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With Rising Income Inequality, 100 Bank Customers Get 47% of Loan

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  • With Rising Income Inequality, 100 Bank Customers Get 47% of Loan

Nigerian banks have high credit concentration risk, with 47 per cent of total industry loans having been extended to 100 large customers in the country, a report by Moody’s Investor Service has revealed.

Moody’s, a credit rating agency, stated this in its latest report on Nigerian banking sector.

This is just as the Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, attributed the development to the level of income inequality in the country.

Moody’s stated that the recent directive by the Central Bank of Nigeria (CBN) that banks should maintain a minimum loan-to-deposit ratio (LDR) of 60 per cent by the end of September 2019, would help support loan growth recovery in Nigeria and support banks’ revenue.

“The directive will encourage banks to diversify their exposure to more granular borrowers, reducing their concentration risks.

“Nigerian banks have high concentration risk, with 47 per cent of total system loans having been extended to 100 large customers,” it added.

Nigerian banks’ loans contracted 6.7 per cent in 2018 and was expected to grow by about five per cent this year.

But speaking with the press, Rewane said the 47 per cent industry loan being extended to 100 customers also showed that the consumer lending segment of the market was still low.

“Yes, there is a concentration risk, but it shows that consumer lending in the country has not been developed. For instance, a loan to Dangote Group of let’s say N100 billion will be more viable than a bank giving N5,000 loan to 100 customers each. It shows the level of income inequality in the country.

“But it is not something to worry about because that is how it is in other countries. That is why you see the CBN coming up with various policies to encourage lending to micro, small and medium scale businesses.

“But there are structural issues in the economy that must be addressed to encourage banks to lend,” he added.

Meanwhile, a former Deputy Governor of the CBN and 2019 presidential aspirant, Prof. Kingsley Moghalu, yesterday decried the state of the economy, noting that a country where one state such as Lagos receives more than 70 per cent of credit does not run “a model of sustainable finance.”

Moghalu, said rather than undertake “structural reforms and create an optimal environment for business productivity,” the government appears to “have a misplaced faith in the ability of its special interventions and those by its central bank to solve all the economy’s problems.”

Moghalu, said this in Lagos, at an Impact Investing Conference organised by financial communications firm, Africonomie.

According to the International Finance Corporation (IFC), impact investing involves investments made into companies, organisations, vehicles and funds with the intent to contribute to measurable positive social, economic and environmental impact alongside financial returns”

Although Nigeria is the largest recipient of impact investments in West Africa, most impact investors in Nigeria are overwhelmingly Development Finance Institutions (DFI), are not based in Nigeria and are not Nigerians.

“I suspect the reason for this absence of big Nigerian players in the impact investing space is that most established Nigerian corporate and fund managers are still operating from a traditional business that drives their business models. If you are of this mindset, you would rather invest in “bricks and mortar” businesses or in low-risk treasury bills than in innovative impact business ventures that may yield even better returns,” Moghalu said.

Also at the conference, the Chief Executive Officer of the Nigerian Stock Exchange (NSE), Oscar Onyema, said more investment opportunities at the NSE was focusing on climate impact and supporting the United Nations’ Sustainable Development Goals.
“There is more money going into those type of funds,” he said.

Onyema, also stressed that Impact Investing shouldn’t be confused with corporate social responsibility, saying it is about embedding sustainability in the way a company is being run.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Insurance

Heirs Insurance Group Unveils Revolutionary Website for Seamless Insurance Experience

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Heirs Insurance Group has launched a website designed to revolutionize the insurance experience for its customers.

With a focus on simplicity, accessibility, and personalized service, the new website aims to streamline the process of obtaining insurance coverage and empower customers to make informed decisions about their insurance needs.

The website boasts a range of innovative features that make navigating insurance options easier than ever before.

From simple and intuitive navigation menus to personalized insurance recommendations, the website is designed to guide customers through every step of the insurance process quickly and efficiently.

