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Banking Sector

CBN Debits 14 Banks N356.1bn For Defaulting Cash Reserve Requirement

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CBN

N170 billion loss hit Zenith Bank Plc on Friday as the Central Bank of Nigeria, CBN debited 14 banks of N356.1billion for failure to meet its 27.5 percent Cash Reserve Requirement (CRR).

The cash reserve ratio was increased from 22.5 percent to 27.5 percent in January 2020 by the apex bank with an intention to address monetary-induced inflation and sustain the benefits of its 65 percent Loan Deposit Ratio (LDR) policy.

Investors King reports that Nigeria has the highest reserve requirement in sub-Saharan Africa. Countries like South Africa, Ghana and Kenya have their ratios below 10 percent.

Meanwhile, stakeholders in the banking sector and analysts have frowned at the CBN’s Cash Reserve Requirement policy, describing it as huge and its impact greatly felt in the industry.

According to the CBN data on the latest deduction, Zenith Bank Plc was the most debited of the commercial banks and Fidelity Bank the least debited with N2 billion. A merchant bank was as well hit by the penalty.

The data revealed the debit details as: Zenith bank– 170bn, Providus Bank– 40bn, FCMB– N39 billion, First Bank of Nigeria– N27 billion, Guaranty Trust Bank Plc– N20 billion, Citibank– N12 billion, Stanbic IBTC bank– N10 billion, Polaris Bank– N10 billion, Union Bank of Nigeria Plc– N10 billion.

Other Banks debited include: Keystone Bank– N6 billion, Ecobank –N5 billion, Sterling Bank Plc– N3.6 billion, Fidelity Bank– N2 billion and Nova merchant bank– N1.5 billion.

Investors King recalls that in November, 2021, Zenith bank was also the most debited as it lost N90bn to CBN alongside Access Bank Plc and United Bank for Africa Plc (UBA) who were debited N25 billion.

In December 2021, CBN debited 16 banks and two merchant banks N175 billion for defaulting in the Cash Reserve Requirement.

Agusto & Co. in their report titled, ‘Economic outlook for 2022’, explained that cash reserves ratios are usually between 5 percent and 10 percent of local currency deposits.

It hinted that aside from the compulsory cash reserve ratio, banks hold special bills with 0.5 percent interest per annum. “These “special bills” are not easily convertible into cash and are, in substance, interest bearing cash reserves.

“We estimate that cash reserves (including interest bearing cash reserves) were about 50 per cent of LCY deposits at the end of 2021. We do not believe that the CBN will reduce this ratio significantly in 2022, as it continues to see this as a major instrument for maintaining “stable” exchange rates,” the report read.

Sunny Nwosu, the National Coordinator Emeritus, Independent Shareholders Association of Nigeria (ISAN) opined that the 27.5 per cent CRR has not impacted the economy with the desired outcome after the relaxation of the Covid-19 lockdown.

Nwosu pointed that the subsequent debit of banks by CBN is obviously a threat to the banking sector of the country as shareholders are worried about the state of banks and the safety of their investments.

Calling on CBN to rethink, he said, “Banks restricted deposits with CBN are idle funds. We argue that if these funds are with banks, it will certainly enhance their earnings, loans to the real sector and returns for shareholders. 

“If CBN can pay at least three per cent interest on the mandatory CRR deposits, it will go a long way in driving the real sector and the payment of robust dividends to shareholders.”

However, the Vice President, Highcap Securities Limited, David Adnori explained that CRR is a monetary policy for the control of money supply in the banking industry and to reduce inflation. 

Adnori noted that if the CRR policy is not strictly followed, so much money will flow into the market thereby deprecate the naira. 

On the contrary, he pointed that “the policy has not favoured banks because the fund is not yielding any interest and of no benefit to the productive sector. These are funds banks lend to the real sector to drive business activities, finance working capital of the productive sector and boost GDP but the CBN is holding it down. It is not a good development for the nation’s economy in general.

“CBN has its reasons and releasing these funds, it might result in hyperinflation which can damage the nation’s economy. It is like a double edge situation- if you don’t do it, the economy is damaged and if you do it, the economy also struggles,” Adnori concluded.

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Banking Sector

FMBN Set for Commercialization to Improve Affordable Mortgage Financing

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FMBN

In a bid to bolster housing delivery efficiency and enhance affordable mortgage financing for Nigerians, the Federal Mortgage Bank of Nigeria (FMBN) is gearing up for commercialization.

This move comes as part of the Nigerian government’s efforts to address the housing deficit and ensure adequate shelter for its citizens.

The Managing Director of FMBN, Shehu Osidi, made this announcement during a courtesy visit by the Federal Housing Delivery Reforms Task Team at the bank’s headquarters in Abuja.

Led by Mr. Adedeji Adesemoye and Brig. Gen. Tunde Reis, the task team discussed strategies to revitalize the housing sector, with a focus on FMBN’s pivotal role in providing affordable mortgage financing.

Osidi explained the bank’s commitment to supporting the government’s agenda of reforming and improving the housing sector, which is vital for sustainable development and enhancing citizens’ quality of life.

