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Heritage Bank Revoked Licence: CBN Pays FirstBank

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The Nigeria Deposit Insurance Corporation (NDIC) yesterday announced the commencement of the liquidation of the defunct Heritage Bank Plc, following the revocation of its operating licence by the Central Bank of Nigeria (CBN).

The corporation said the move was in accordance with Section 55 sub-section 1 and 2 of the NDIC Act 2023, adding that depositors of the defunct bank that have alternate accounts within the industry would be paid up to the insured amount of N5 million per depositor using their Bank Verification Number (BVN) to locate their alternate account.

In a statement, NDIC Director, Communication and Public Affairs, Bashir Nuhu, said that the liquidation process was with immediate verification and payment of insured deposits to the bank depositors.

He said depositors with funds more than N5 million would be paid liquidation dividend upon realisation of the bank’s assets and recovery of debts owed to Heritage Bank.

The revocation is coming on the revelation that FirstBank’s total exposure to Heritage bank amounted to about N500 billion.

The CBN under former Central Bank Governor, Godwin Emefiele, got FirstBank to support Heritage Bank at the level of forbearance, clearing of their checks and instruments. “This led to their massive indebtedness to FirstBank to the tune of N500 billion,” a source with knowledge of the matter revealed.

THISDAY reliably learned last night that before the announcement of the revocation of Heritage Bank’s licence was made, CBN paid off First Bank’s exposure to Heritage. Since its intervention was at the behest of the apex bank under Emefiele.

The NDIC further advised all depositors of the defunct bank without alternate bank account in the industry to visit the nearest branch of the bank with proof of account ownership, verifiable means of identification such as driver’s licence, permanent voter’s card, national identity card, together with their alternate account and BVN for the verification of their deposits and subsequent payment of insured sums.

Nuhu, also the bank’s creditors to visit the nearest branch of the bank to file their claims or via the online platform, adding that the process of payment of creditors would commence immediately after all depositors have been paid.

He also advised debtors that are yet to complete the repayment of loans to contact the corporation’s Asset Management Department (AMD) or visit the NDIC website for more details.

The NDIC however, assured the entire banking public of its commitment to the continued safety of depositors’ funds in all licensed banks.

It therefore, urged depositors to continue their banking businesses without fear as banks whose licenses have not been revoked remain safe and sound.

The CBN had earlier announced the revocation of the operating licence of the failed bank with immediate effect.

In a statement issued by CBN acting Director, Corporate Communications, Mrs. Hakama Sidi Ali, the apex bank said the move was in accordance with its mandate to promote a sound financial system in Nigeria and in exercise of its powers under Section 12 (1l of the Banks and Other Financial Act (BOFIA) 2020.

The central bank pointed out that the Board and management of the bank had not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability.

This followed a period during which the CBN engaged with the bank and prescribed various supervisory steps intended to stem the decline.

Sidi Ali said, “Regrettably, the bank has continued to suffer and has no reasonable prospects of recovery, thereby making the revocation of the license the next necessary step.”

Specifically, the CBN said the action became necessary due to the bank’s breach of Section 12 (1) of BOFIA, 2020.

The CBN acting director further explained that the central bank took the action to strengthen public confidence in the banking system and ensure that the soundness of the financial system was not impaired.

She said the NDIC had also been appointed as the liquidator of the distressed bank in accordance with Section 12 (2) of BOFIA, 2020.

She explained, “We wish to assure the public that the Nigerian financial system remains on a solid footing.

“The action we are taking today reflects our continued commitment to take all necessary steps to ensure the safety and soundness of our financial system.”

However, reacting to the licence revocation by the CBN, Founder/Chief Executive Officer of Proshare Nigeria Limited, Mr. Olufemi Awoyemi, argued that at least four other banks “are in situations requiring swift CBN intervention; therefore, the #CBN and the #NDIC will have to shift regulatory/intervention gear sticks to ensure that the banking system works with minimal disruption.”

He pointed out that the revocation of Heritage Bank’s licence did not come as a surprise.

“For a bank under forbearance, this was a long time coming (as we recall the number of reports on same and challenges with similar entities under the same program), given the numerous follow-ups done by Proshare.

“Neither the CBN nor NDIC took to Proshare’s recommendations; with the wheels now turning full circle with the CBN’s recent decision to liquidate Heritage Bank, the crackling of regulatory noise has been tuned up. Therefore, we remain unsurprised and ask why it took so long for the regulators (CBN and NDIC) to see the merit in the recommendations proffered,” he added.

According to him, almost five years after, and sequel to the multiple interventions by the CBN, including its forbearance position, nothing changed.

