- Weak Economic Activities May Force Banks to Cut Lending
Weak economic activities due to lockdown in key states could prevent banks from lending money to the private sector, according to analysts.
Analysts doubt banks will create new loans in view of the current disruption in economic activities and an increase in the risks associated with such investment in recent weeks.
“If the economy is fragile as we are seeing, lenders may be hesitant to lend as they fear that loans may go bad. And if the loans go bad, that might result in spiralling non-performing loans that will impair their capital,” said Ayodeji Akinwunmi, head of corporate banking at FSDH Merchant Bank.
“The situation is presenting an opportunity for government to diversify the economy away from reliance on oil,” said Akinwunmi.
It should be recalled that the Central Bank of Nigeria had increased the Loan-to-Deposit ratio to 65 percent to force Deposit Money Banks (DMBs) to increase credit facility to the private sector.
The initiative led to 14 percent year-on-year growth in credit facility to the private sector in 2019. DMBs credit to the private sector rose to N17.2 trillion in 2019, the highest since 2007.
However, weak economic fundamentals amid projected slow economic activities could prevent banks from lending to the private sector after the lockdown. Nigeria’s unemployment rate remained high at 23.1 percent or 20.9 million people, the inflation rate rose to a 21-month high in February and foreign reserves has been on a downward trend since June 2019.
The critical state of the nation forced the central bank to adjust the foreign exchange rate of the Naira to reflect changes in the nation’s economic fundamentals after calling experts criminal with the sole aim of profiting from the forex market.
Deposit Money Banks have started putting limits on foreign spending on naira denominated cards, another sign they are doubting central bank’s ability to effectively intervene at the forex market as usual given low oil prices and drop in the nation’s foreign reserves to $35.5 billion, down from $45 billion in June 2019.
All these could change if the projected oil agreement between Saudia Arabia led 14 members and Russia materialised on April 9, 2020. Crude oil broke rose to $33 per barrel on Monday following President Trump’s tweet on Thursday that the two oil giants would cut production by the most on record.
Still, experts expect demand for loans to drop during this period.
“On the demand side, we expect the pass-through impact of subdued economic activities to constrain the demand for credit from individuals and corporates,” said analysts at CSL Securities Limited.
“In the medium to long term, credit creation in the economy depends on the pace of flattening in the curve of COVID-19 cases as well as the rebound in oil prices,” said the analysts.
Fidelity Bank Promotes 745 Staff Members
Seeking to increase staff morale while empowering them to work more efficiently, Fidelity Bank has announced the promotion of 745 employees following the performance review of two financial years – 2019 and 2020.
A total of 461 staff members benefited from the FY 2019 promotion exercise, while 284 staff members benefited from the FY 2020 exercise. The beneficiaries cut across the senior, middle, and junior management cadre of the bank, and the promotion was based on merit, using a transparent and robust performance management system in line with global best practices.
Speaking about this, Nneka Onyeali-Ikpe, MD/CEO, Fidelity Bank Plc said “I am very delighted to announce the promotions for 2019 and 2020 financial years. Releasing the list for 2 financial years’ promotion at the same time is something we are very proud of. We strongly believe that the continuous growth of our bank over the years has been largely attributed to the commendable efforts and unrelenting sacrifices of our employees. Promotion is one of the many ways we express our gratitude. We are thankful to be home to many amazing talents that continue to drive our value and most importantly, serve our stakeholders to the highest standards.”
Speaking further, she said. “Since I was appointed the MD/CEO of our great bank in January 2021, I have been committed to a 7-point agenda to move our bank further, out of which workforce transformation is a key category. Staff performance and reward are critical to us, and as an organisation, we will continue to make available adequate resources to deepen the skills and entrench a culture of high performance amongst employees. I wish to appreciate all members of the Fidelity Bank family for their commitment and drive and unrelenting sacrifices towards delivering our objectives. As we move forward in our quest to becoming a leading tier-one bank, I encourage all elevated staff to see their promotion as a call to rededicate themselves to excellence.”
Fidelity Bank has continued to empower its employees with invaluable resources capable of putting them at the forefront of innovative transformation. In March 2021, the bank announced two capacity-building projects – One Culture Project and Project Alpha – that were targeted at transforming the workplace for its staff. In particular, Project Alpha was created to help Fidelity Bank develop a robust and holistic learning and development framework for all staff while One Culture Project was formed to reinforce the behaviour and value systems that will help the bank, as well as staff, achieve set goals.
