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Credit To Private Sector Increases By 6.68 Percent In 7 Months

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Godwin Emefiele CBN - Investors King

According to the Central Bank of Nigeria (CBN) Money and Credit Statistics, credit to the private sector gained 6.68 percent from N30.65trillion in January to N32.8trillion in July 2021.

But analysts said the increase in the private sector has not manifested in increased output, lower inflation, lower interest rates, improved Purchasing Managers Index and stock market performance as well as job creation opportunities.

While describing the growth in credit to the private sector as laudable, analysts stressed that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.

Meanwhile, the CBN Money and Credit Statistics revealed that credit to the private sector crossed the N32 trillion mark in May and since then, maintained growth.

According to the CBN, credit to the government rose by 5.3 percent to N12.13trillion in July from N11.52trillion in June.

Analysis of CBN numbers showed that credit to the private sector in seven months of 2021 appreciated by N2.19 trillion, a development some analysts say showed deposit money banks supporting the apex bank in lending to the real sector and creating jobs.

Further analysis of the CBN Credit Statistics revealed that credit to the private sector hits a peak of N30.19trillion in July 2021 amid the ease in COVID-19 lockdown.

According to the CBN statistics, Money Supply (M3) increased to N39.79trillion in July from N38.78 trillion in January 2021, while Narrow Money rose by 2.15 percent from N15.95 trillion in January to N16.29 trillion in July.

Further review of the CBN statistics showed that Net Domestic Assets (NDA) rose to N44.97 trillion in July, an increase of five percent from N42.95 trillion in January this year.

Some analysts contended that banks lending to the real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).

The National Bureau of Statistics (NBS) had last week announced that Nigeria’s real GDP growth for the second quarter (Q2) of 2021, came in at a 5.01 percent Year-on-Year (YoY) increase.

Announcing the GDP figures, the bureau said: “The YoY performance was mainly supported by the Non-oil GDP component, as it grew 6.7 percent y/y compared to the 6.1 percent YoY contraction in Q2:2020. This was on the back of the strong growth recorded in Trade (22.5 percent YoY), Transportation & Storage (76.8 percent YoY), and Manufacturing (3.5 percent YoY) activity sectors amidst full re-opening of the economy.”

Commenting on the impact of private sector lending to Small and medium-sized enterprises (SMEs), Head, Retail Investment, Chapel Hill Denham, Mr. Ayodeji Ebo opined that there has not been a major credit to SMEs aside from the government intervention.

Ebo said banks lending towards government bonds, and Commercial papers and corporate lending increased recently.

On his part, an Economist & Private Sector Advocate, Dr. Muda Yusuf said the growth in credit to the private sector is laudable, stressing that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.

He explained further that: “The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.

“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity. The context in which businesses are operating is as important as the funding, if not even more important.

“The totality of the investment environment must be right for sustainable real sector development to be achieved. Therefore, to complement the credit to the private sector, the other factors that should be reckoned with include infrastructure quality, especially power, roads and railways.”

He added, “There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation. These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems.

“Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers are critical to achieving sustainable development of the economy.”

Speaking from a different perspective, the President, Association of Capital Market Academics of Nigeria (ACMAN), Prof Uche Uwaleke said the increase has no noticeable impact on the real sector, which concerns the production, purchase, flow of goods and services.

He stated that “While inflation rate in June trended marginally downward, available evidence regarding the other metrics does not indicate any significant impact of the increase in private sector lending on the economy.”

He suggested that, “For impact to be noticeable, it needs to be sustained and scaled up, especially targeting critical sectors of the economy with job creation potentials such as SMEs.”

The Governor of CBN, Mr. Godwin Emefiele in his communiqué at the end of July’s Monetary Policy Committee (MPC) meeting said the committee noted that broad M3 declined to 2.02 percent in June 2021, compared with 2.99 percent in May 2021.

According to the CBN boss, “This development was largely driven by a slowdown in the growth rate of Net Domestic Assets (NDA) and Net Foreign Assets (NFA). Net Foreign Assets contracted by 3.65 percent due to the contraction of foreign asset holdings of the central bank, as well as non-interest, primary mortgage, and microfinance banks. The marginal decline in Net Domestic Assets reflected the slowdown in aggregate credit net, which decreased to 4.30 percent in June 2021, from 4.79 percent in May 2021.”

A member of the MPC and the Deputy Governor, Operations at the CBN, Folashodun Shonubi, in a statement had said, “Growth in credit to the government and credit to private sector reflected the impact of various measures by the CBN to promote the flow of credit to drive economic activities.”

