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Banking Sector

Nigeria’s Banking Sector Experiences Sharp Decline in Borrowing Amidst Central Bank’s Hawkish Policy

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First Bank

Deposit Money Banks (DMBs) in Nigeria have seen an 82.15 percent decline in borrowing from the Central Bank of Nigeria (CBN) under the Standing Lending Facility (SLF).

This sharp decrease from N4.11 trillion in April 2023 to N714.10 billion in May 2023 has left financial analysts intrigued.

According to the CBN’s monthly economic report, the decline in banks’ borrowing is attributed to an increased liquidity position within the banking system.

This liquidity boost was influenced by injections via the Federation Account Allocation Committee (FAAC), totaling N655.93 billion as well as Nigerian Treasury Bills (NTBs) and CBN bills maturities amounting to N324.43 billion and N85.00 billion, respectively.

Simultaneously, deposits within the banking system increased substantially to N450.25 billion, with an average daily placement of N21.44 billion.

This marked a significant rise from N224.29 billion with an average daily placement of N14.02 billion in the preceding month.

The CBN’s decision to raise the applicable rates for the standing deposit facility and standing lending facility by 50 basis points to 11.50 and 19.50 percent, respectively, in May played a pivotal role in these developments. This followed the central bank’s hawkish monetary policy stance initiated in May 2022 to combat inflation.

In the most recent Monetary Policy Committee (MPC) meeting held in July 2023, the CBN raised its benchmark interest rate to 18.75 percent.

Despite this, the report highlighted that there were no Open Market Operation (OMO) auctions conducted in May. However, maturing bills totaling N85.00 billion were redeemed.

The NTBs and FGN Bonds market remained active, with investors showing a preference for longer-term securities (364 days), which constituted 92.0 percent of total subscriptions.

In the bond market, FGN Bonds with 10-, 20-, and 30-year tranches saw increased activity, with total amounts offered, subscribed, and allotted surpassing the previous month’s figures.

As the banking system grapples with shifting borrowing and deposit trends, Nigeria’s financial landscape continues to evolve under the influence of the CBN’s monetary policy decisions.

The direction of lending rates remains mixed, reflecting the dynamic nature of the country’s economic conditions.

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

85.51 Million Nigerian Bank Customers Face Withdrawal Freeze Over NIN, BVN Deadline

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First Bank

As the March 1 deadline looms, an estimated 85.51 million Nigerian bank customers are facing the possibility of frozen accounts due to their failure to link their National Identification Numbers (NINs) and/or Bank Verification Numbers (BVNs) to their accounts.

Recent findings reveal the potential scale of the impending banking crisis.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) indicates that Nigeria had approximately 146 million active individual bank customers as of December 2022.

However, by January 26, 2024, only 60.49 million BVNs were recorded on the NIBSS portal, leaving a significant portion unlinked.

Meanwhile, about 104 million NINs had been issued by December 2023, highlighting the disparity between NIN issuance and BVN linkage.

The Central Bank of Nigeria (CBN) had earlier issued directives to banks, mandating them to restrict transactions on accounts lacking linked NINs and BVNs, with effect from March 1, 2024.

Any accounts found non-compliant risk being designated as ‘Post no Debit,’ rendering them unable to process further transactions.

Responding to the impending crisis, the Director-General of the National Identification Management Commission (NIMC), Abisoye Coker-Odusote, emphasized the need for the revalidation of Front-End Partners (FEPs) to ensure the integrity of the identity database.

She underscored the importance of NIN registration and urged collaboration with various stakeholders to expedite the process.

The Executive Vice Chairman/CEO of the Nigerian Communications Commission (NCC), Dr. Aminu Maida, reiterated the significance of linking NINs to SIM cards to enhance national security.

Telecom subscribers were urged to comply with the NIN-SIM linkage directive to avoid service disruptions.

Meanwhile, financial service providers like Opay have issued reminders of the impending restrictions, urging customers to comply with the linkage requirements.

Amidst concerns, some customers contemplate transferring funds to compliant accounts to avoid potential financial setbacks.

As the deadline approaches, stakeholders are intensifying efforts to mitigate the impact of the impending banking crisis on millions of Nigerians.

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Banking Sector

Central Bank of Nigeria Injects Over $300 Million to Stabilize Naira-Dollar Exchange Rate

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In a bid to mitigate the continuous depreciation of the naira against the dollar, the Central Bank of Nigeria (CBN) has injected over $300 million into the foreign exchange market.

This move comes amidst concerns over the instability of the naira-dollar exchange rate, which has seen rates soar as high as N1850/$ in recent trading sessions.

The Association of Corporate Treasurers of Nigeria revealed the CBN’s intervention in an advisory memo to its members, highlighting the significant injections made over the past two weeks.

The memo underscores the urgency to address the steep decline in the value of the naira, which has posed challenges to businesses and individuals alike.

The CBN’s proactive measures signal a concerted effort to stabilize the forex market and restore confidence in the domestic currency.

The injection of funds aims to provide liquidity and alleviate pressure on the naira, which has experienced rapid depreciation in recent weeks.

Market analysts anticipate that the CBN’s intervention will help mitigate the volatility of the naira-dollar exchange rate, providing relief to businesses and consumers grappling with the economic uncertainties.

The move reflects the CBN’s commitment to maintaining stability in the forex market and fostering economic growth amidst challenging times.

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Banking Sector

FBN Holdings Surpasses GTCO, Zenith Bank to Become Nigeria’s Most Valuable Bank

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Femi Otedola

FBN Holdings has emerged as Nigeria’s most valuable bank, surpassing Guaranty Trust Holding Company (GTCO) and Zenith Bank in terms of market capitalization.

At the close of trading on Monday, FBN Holdings achieved a market capitalization of N1.22 trillion, solidifying its position at the forefront of the banking sector.

The bank’s market cap is now higher than GTCO’s N1.16 trillion and Zenith Bank’s N1.11 trillion.

The surge in FBN Holdings’ market capitalization represents a 56.68% increase since Femi Otedola assumed the role of chairman on January 31st.

Otedola’s stewardship has been instrumental in driving FBN Holdings’ exponential growth.

Since he was appointed a non-executive director in August 2023 and subsequent ratification by shareholders, his leadership has been characterized by strategic decision-making and investor confidence.

Holdings’ shares have risen from N21.70 to N34 under his chairmanship, representing a significant boost for investors and shareholders.

The market’s positive response to Otedola’s leadership underscores the importance of effective governance and visionary leadership in driving financial performance and investor value.

Minority shareholders have expressed optimism about Otedola’s impact on dividend payments and capital appreciation, highlighting his track record of prioritizing shareholder interests in his previous roles.

FBN Holdings’ ascent to the top spot signals a new era of growth and stability for the bank, setting the stage for continued success in Nigeria’s dynamic financial landscape.

As the banking sector navigates evolving market conditions, FBN Holdings’ position at the pinnacle reflects its resilience and adaptability in driving sustainable value for stakeholders.

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