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Development Bank of Austria (OeEB) and European Investment Bank Launch EUR 100 Million African Private Sector COVID-19 Resilience Investment Initiative

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European Investment Bank - Investors King

Entrepreneurs and businesses most impacted by economic, health and social challenges triggered by COVID-19 will be able to benefit from a new EUR 100 million private-sector financing initiative backed by (OeEB), the Development Bank of Austria, and the European Investment Bank.

The programme will enhance access to long-term financing across sub-Saharan Africa, help to create thousands of jobs and accelerate sustainable development and poverty reduction. The first joint business financing supported by the two institutions will provide both direct loans to companies in Africa and financing managed by local banks.

“This first cooperation between the Development Bank of Austria, and the European Investment Bank will provide timely support for private sector investment across Africa and strengthen sustainable development during challenging times. Austria is committed to supporting high-impact investment in Africa and I welcome this new EUR 100 million COVID-19 economic resilience initiative that will support thousands of jobs in businesses and help companies large and small to tackle the impact of the pandemic.” said Gernot Blümel, Federal Minister of Finance of the Republic of Austria and Governor of the European Investment Bank.

“Companies across Africa and Europe are faced by unprecedented challenges caused by COVID-19, with disruption to exports and the need to rapidly change business activity. The European Investment Bank is pleased to join forces with OeEB, the Development Bank of Austria, to provide EUR 100 million to ensure that private sector business across Africa can access long-term financing, create jobs and invest during these challenging times.” said Werner Hoyer, President of the European Investment Bank.

“Improving access to finance for small and medium-sized businesses – particularly in Sub-Saharan Africa and the world’s Least Developed Countries – has been one of our core goals for many years. Especially now, in light of the ongoing COVID-19 pandemic which hits SMEs hardest, it has become even more important. We are therefore delighted that this cooperation with the European Investment Bank enables us to provide targeted, much needed support to the private sector and businesses across Africa which helps ensure ongoing investments and secures jobs.” said Sabine Gaber and Michael Wancata, Members of OeEB’s Executive Board.

Addressing poverty, delivering SDGs and helping Africa companies impacted by COVID-19

Reflecting the crucial need to strengthen economic resilience and private sector investment during the pandemic the new financing scheme will be able to support a broad range of eligible investments by African small and medium sized enterprises.

The new initiative will contribute towards sustainable development goals, including SDG 1 “No Poverty” and SDG 8 “Decent work and economic growth.

Backing business investment across key sectors

The new financing is available immediately to support investment by agribusinesses, manufacturing and service sector businesses across sub-Saharan Africa.

Through this credit line, OeEB and EIB will provide funding to multiple financial institutions and directly to private business to address the adverse consequences of the COVID-19 pandemic on private businesses and to contribute to the financial inclusion of SMEs.

The EIB is the world’s largest international public bank and last year provided EUR 5 billion for public and private investment across Africa supported by nine regional offices across the continent.

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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Banking Sector

CBN Rate Hikes Raise Borrowing Costs for Banks Seeking FX

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Retail banking

The Central Bank of Nigeria (CBN) has implemented a significant adjustment to its borrowing rates.

The move, which follows the CBN’s recent decision to adjust the asymmetric corridor around the Monetary Policy Rate (MPR), has led to an increase in the cost of borrowing for banks seeking foreign exchange (FX).

This decision comes amid heightened concerns over the Naira’s performance and inflation rates.

According to Bismarck Rewane, Managing Director/CEO of Financial Derivatives Company Limited, the adjustment means that banks now face borrowing costs of nearly 32% from the CBN, a sharp increase from the previous rate of approximately 26%.

This change in borrowing costs is intended to deter banks from relying on the CBN for FX purchases, thereby reducing pressure on the Naira.

Data reveals that in the first five days of July 2024, banks borrowed an unprecedented N5.38 trillion from the CBN, marking a record high.

The increased borrowing costs are expected to reduce this practice, thereby alleviating some of the strain on the Naira.