Shonubi added that: “I believe the CBN’s interventions through the aggressive provision of credit should continue as a complement to the ongoing effort by the fiscal authority to boost economic activities.

“As the government act, more decisively to discourage bad behaviour and restore orderliness, we must collectively work to overcome the insecurity challenges. At the same time, we must begin to tighten to deal with the subtle monetary component of inflationary pressure and curb spiraling inflation, without suffocating economic growth.”

The apex bank in its statistics also disclosed that currency in circulation increased by nearly three percent from N2.74trillion in June to N2.81trillion in July.

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Finance

Private Sector Seeks FG’s Directive on VAT Payment

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Value added tax - Investors King

The Organised Private Sector of Nigeria (OPSN) on Sunday in Lagos called on the Federal Government to urgently make a pronouncement on the ongoing controversy over VAT payment so that businesses will know what to do.

OPSN chairman, Mr Taiwo Adeniyi, made the call at a news conference and said delays in addressing the issue could cause negative effects on businesses, most especially in the collection and remittances of VAT.

“We are aware that by Sept. 21 we get penalised if we do not pay or remit the VAT for the month of August.

“We are also aware that laws are not made in retrospect. It then means that even if those laws have been enacted, particularly the Lagos State law which came into effect in September, it will not affect the payment by businesses in the state.

“Due to our remittances, we have issues with the fact that the law for Rivers was made in August and the majority of the businesses in Lagos usually will have a relationship with the Rivers State Inland Revenue too.

“The confusion in the public space is the reason we are calling on the government to come to our aid as we want to pay.

“It is for the government at the center to make a pronouncement as to what becomes of us,’’ he said.

Adeniyi, who is also the President of, Nigeria’s Employers Consultative Association (NECA), said that the ongoing challenge had the potential to make businesses pay double VAT in view of demands by the FIRS and state governments.

He said that businesses, as the collecting agents, were practically unclear on the authority to remit to and without a clear path, this would further aggravate the pain on businesses.

“It is a popular saying that where two elephants fight, it is the grass that suffers.

“It is no longer news that Nigerian businesses have been battling with myriads of challenges, making the survival of enterprises and ease of doing business in the country among the worst in this part of the world,’’ he said.

There has been controversy over the collection of VAT after a Federal High Court ruled that it was not the duty of the Federal Government to collect the tax.

VAT is normally collected by the Federal Government since the military era and the money is shared by the three tiers of government.

Following the court ruling, however, Lagos and Rivers states passed laws that allowed them to collect VAT.

FIRS, which used to collect the VAT on behalf of the Federal Government, has challenged the court ruling at the appellate court.

OPSN comprises the Manufacturers Association of Nigeria, the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NECA, Nigeria Association of Small Scale Industries and the Nigeria Association of Small and Medium Enterprises.

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Banking Sector

Global Banking Sector Grows 40% Reviving Pandemic Losses in Just 12 Months

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European Investment Bank - Investors King

In 2020, the global banking sector took a hit following the economic impact of the coronavirus pandemic, which was reflected in the overall market capitalization. However, with the ongoing global recovery, the banking industry has regained most of the losses incurred during the health crisis. 

According to data acquired by Finbold, in just 12 months between Q2 2020 and Q2 2021, the global banking sector’s market cap has surged 39.62%, adding €2.1 trillion from €5.3 trillion to €7.4 trillion. On the path to recovery, the market cap slightly plunged in 2020 Q3 to €5.2 trillion before gaining 17.3% the next quarter.

Among the Western European banks, Spain’s BBVA bank recorded the highest total shareholder return rate at 19.7% between April 2021 – July 2021, followed by Société Générale from France at 13.8%, while Banco Santander, also from Spain, ranks third at 12.1%. United Kingdom’s Barclays is the worst performer with a TSR of -8%. Data on the global banking sector’s market cap is provided by Banking Hub.

How banking sector sustained growth

The registered market capitalization is supported by the large-scale reopening of economies due to the vaccine rollout. Additionally, the banks, especially from major economies like the United States and Europe, have reaped from policies meant to cushion the economy from the adverse effects of the pandemic. Notably, the decisions by most banks to retain a low-interest-rate environment has been beneficial to banks.

Worth noting is that during the pandemic, banks found themselves in a tight spot. Historically, the banking sector has been considered the custodian of the economy but the pandemic also plunged the banks into a crisis. The banking sector’s profits were adversely affected considering they are bound to the business cycle and interest rates.

At the same time, banks also put in place measures like approaching loans with caution due to uncertainty in repaying which directly impacted profits. However, banks were tapped to facilitate the distribution of stimulus packages boosting their capital reserves in return.

