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Banks Cutting Down Loans to Private Sector Amid Growing Uncertainty

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First Bank

Nigerian banks have started cutting down on loans to the private sector as economic uncertainty persists amid rising risk.

The latest data from the Central Bank of Nigeria (CBN) showed that the total credit to the private sector declined by N425 billion or 1.41 percent to N29.71 trillion in the month of September, down from N30.13 trillion in August.

While credit facility to the government jumped by 13.51 percent from N8.56 trillion in August to N9.68 trillion in September. Bringing the total credit to the economy in the month under review to N39.39 trillion, up by 1.81 percent from N38.69 trillion in August.

The latest trend of cutting down on loans to the private sector reflects lenders’ strategy to curb rising bad loan default by households and businesses.

The report stated: “The performance of total unsecured loan to households, measured by default rates, worsened in Q3 2020 and it is expected to deteriorate further in Q4 2020.”

The report noted that financial institutions experienced higher default rates on credit cards and overdrafts/personal lending to households in the third quarter of the year. However, it said they expect the default rates to drop in this current quarter.

“Losses given default on total unsecured loans to households and overdraft/personal loans to households both declined in Q3 2020. Similarly, default on total unsecured loans to households was expected to worsen further while default on overdraft/personal loans to households would improve in Q4 2020.

“Corporate loan performance as measured by the default rates worsened for small businesses and medium PNFCs but improved for large Public Non-Financial Corporations (PNFCs) and small businesses and Other Financial Corporations (OFCS) in Q3 2020. However, lenders expect lower default rates on lending to all sized businesses except small businesses in Q4 2020.”

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

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Loans

Loan Default: AMCON Takes Over IBEDC

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AMCON

Further to the judgment of the Federal High Court on the 8th of September 2021, the Asset Management Corporation of Nigeria (AMCON) has announced its takeover of the Ibadan Electricity Distribution Company (IBEDC).

This is following the electricity distribution company’s default in a loan servicing agree­ment executed with Polar­is Bank.

“AMCON has been ap­pointed receiver/manager over all the Assets of In­tegrated Energy Distribu­tion and Marketing Lim­ited as stipulated in the instruments executed in favour of AMCON by vir­tue of the Loan Purchase and Limited Servicing Agreement executed with Polaris Bank Limited dat­ed 30th November 2018 and a Notice of Appointment of the Receiver/Manager dated August 6th, 2021, which was duly stamped by the Commissioner for Stamp Duties”, a statement from AMCON reads.

AMCON further revealed that it has appointed Osayaba Giwa-Osagie to take over the entire undertakings on the IBEDC, including the assets, shares and interests in related companies and entities, and also monies kept in any of the 25 banks in Nigeria.

Investors King gathered that AMCON’s takeover might also not be unconnected to some crisis inside the power company, a development which has reportedly affected its ser­vice delivery to customers.

IBEDC’s Chief Operating Officer (COO), Engineer John Ayodele however allayed the fears of the IBEDC staff.

“I hereby wish to inform all staff that there is no cause for alarm. We are assured of job security which entails our position/duties in the company, being entitlements to our salaries and other benefits etc.”, he said.

Investors King recalls that the IBEDC, during a stakeholders’ meeting in May 2021 had disclosed that it secured N4.2billion from the Central Bank of Nigeria (CBN) to improve power supply to its numerous customers in Ogun State.

According to Ayodele, the facility would be channelled into building lines to improve power/electricity supply to the communities. He had also revealed that 80 percent of the money collected by IBEDC goes for other services, adding that the company has lost over N3billion in estimated billing.

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Finance

Lawmakers Consider Capital Market Bill, Propose Ten-Year Jail Term For Ponzi Scheme Operators

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Ponzi schemes

Some Nigerians would still cringe at the mere mention of ‘Investment’. This is due to their exposure to the dubious schemes of fake investment platforms and Ponzi schemes.

Hence, as part of efforts in curbing this, a bill seeking the prohibition of Ponzi and Pyramid schemes has passed the second reading at the house of representatives. The bill also proposes a 10-year prison sentence for operators of the Ponzi and pyramid schemes.

The bill, which was sponsored by the Chairman, house committee on capital markets, Ibrahim Babangida, also seeks to repeal and re-enact the Nigerian Capital Market, Investments and Securities Act.

It is titled, ‘A Bill for an Act to Repeal the Investments and Securities Act, 2007 and Enact the Investments and Securities Bill to Establish Securities and Exchange Commission as the Apex Regulatory Authority for the Nigerian Capital Market as well as Regulation of the Market to Ensure Capital Formation, the Protection of the Market to Ensure Capital Formation, the Protection of Investors, Maintain Fair, Efficient and Transparent Market and Reduction of Systematic Risk; and for Related Matters.’

A Ponzi scheme is an investment fraud that pays existing investors with the money collected from new investors. The scheme generally leads victims to believe that their earnings are from genuine business investments, and therefore, can be sustained.

Regarded as one of the world’s largest Ponzi schemes of all time, the Mavrodi Mundial Moneybox (MMM) is a Russian-founded Ponzi scheme which left some Nigerians in despair at their lost “investments” after the company suddenly went into ‘extinction’ in 2017.

After MMM, a lot of other fake investment platforms have emerged and are still emerging, ripping Nigerians off their monies.

The bill, when passed into law, will enable SEC to properly regulate the capital market, ensure capital formation, protect the market to ensure capital formation, protect investors, maintain a fair, efficient and transparent market and reduce systematic risks.

According to Babangida, current trends in capital markets regulation have made it necessary to make major improvements to the Nigerian capital market, the Investments and Securities Act, Act No. 29 of 2007, which was initially signed into law by the late President Umar Musa Yar’adua in June 2007.

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Banking Sector

Parallex Bank Debuts As Newest Commercial Bank In Nigeria

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Parallex Bank

Parallex Bank, a licenced Microfinance Bank, has successfully transited to a commercial bank after 14 years of operations.

According to the bank’s chairman, Dr. Adeola Phillips, the bank is delving into the commercial banking space, to drive consumer-centric innovation that will propel the banking industry to greater heights.

The bank’s Managing Director, Mr. Olufemi Bakre, who spoke during the launch of the bank’s commercial operations, affirmed that the bank’s promise to its customers is to be an enabler of limitless banking. According to him, the vision of the bank is to be the preferred financial solution provider redefining customer experience through innovation.

The bank revealed its plan to disrupt the market and delight customers with very attractive offers. It noted that most transactions on Parallex mobile app are free but beyond that, customers will have the freedom to do much more with the app.

Parallex bank converted from Parallex Microfinance Bank (a National Microfinance Bank incorporated in 2008 as a Unit MFB) to a commercial bank duly licensed by the Central Bank of Nigeria to carry out commercial banking services. This is a first-of-its-kind achievement in the Nigerian banking space.

The bank noted that it is “poised to be the preferred financial solutions provider redefining customer experience through digital innovations.

“This we will achieve by leveraging the best talents and technology to deliver unparalleled value to our stakeholders. With a strong ecosystem anchored around the customer, we offer a superior product portfolio that is customer-focused and innovative, yet simple”.

With a vision to leverage the best talent and technology to deliver unparalleled value to all its stakeholders, the bank noted that it is open to working with various stake holders to amplify its impact and capability.

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