Despite these efforts, the Naira has continued to struggle. On Tuesday, the Naira depreciated by 3.13% against the US dollar, with the exchange rate falling to N1,548.76.

This decline is attributed to reduced dollar supply and ongoing uncertainty surrounding Nigeria’s foreign reserves.

The black market saw an even sharper drop, with the Naira falling to 1,687 per dollar, reflecting broader concerns about currency stability.

Rewane highlighted that the recent rate hikes are part of a broader strategy by the CBN to manage inflation and stabilize the Naira.

“The increase in borrowing costs is a necessary step to address the carry trade practices where banks use cheap funds from the CBN to buy FX and sell it at higher rates,” he explained.

The CBN’s decision to raise borrowing costs comes amid a backdrop of persistent inflation and rising interest rates.

Over the past three years, the CBN has raised interest rates 12 times, with recent adjustments aimed at managing liquidity and curbing inflation.

As of June 2024, Nigeria’s headline Consumer Price Index (CPI) reached 34.19%, up from 33.95% in May.

The central bank’s policy changes are expected to have mixed effects.

Analysts at FBNQuest anticipate that banks will continue to benefit from the high-interest rate environment, potentially leading to a shift of assets from equities to fixed-income securities as investors seek higher yields.

The CBN remains committed to navigating Nigeria through these challenging economic conditions.

By adjusting borrowing costs and implementing tighter monetary policies, the central bank aims to strike a balance between managing inflation, stabilizing the Naira, and supporting overall economic growth.

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Finance

Senate Passes Bill for 70% Windfall Levy on Banks’ Forex Gains

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Naira Exchange Rates - Investors King

The Nigerian Senate has approved an amendment to the Finance Act of 2023, increasing the windfall levy on banks’ foreign exchange gains from 50% to 70%.

The bill was passed during a plenary session on Tuesday after a thorough review by the Finance Committee.

The Senate’s decision aims to address the significant profits banks have accrued due to recent foreign exchange policy shifts.

This windfall is viewed as a product of government intervention rather than the banks’ strategic efforts, prompting the call for redistribution.

The additional revenue from this levy is expected to contribute to financing the N6.2 trillion Appropriation Amendment Bill.

This funding will support various government projects and initiatives, ensuring that the windfall benefits are reinvested into the economy.

The Senate also approved amendments to the payment timeline, setting the levy to take effect from the start of the new foreign exchange regime through 2025, avoiding retrospective application from January 2024.

Also, the Upper Chamber removed the proposed jail term for principal officers of defaulting banks.

Instead, banks that fail to remit the levy will incur a penalty of 10% per annum on the withheld amount, alongside interest at the prevailing Central Bank of Nigeria (CBN) Minimum Rediscount Rate.

This legislative move aligns with President Tinubu’s broader fiscal strategy, which aims to optimize national revenue through independent sources.

The amendment underscores the Senate’s commitment to leveraging bank profits for national development, especially amid economic challenges.

While some industry stakeholders express concerns about the impact on banking operations, others see this as a necessary step towards equitable wealth distribution and economic stability.

The bill’s passage is anticipated to have significant implications for both the financial sector and the broader economy.

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Banking Sector

Zenith Bank Retains Position As Nigeria’s Number One Bank By Tier-1 Capital For Fifteen Consecutive Years In The 2024 Top 1000 World Banks’ Ranking

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For the fifteenth consecutive year, Zenith Bank Plc has retained its position as the Number One Bank in Nigeria by Tier-1 Capital in the 2024 Top 1000 World Banks’ Rankings, published by The Banker Magazine.

This ranking places Zenith Bank Plc as the 565th Bank globally with a Tier-1 Capital of $2.01 billion. The rankings, published in the July 2024 edition of The Banker Magazine of the Financial Times Group, United Kingdom, recognise Zenith Bank’s continued financial strength and stability.

They are based on the 2023 year-end Tier-1 capital of banks globally and remain the primary source for global bank financials used by most international organisations in their assessments of banks.