“Eventually, it would appear that the CBN took the first option we proposed. The action today compels the need to interrogate the institutional decision-making capacity and capability in the face of the obvious financial system and organisation shortcomings,” Awoyemi said.

Also, Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi said, “Heritage Bank has been struggling for a while now. The bank’s capital has been persistently below the CBN minimum threshold.

“I believe that the revocation is meant to send a message to the banks that the CBN will not hesitate to revoke the licence of any bank in breach of the CBN regulations. It could also sanitise the banking industry to an extent.”

He noted that the revocation could improve confidence in the financial system since the banks know that their licences could be withdrawn and would have to comply with the various regulations.

Olubunmi, further stressed that the recent increase in the NDIC coverage would provide some comfort to depositors.

Also, a banker who pleaded anonymity said the distressed bank had not reported their financials in five years, adding that he perceived two other banks have negative capital and bad financials which may go the route of license revocation.

The source said, “Heritage Bank had not produced their financials for years and over the years there had been various investors that had tried to acquire the bank but once they did their due diligence they backed out. Things have been so bad that they don’t have senior staff for certain pertinent positions such as Chief Risk Officer and Treasurer. So, things have been bad in the bank for a while.”

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

CRC Credit Bureau Celebrates 15 Years with Record 14% Credit Penetration in Nigeria

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CRC Credit Bureau Limited celebrated its 15th anniversary with a record 14% credit penetration rate.

The occasion was marked with the CRC Finance and Credit Conference 2024 held in Lagos, where key industry stakeholders gathered to reflect on the bureau’s journey and discuss future trends in credit risk management.

Founded in January 2010 and licensed by the Central Bank of Nigeria (CBN), CRC Credit Bureau has played a pivotal role in enhancing access to credit across Nigeria.

Dr. Tunde Popoola, the Group Managing Director/CEO of CRC Credit Bureau Limited, highlighted the bureau’s journey, noting that from its inception with a single product, CRC has expanded its offerings to 18 products covering all aspects of the lending value chain.

Speaking at the conference, Dr. Popoola underscored the bureau’s contribution to Nigeria’s financial sector, stating, “CRC Credit Bureau has been instrumental in transforming access to credit in Nigeria over the past 15 years. We started with a vision to simplify credit access through reliable data and have since grown to serve millions of Nigerians.”

The event focused on the theme “Sustainable Financing Options: Innovations in Credit Risk Management,” emphasizing the importance of sustainable finance amid economic challenges.

The conference provided a platform for stakeholders to discuss strategies for mitigating risks and enhancing the efficiency of credit operations in Nigeria.

Reflecting on the current state of credit penetration, Dr. Popoola noted that while Nigeria has made significant progress, the 14% penetration rate still falls below global benchmarks.

He highlighted that CRC Credit Bureau currently holds credit scores for 33 million Nigerians, facilitating over 29.4 million searches in 2023 alone, with an additional 10 million searches conducted in the first quarter of 2024.

Joel Owoade, Chairman of CRC’s Board of Directors, acknowledged the economic headwinds impacting businesses in Nigeria but stressed the importance of sustainable financing to mitigate risks associated with lending.

“As we navigate economic fluctuations, sustainable financing remains crucial to fostering economic stability and growth,” Owoade remarked.

The conference also featured insights from industry experts on leveraging artificial intelligence (AI) in credit risk management and regulatory frameworks to support AI-driven innovations.

Olaniyi Yusuf, Managing Partner of Verraki, highlighted the potential of AI to create jobs and enhance economic productivity, calling for supportive regulatory environments that balance innovation with risk management.

Representatives from the Central Bank of Nigeria (CBN) emphasized the regulator’s efforts to promote sustainable credit practices.

Dr. Adetona Adedeji, Acting Director of the Banking Supervision Department at CBN, outlined initiatives such as the National Collateral Registry and Global Standing Instruction aimed at enhancing credit access while minimizing risks.

As CRC Credit Bureau looks ahead, Dr. Popoola expressed optimism about the future, stating, “We remain committed to driving greater financial inclusion and expanding credit access in Nigeria. Our focus is on leveraging technology and strategic partnerships to deliver innovative solutions that meet the evolving needs of consumers and lenders.”

The celebration of CRC Credit Bureau’s 15th anniversary underscored its pivotal role in Nigeria’s financial sector, marking a milestone in the nation’s journey towards broader financial inclusion and sustainable economic growth.

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Loans

Nigeria’s Public Debt Hits N101tn as World Bank Loans Soar to $4.95bn

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Nigeria’s public debt has breached the N101 trillion mark, driven by a substantial influx of loans from the World Bank totaling $4.95 billion over the past twelve months.

This surge in borrowing has raised concerns about the country’s ability to service its growing debt obligations amidst economic challenges exacerbated by the COVID-19 pandemic and fluctuating global oil prices.