Nigeria’s Central Bank To Launch Digital Currency On Oct 1
The Central Bank of Nigeria (CBN) has said that it will launch its much-awaited digital currency on October 1, to mark Nigeria’s independent anniversary.
CBN Director of IT Department, Rakiya Mohammed, revealed this at a private webinar, explaining that the banking sector regulator had been conducting research towards the launch of digital currencies since 2017.
She added that the central bank may conduct a proof of concept before the end of the year. The move to adopt the digital currency was first mulled by the CBN Governor, Godwin Emefiele, during the Monetary Policy Committee (MPC) in May.
He had said a digital currency will soon become a reality in the country, adding that the central bank had already set up its committee which was working on the concept.
The CBN governor had further restated the determination of the apex bank to drive the e-Naira project during the recent 306th Banker’s Committee meeting, pointing out that the process was ongoing.
Mohammed was quoted by Nairametrics to have highlighted the benefits of the digital currency, saying it would enhance macroeconomic management, boost economic growth, facilitate cross-border trade, boost financial inclusion and monetary policy effectiveness.
Mohammed said the digital payment instrument would further improve payment efficiency, revenue tax collection, remittance improvement, and targeted social intervention.
She added that the innovation would also benefit the fintech ecosystem by enhancing operational efficiency, opportunities for fintech start-ups in building services and products as well as financial inclusion that will contribute to economic growth, and the creation of a new system complimenting the traditional payment system.
Mohammed had last month said the proposed digital would be launched before December. According to her, every Nigerian would have access to digital currency.
She had while briefing journalists at the end of a Bankers’ Committee meeting said: “Let me state categorically that cryptocurrency such as Bitcoin and the rest of them are not under the control of the central bank; they are purely private decisions that individuals make and are not part of this arrangement.
“We have spent over two years studying this concept of central bank’s digital currency and we have identified the risks. And it is one of the reasons why I said we are setting up a central governance structure that would involve all industry stakeholders to access all the risks as we continue on this journey.
“Very soon we would make an announcement on the date for the launch and by the end of the year, we should have the digital currency.”
According to her, about 80 percent of central banks across the world are presently exploring the possibility of issuing the central bank’s digital currency, saying that Nigeria cannot be left behind.
Mohammed had added: “You are aware that we have two forms of fiat money: The notes and the coins. So, the central bank’s digital currency is the third form of fiat money. So, this digital money is going to complement the cash and note that we have.
“The central bank digital currency will just be as good as you having cash in your pocket. So, if you are having the currency in your pocket, you are as good as having cash on your phone.
“Now, why did we need to go into this? There are different cases that the central bank is looking at.
UK Financial Reporting Council Sanctions KPMG On Quality Of Banking Audits
The United Kingdom Financial Reporting Council (FRC) has sanctioned one of the biggest audit firms, KPMG LLP over the quality of its banking audits which U.K.’s industry regulator said it was “unacceptable” that for the third year running the accounting firm’s work wasn’t up to scratch.
The FRC in its annual report released on Friday examined the U.K.’s seven biggest auditing firms, which include Ernst & Young and Deloitte, said almost 30 percent of all bookkeeping was below par in the year to the end of March.
“Overall Inspection results at KPMG did not improve and it is unacceptable that, for the third year running, the FRC found improvements were required to KPMG’s audits of banks and similar entities.
“Given the systemic importance of banks to the UK economy, the FRC will be closely monitoring KPMG’s actions to ensure findings are addressed in a timely manner.
“KPMG has agreed on additional improvement activities to be delivered this year over and above its existing audit quality improvement plan,
“In response to our findings this year, the firm’s senior leadership has committed to making further changes necessary to improve audit quality in time for 2021 year-end audits.
“We will monitor these closely to assess on a timely basis the extent to which they address our findings,” the report released on Friday stated.
The FRC said that “We will also continue to focus our inspections on KPMG banking audits.”
The regulator said central to achieving consistent audit quality is a healthy culture within the audit practice that encourages challenge and professional skepticism, as it set out in its letter to Heads of Audit
in December 2020.
“We have a major project underway to examine audit culture, including an international conference held in June this year on the subject.
“Operational separation of audit practices from the rest of the firm should help the largest firms to focus on developing an appropriate audit culture,” the FRC stated.
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