- Banks Must Get Adeosun’s Approval Before Lending to States – DMO
To reduce their exposure to huge indebtedness, the state governments can no longer borrow from the banks or the bond market without the express approval of the Minister of Finance acting on the advice of the Debt Management Office, investigation has shown.
Already, no state government can contract external loans without the approval of the Federal Government, which acts as a guarantor, and the National Assembly, which must give its nod to any external loan by any tier of government in the country.
The PUNCH had recently reported that the 36 states of the federation and the Federal Capital Territory raised the nation’s domestic debt by N1.64tn in the past three years.
Following the conversion of loans owed by most state governments into bonds, the Federal Government now insists that no bank should lend to the state governments without clearance from it.
The Director-General, DMO, Patience Oniha, confirmed this in a telephone interview with our correspondent in Abuja.
She said, “Some banks lent to some states without the approval of the Minister of Finance. We could have simply told the banks to go and write off the debts, because they did not comply with due process. We looked at the impact this could have on the economy and waved it aside.
“Now, no bank needs to be told that the Minister of Finance must give her express approval before it can lend to a state government. The Minister of Finance gets a letter from the state governments seeking for loans; the DMO is copied.”
Oniha added, “When the minister gets a letter, she minutes it to the DMO for proper advice. We look at the indebtedness of the state. We check how much it costs them to service the debt already in their portfolio.
“The criterion is that the cost of servicing the debt, including the new one being requested, should not be more than 40 per cent of their revenue in the past 12 months. What we recognise as the states’ revenue is what they receive on monthly basis from the Federation Account, because this can be easily verified.”
Oniha disclosed that the DMO recently turned down requests to borrow from a few states, because approval would have taken them beyond the threshold of servicing debts with more than 40 per cent of the revenue.
In a few cases, the DMO has had to advise the states to reduce what they wanted to borrow to ensure that it stayed within the limits stipulated by the Subnational Borrowing Guidelines articulated by the agency.
Oniha, however, declined to mention the states involved, because it would breach the confidentiality understanding that the DMO had with the states.
The Subnational Borrowing Guidelines obtained by our correspondent state, “Without prejudice to the provisions of the Nigerian Constitution, all banks and financial institutions requiring to lend money to the federal, state and local governments or any of their agencies shall obtain the prior approval of the Minister of Finance in accordance with Section 24 of the DMO Act, 2003, and the Fiscal Responsibility Act, and shall state the purpose of borrowing and the tenor.
“The monthly debt service ratio of a subnational, which includes the commercial bank loan being contemplated, should not exceed 40 per cent of its monthly federation allocation of the preceding 12 months.”
The guidelines explained that it became necessary to put measures in place to prevent the country from relapsing into unsustainable debts after Nigeria’s exit from the Paris and London Clubs of Creditors.
The guidelines stated, “Given the country’s recent experience with an unsustainable public debt portfolio, it is important that measures are taken to prevent a relapse into debt unsustainability.
“This challenge is quite demanding, because the federal and state governments need to mobilise substantial resources in order to fund the growth and development of the economy.
“In this context, it is necessary to have subnational borrowing guidelines in addition to the existing borrowing provisions, so that the states could be assisted to be prudent in their borrowing and debt management activities.”
Remove Face Mask When Using ATM, Banks Tell Customers
Face Mask May Cause ATM Transaction Failure, Banks Tell Customers
Deposit Money Banks have said due to their face recognition technology, customers wearing face masks may experience service failure while using the Automated Teller Machines (ATMs).
In an email issued to customers by Fidelity Bank, the bank said why the use of face masks is important to curb the spread of COVID-19 pandemic, customers should remove when performing ATM transactions.
The bank said “Wearing of face masks is a safety and precautionary measure we must all adhere to in this period of the COVID-19 pandemic.
“However, we advise that you remove your face mask while making withdrawals or carrying out ATM transactions to allow our ATM properly recognise you.
“Fidelity Bank ATM machines have face detection features installed to curb incidences of fraudulent ATM withdrawals.
“Consequently, you may not be able to carry out any transaction if our ATMs are not able to properly recognise you. We apologise for the inconvenience that this may cause you.”
Meanwhile, Guaranty Trust Bank plc continues to ease accessibility for all customers and advised customers to protect themselves.
GTBank said, “When visiting any of our branches, kindly protect yourself by wearing a face mask at all times. It is also very important that you keep a safe distance when in a queue inside or outside the branch.
“Before visiting any of our branches, please remember that you can withdraw up to N150,000 at all our ATMs and that you can do most of your banking from the safety of your home.”
Access Bank in Talks to Acquire Cavmont Bank
Access Bank to Acquire Cavmont Bank in Zambia
Access Bank Plc on Wednesday announced that its wholly-owned subsidiary in Zambia, Access Bank Zambia Limited (Access Bank Zambia) is in talks to acquire Cavmont Bank Limited, a subsidiary of Cavmont Capital.
According to the statement signed by Mr. Sunday Ekwochi, Company Secretary, Access Bank and released on the Nigerian Stock Exchange website on Wednesday, the ongoing discussions is to acquire 100 percent of Cavmont Capital’s interest in Cavmont Bank.
However, the lender said “there can be no certainty that a transaction will be agreed, nor as to the terms of any such agreement.
“The completion of a transaction would be subject to formal regulatory approvals. Access Bank will be updating the market as appropriate and in accordance with its disclosure obligations.”
The lender, therefore, advised shareholders to exercise caution when dealing in Access Bank’s securities.
Investors King Ltd note: This announcement further threw more lights on the recent purchases of Access Bank’s shares by Herbert Wigwe, the Chief Executive Officer and Managing Director, Access Bank.
The CEO/MD purchased 7.532 million of Access Bank‘s shares in the last one month.
Mohammed Umar is the New Acting Chairman of EFCC
Buhari Appoints Mohammed Umar as EFCC Acting Chairman
President Muhammadu Buhari has appointed, Mohammed Umar, the director of operations at the Economic and Financial Crimes Commission (EFCC), as the new Acting Chairman of the agency, according to the NAN.
A top official of the commission confirmed to NAN that Umar has taken charge of the agency following the suspension of Ibrahim Magu, the former acting Chairman.
Ibrahim Magu was suspended by the President on Tuesday following series of allegations bordering on frauds, financial misappropriations and abuse of power.
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