness sector. The Bank has solidly financed over one million farmers over the past three years. These farmers cut across several primary crop production such as rice, maize, cotton, wheat, sorghum, etc coupled with their rich value chains, and we hope to continue to expand on this as we play our part in driving the country’s quest for self-sufficiency in food production.”

Analysts are of the view that has made an appreciable impact in the agribusiness and its value chains consistently, the market is excited that the current year performance and different initiatives of the Bank show that the agribusiness is bankable not only as a differential positioning but also for sustainable business performance and profitability.

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Banking Sector

Access Bank To Acquire BancABC Botswana



Access bank

Access Bank Plc on Monday disclosed that it had entered into a definitive and binding agreement with ABC Holdings Limited to acquire 78.15 per cent shareholding in African Banking Corporation of Botswana Limited (BancABC Botswana).

The transaction, which is subject to regulatory approvals and customary conditions precedent, is expected to close before the end of this quarter.

ABC Holdings is a subsidiary of London Stock Exchange listed group – Atlas Mara Limited.

Access Bank disclosed this in a statement signed by its Company Secretary, Sunday Ekwochi.

Bostwana is renowned for its quality sovereign credit rating and stability. Access Bank’s market entry is expected to further solidify its strategy as, “a strong banking partner in key verticals across retail and corporate banking, including especially supporting trade in payments across southern Africa and Sub-Saharan Africa more broadly.”

Commenting on the deal, the GMD/CEO, Access Bank, Herbert Wigwe, said: “We remain committed to a disciplined and thoughtful expansion strategy in Africa, which we believe will create strong, sustainable returns for our shareholders and stakeholders at large, over the medium and long-term.

“The establishment of Access Bank through this acquisition in the Republic of Botswana will position the bank to deliver a more complete set of banking solutions to its clients active in and across the SADC and COMESA regions.

“This transaction complements our recent strategic growth acquisitions in South Africa, Zambia and Mozambique. We are building a bank of the future that Africans across Africa and the world would be proud of and look forward to welcoming the employees, customers and other stakeholders of BancABC Bostawana to Access Bank.”

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