Tier-1 Capital describes capital adequacy, the core measure of a bank’s financial strength from a regulator’s perspective.

According to the ranking, Tier-1 Capital, as defined by the latest Bank for International Settlements (BIS) guidelines, includes loss-absorbing capital, i.e., common stock, disclosed reserves, retained earnings, and minority interests in the equity of subsidiaries that are less than wholly owned.

A strong Tier-1 capital ratio boosts investor and depositor confidence, indicating the Bank is well-capitalised and financially stable.

Commenting on this achievement, the Group Managing Director/CEO of Zenith Bank Plc, Dame (Dr.) Adaora Umeoji, OON, said, “We are deeply honoured to be recognised as the Number One Bank in Nigeria by Tier-1 Capital for the fifteenth consecutive year. This recognition is a testament to our strategic focus on sustainable growth, innovation, and customer satisfaction. It also emphasises our resilience and strength in navigating the ever-evolving financial landscape. Our dedicated team of professionals has remained steadfast in ensuring that we maintain our position at the forefront of the banking industry.”

She extended her profound and sincere appreciation to the Founder and Chairman, Dr. Jim Ovia, CFR, whose visionary and transformative leadership has played a pivotal role in cultivating a resilient and thriving establishment.

She also expressed her deep appreciation for the board’s insightful governance, the staff’s relentless dedication, and the unwavering loyalty of the bank’s esteemed customers to the Zenith brand.

Zenith Bank’s financial performance for the year was driven by a remarkable triple-digit growth of 125% in gross earnings, from N945.6 billion reported in 2022 to N2.132 trillion in 2023. This growth led to an improved market share in both the retail and corporate segments despite a persistently challenging macroeconomic environment.

The increase in gross earnings was primarily due to growth in interest and non-interest income. Interest income growth was attributed to the increase in the size of risk assets and their effective repricing, while non-interest income was driven by significant trading gains and gains from the revaluation of foreign currencies.

Zenith Bank recently commenced recapitalisation efforts with the conclusion of its Capital Markets Day held on 11th July 2024. It aims to raise the least amount of capital amongst its peers at N230 billion, considering it already maintains a robust capital base of N270.7 billion.

The Bank remains dedicated to supporting the growth of the Nigerian economy and providing its numerous customers with innovative and efficient banking solutions.

Zenith Bank’s track record of excellent performance has continued to earn the brand numerous awards, with these latest accolades coming on the heels of several recognitions. These include being recognised as the Number One Bank in Nigeria by Tier-1 Capital for the fourteenth consecutive year in the 2023 Top 1000 World Banks Ranking, published by The Banker Magazine.

The Bank was also awarded the Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards for 2020 and 2022; and Most Sustainable Bank, Nigeria in the International Banker 2024 Banking Awards.
Further recognitions include Best Bank in Nigeria for three consecutive years from 2020 to 2022 in the Global Finance World’s Best Banks Awards and Best Commercial Bank, Nigeria for three consecutive years from 2021 to 2023 in the World Finance Banking Awards.

Additionally, Zenith Bank has been acknowledged as the Best Corporate Governance Bank, Nigeria, in the World Finance Corporate Governance Awards for 2022 and 2023, and ‘Best in Corporate Governance’ Financial Services’ Africa for four consecutive years from 2020 to 2023 by the Ethical Boardroom.

The Bank’s commitment to excellence saw it being named the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands for 2020 and 2021, and Retail Bank of the Year for three consecutive years from 2020 to 2022 at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards.

The Bank also received the accolades of Most Sustainable Bank, Nigeria, in the International Banker 2023 Banking Awards, Best Commercial Bank, Nigeria and Best Innovation in Retail Banking, Nigeria, in the International Banker 2022 Banking Awards. Zenith Bank was named Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Bank of the Year 2021 by Champion Newspaper, Bank of the Year 2022 by New Telegraph Newspaper, and Most Responsible Organisation in Africa 2021 by SERAS Awards.

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