According to Ifesinachi Okpagu, the Chief Marketing Officer of Heirs Insurance Group, the new website embodies the company’s commitment to delivering exceptional customer service.

“Today’s customers want simplicity, and this new website delivers on that request,” Okpagu said. “We are empowering customers to take control of their lives, their businesses, assets, and their most cherished people.”

One of the key features of the website is its personalized insurance experience, which takes customers through a short journey to help them identify the best insurance plan for their needs.

Whether customers are looking for coverage for their home, car, business, or loved ones, the website provides tailored recommendations to ensure they find the right insurance solution quickly and easily.

With its user-friendly interface and innovative features, the new website from Heirs Insurance Group sets a new standard for the insurance industry, making it easier than ever for customers to protect what matters most to them.

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Banking Sector

Safaricom, Access Holdings Forge Partnership to Revolutionize Remittance Corridor in Africa

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Safaricom, the leading telecommunications company in Kenya, has entered into a strategic partnership with Access Holdings, spearheaded by Aigboje Aig-Imoukhuede.

The collaboration aims to revolutionize the remittance corridor between East and West Africa, marking a significant step towards enhancing financial inclusion and empowering millions of individuals across the continent.

The partnership comes on the heels of Access Holdings’ recent acquisition of the National Bank of Kenya Limited, signaling the company’s ambitious expansion into the East African market.

Leveraging Safaricom’s extensive network and expertise in mobile money through M-Pesa, which currently dominates the mobile money market in Kenya, the alliance seeks to create seamless and efficient channels for remittance transactions.

Aigboje Aig-Imoukhuede, the driving force behind Access Holdings, expressed enthusiasm about the collaboration, highlighting its potential to transcend traditional boundaries and foster greater economic connectivity between East and West Africa.

He highlighted the fusion of collective expertise and resources between the two entities, underlining their shared commitment to driving financial inclusion and empowerment across the continent.

The partnership holds promise for addressing the challenges faced by millions of Africans in accessing affordable and reliable remittance services.

By connecting more than 60 million customers and 5 million businesses across eight countries, the collaboration aims to facilitate over $1 billion in daily transaction value, significantly boosting the flow of remittances within and outside Africa.

With the first phase of the collaboration focusing on key markets such as Nigeria, Kenya, Ghana, and Tanzania, stakeholders anticipate a transformative impact on the remittance landscape, paving the way for greater intracontinental trade and economic integration in line with the objectives of initiatives like the African Continental Free Trade Area (AfCFTA).

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Banking Sector

EFCC Urged to Repatriate Recoveries to NDIC for Depositors’ Relief

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The Nigeria Deposit Insurance Corporation (NDIC) has made a fervent plea to the Economic and Financial Crimes Commission (EFCC) to expedite the repatriation of recovered funds to its coffers to facilitate the timely reimbursement of depositors affected by bank failures.

During a recent meeting between the Managing Director of NDIC, Bello Hassan, and the Executive Chairman of the EFCC, Ola Olukoyede, at the NDIC headquarters in Abuja, Hassan stressed the importance of enhanced collaboration between the two agencies in recovering depositors’ funds lost due to bank failures.

Hassan emphasized that the return of recoveries made by the EFCC on behalf of the NDIC would significantly contribute to the prompt reimbursement of affected depositors.

He commended the EFCC for its unwavering efforts in combating corruption and financial crimes, highlighting its crucial role as a key member of the Taskforce on Implementation of the Failed Banks Act chaired by the NDIC.

The NDIC boss also highlighted the existing partnership between the two organizations, which led to the establishment of the NDIC Help Desk at the EFCC in 2022.

He disclosed that several high-profile cases referred to the EFCC were currently under investigation.

In response, Olukoyede reiterated the EFCC’s commitment to collaborating closely with the NDIC to combat financial crimes and safeguard the integrity of the Nigerian banking sector.

He pledged to intensify efforts to repatriate recovered funds promptly, acknowledging the interconnectedness between criminal activities and bank failures.

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