He underscored FMBN’s significant journey in the history of mortgage and housing finance in Nigeria and expressed optimism about the forthcoming commercialization process.

The commercialization plan involves repositioning and recapitalization efforts, following extensive engagements with the Bureau of Public Enterprise (BPE).

Osidi stressed the importance of aligning the bank’s operations with its mandate of affordable mortgage financing, ensuring that it remains a reliable partner in the quest for accessible housing solutions.

As part of its strategic blueprint, FMBN has prioritized various initiatives to enhance service delivery and operational efficiency.

Of note is the ICT project aimed at upgrading core banking applications that is almost complete and promised to revolutionize customers’ experience.

Also, amendments to the FMBN and NFH Acts are underway in the National Assembly, addressing key areas to facilitate the bank’s transformation.

Despite challenges, including performance issues with estate development loans, FMBN is determined to overcome obstacles and achieve its objectives.

The commercialization plan aligns with broader efforts to deepen reforms and foster a remarkable turnaround in the housing sector.

By focusing on process automation, cost efficiency, credit quality enhancement, and strategic partnerships, FMBN aims to catalyze sustainable growth and address the nation’s housing needs effectively.

Chairman of the Federal Housing Reforms Task Team, Adedeji Adesomoye, reiterated the committee’s mandate to review the operations and governance structures of key housing institutions.

With ambitious targets set by the government, including the construction of 20,000 housing units in 2024 and 50,000 units in subsequent years, the commercialization of FMBN marks a pivotal step towards realizing Nigeria’s housing aspirations.

As the commercialization process unfolds, FMBN stands poised to play a central role in facilitating access to affordable mortgage financing, thereby contributing to the realization of homeownership dreams for millions of Nigerians.

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Banking Sector

Adesola Adeduntan’s Early Departure Prompts First Bank Holdings to Scrap Capital Raise Plans

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FirstBank Headquarter - Investors King

First Bank Holdings Plc has decided to scrap its plans for capital raise following the early departure of its Managing Director, Adesola Adeduntan.

The decision to cancel the extraordinary general meeting (EGM), which was planned to discuss the proposed N300 billion capital raise, comes amidst Adeduntan’s resignation from his role, eight months before the scheduled expiration of his tenure.

The bank formally announced the cancellation of the EGM in a filing seen by Investors King on Friday.

The meeting, which was initially scheduled to be held virtually on April 30, 2024, aimed to seek authorization from the company’s members for the capital raise and address other related matters.

Adeduntan’s resignation, announced on the same day as the cancellation of the EGM, comes as a result of the Central Bank of Nigeria’s tenure requirements affecting bank executives.

In his retirement letter addressed to the Chairman of First Bank, Adeduntan expressed gratitude for the support received during his stewardship and highlighted the strides made by the bank during his tenure.

He stated, “During this period, the bank and its subsidiaries have undergone significant changes and broken new grounds. We have repositioned the institution as an enviable financial giant in Africa.”

Adeduntan further mentioned his decision to pursue other interests, prompting his early retirement effective April 20, 2024.

The cancellation of the capital raise plans shows the impact of Adeduntan’s departure on the bank’s strategic initiatives.

It reflects a shift in priorities for First Bank Holdings as it navigates leadership changes and seeks to chart a new course for its future direction.

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Banking Sector

First Bank MD, Dr. Adesola Adeduntan, Resigns to Pursue New Opportunities

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Dr. Adesola Adeduntan - FirstBank CEO - Investors King

Dr. Adesola Adeduntan, the Managing Director of First Bank Nigeria Limited, has announced his resignation from the bank after nine years of leadership.

In a letter addressed to the Chairman of First Bank, Mr. Tunde Hassan-Odukale, Dr. Adeduntan expressed his decision to step down voluntarily, effective April 20, 2024, to pursue new opportunities.

Having served as the CEO since January 1, 2016, Dr. Adeduntan’s tenure has been marked by significant transformations within the institution. Under his leadership, First Bank and its subsidiaries have undergone substantial changes, positioning the bank as a formidable financial powerhouse in Africa.

In his resignation letter, Dr. Adeduntan highlighted the achievements made during his tenure, stating, “We have repositioned the institution as an enviable financial giant in Africa.”

He expressed gratitude to the board of directors of First Bank and FBN Holdings Plc for their support throughout his stewardship.

Dr. Adeduntan’s decision to resign comes as he approaches the end of his contract, which was set to expire on December 31, 2024.

He stated, “After which I would no longer be eligible for employment within the bank.” Despite his departure, he wished the institution continued success and progress in its evolution.

Throughout his career in banking and finance spanning over three decades, Dr. Adeduntan has been recognized for his contributions and received numerous awards.

He holds a Doctor of Science, Honoris Causa, and an MBA from Cranfield University, United Kingdom, and is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Bankers of Nigeria (CIBN).

Dr. Adeduntan’s departure marks the end of an era for First Bank, as the institution prepares to transition into a new phase of its evolution.

His leadership has left a lasting legacy of transformation and growth, and his contributions will be remembered in the annals of the bank’s history.

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