As of December 2023, Nigeria’s debt stood at approximately N97 trillion, according to data from the Debt Management Office (DMO).

The recent borrowing spree has propelled this figure to N101 trillion, reflecting a rapid escalation in the country’s indebtedness.

The loans from the World Bank are earmarked for various developmental projects, including critical sectors such as power, women empowerment, education, renewable energy, and economic reforms.

These initiatives are part of Nigeria’s broader strategy to enhance infrastructure, socio-economic development, and institutional reforms aimed at bolstering long-term growth and resilience.

The breakdown of the World Bank funding includes $750 million allocated for power sector financing aimed at improving electricity generation and distribution, which remains a persistent challenge in Nigeria.

Another $500 million is dedicated to women’s empowerment programs, focusing on expanding opportunities and economic inclusion for women across the country.

Also, $700 million has been allocated to support education initiatives, particularly for adolescent girls under the Adolescent Girls Initiative for Learning and Empowerment project.

This funding seeks to enhance access to quality education and empower young girls in Nigeria.

Moreover, the World Bank has committed $750 million to the Distributed Access through Renewable Energy Scale-up project, aimed at increasing electricity access through renewable energy solutions.

This initiative targets over 17.5 million Nigerians who currently lack reliable electricity.

The largest tranche of $1.5 billion is designated for Economic Stabilisation to Enable Transformation Development Policy Financing Programme. This funding is intended to bolster fiscal revenues, expand social safety nets, and support economic diversification efforts to reduce dependency on oil revenues.

Despite these investments aimed at driving economic growth and improving living standards, concerns linger over Nigeria’s ability to effectively manage its escalating debt burden.

The country’s debt servicing costs have risen significantly, diverting resources away from critical sectors such as healthcare, education, and infrastructure development.

Critics argue that while external financing is necessary for development, the government must ensure transparency, accountability, and effective utilization of borrowed funds to avoid the pitfalls of previous debt mismanagement.

There is also a growing call for stringent fiscal discipline and reforms to enhance revenue generation and reduce dependency on borrowing.

President Muhammadu Buhari’s administration has defended the borrowing, asserting that it is crucial for bridging infrastructure gaps, stimulating economic growth, and creating job opportunities.

However, stakeholders emphasize the need for prudent debt management and sustainable economic policies to safeguard Nigeria’s financial stability and long-term prosperity.

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Insurance

Sanlam to Acquire 60% Stake in MultiChoice’s Insurance Arm for R1.2bn

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South African insurance giant Sanlam Limited has announced plans to acquire a 60% stake in NMS Insurance Services (NMSIS), the insurance subsidiary of pay TV operator MultiChoice Group, for R1.2 billion.

This strategic acquisition aims to enhance Sanlam’s footprint in the African insurance market and leverage MultiChoice’s extensive subscriber base across the continent.

In a joint statement released on Tuesday, both companies revealed that the deal includes a long-term commercial arrangement designed to expand insurance and related financial services to MultiChoice’s diverse audience.

The transaction also features a performance-based cash earn-out potential of up to R1.5 billion, contingent upon the gross written premium generated by NMSIS by the end of 2026.

Paul Hanratty, CEO of Sanlam Group, expressed optimism about the acquisition, stating, “This partnership provides a unique opportunity to combine our market presence and technological capabilities, fostering growth and market penetration while creating synergies beneficial to all stakeholders.”

Calvo Mawela, CEO of MultiChoice, highlighted the strategic significance of the collaboration, noting, “This deal not only enhances the value we provide to our subscribers but also taps into Sanlam’s expertise to drive innovation and growth in our insurance offerings across Africa. It’s a testament to the hard work and dedication of our teams.”

NMSIS has shown impressive growth, with gross written premiums increasing by 36% year-on-year and profit after tax rising by 51% in the first quarter of 2024.

MultiChoice plans to use the proceeds from the sale for working capital while retaining a 40% interest in NMSIS.

The move comes as MultiChoice faces economic challenges, including a 13% drop in subscribers in key markets such as Nigeria, Angola, Kenya, and Zambia due to economic hardships and currency devaluations.

Despite these setbacks, the partnership with Sanlam is seen as a strategic step to bolster its financial services offerings and stabilize revenue streams.

The announcement also follows recent regulatory developments, with MultiChoice entering a Cooperation Agreement with Groupe Canal+ SA after Canal+ acquired a 45.20% stake in MultiChoice, necessitating a mandatory offer under South African takeover regulations.

As the African insurance market continues to grow, Sanlam’s acquisition of a significant stake in NMSIS positions both companies to capitalize on emerging opportunities, providing innovative insurance solutions to millions of customers across the continent.

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