Worth pointing out is that institutions like the European Central Banks allowed banks to continue using their capital buffers flexibly with a planned extension until 2022. With such moves helping banks sustain growth, it eliminates the worry of straining capital buffers while the health crisis is still impacting the banks’ balance sheets.

Furthermore, the crisis highlighted the need for banks to keep huge reserves of capital that can be activated in the wake of economic turmoil. Although most banks have historically relied on assets for future cushion, a crisis like the coronavirus calls for more capital because selling assets in such an environment is challenging.

Besides the policies, the banking sector recovery was partly aided by existing operational risk management arrangements. The pandemic tested all financial market participants and most leading banks successfully invoked business continuity plans. The plans ensured that the financial markets continued to run smoothly and orderly.

The sector’s recovery has also been accelerated by other factors like the increased adoption of pre-pandemic trends like digitalization and sustainability. Digitization of operations has been backed by consumers who are willing to conduct transactions online. At the same time, the digital shift has presented a competitive factor in the sector, with institutions that had established online presence benefiting the most.

Notably, the recovery was at some point under threat during the third quarter of 2020 amid concerns of the pandemic’s second wave. However, the sector sustained the gains with the rollout of the vaccine. Furthermore, moving into 2021, the industry appears not to be bothered by the Delta variant.

The future of the banking sector

By sustaining the market capitalization for two consecutive quarters, it can be assumed that the banking sector response to the health crisis is bearing fruits. However, it is still early to determine if the recovery is sustainable.

The rally will be tested, especially when central banks eliminate all the policies meant to cushion the economy. However, in the long run, banks will have to tailor their operations towards changing consumer behaviour.

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Banking Sector

How Stanbic IBTC is Transforming Nigeria’s Trade Landscape

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Stanbic IBTC - investorsking.com

Stanbic IBTC Bank PLC, a subsidiary of Stanbic IBTC Holdings PLC, has reiterated its commitment to fostering international trade and help the nation actualise its economic growth and development goals.

The Bank said it will continue to fine-tune its three-pronged approach to facilitating trade activities for clients. These are the development of bespoke financial solutions to help boost trade for clients; sponsorship of relevant trade shows that bring together stakeholders in global trade, including exporters and importers; and organisation of seminars and workshops to provide clients and other stakeholders with industry insights and enlighten them on global trade opportunities.

“Our goal is to become the ‘go-to’ Bank as far as global trade is concerned, with emphasis on Africa-China trade. This approach is of immense value to our clients and will help us achieve our fundamental purpose, which is to drive Nigeria’s growth,” Chief Executive Stanbic IBTC Bank PLC, Wole Adeniyi, said.

In line with this resolve, Stanbic IBTC organised a webinar on the African Continental Free Trade Area (AfCFTA). The webinar themed: ‘AfCFTA State of Play: Understanding Potential and Maximising Opportunities for the Customer’, emphasised Stanbic IBTC’s readiness to leverage the trade opportunities of the AfCFTA agreement to unlock business opportunities for its clients in the small and medium-sized enterprises (SMEs) sector as well as its corporate clients.

In 2019, Stanbic IBTC launched its Africa China Agent Proposition (now called Africa China Trade Solutions – ACTS) to boost trade transactions between Africa (Nigeria) and Asia, especially China, and help customers consummate the best business deals without having to travel to China.

According to Stanbic IBTC, ACTS will give customers exclusive access to an array of exporters in China through an accredited agent, Zhejiang International Trading Supply Chain Co Ltd, also known as Guamao.

Stanbic IBTC has held various fora as part of its sensitisation drive on ACTS and the currency swap agreement between Nigeria and China. These fora provided insight on how best to help clients and businesses leverage the opportunity and assess the impact of the Chinese economy on trade in Nigeria and Africa as a whole.

According to Wole, these workshops were geared towards deepening trade connections with the Chinese business community, thereby stimulating strong trade and business ties between Africa, with a special focus on Nigeria and China.

Stanbic IBTC Bank was a platinum sponsor of the 2021 Global Trade Review (GTR) West Africa Conference themed ‘Connecting the Region’s Trade Experts. The GTR West Africa Conference is an annual regional event for trade discussions and networking among leading practitioners in trade, export, and commodity finance to strategically explore the latest developments, strategies, and solutions needed to drive growth.

Experts have continued to commend Stanbic IBTC on this bold approach to educate its clients and investors about the benefits of AfCFTA, the Nigeria China currency swap deal, and the ACTS proposition, all geared towards helping clients unlock business opportunities.

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