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Weak Economic Activities May Force Banks to Cut Lending

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  • 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.

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 Life Assurance- Investors King

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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