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Big Banks Adopt Cautious Lending on Sluggish Economy



  • Big Banks Adopt Cautious Lending on Sluggish Economy

Two of Nigeria’s biggest banks gave out smaller amount of loans in 2018, compared to the previous year as financial institutions remained cautious in creating risk assets, considering the sluggish economic activities in the country.

Specifically, two of the tier 1 banks – Zenith Bank Plc and Guaranty Trust Bank Plc (GTBank) – that have so far released their full year 2018 results, recorded lower loan growth last year, compared with 2017.

For instance, while Zenith Bank Plc saw its loans and advancements fell from N1.823 trillion in 2018, as against the N2.1 trillion posted in 2017, GTBank’s loan book dipped by 12.9 per cent, from N1.449 trillion in 2017, to N1.262 trillion in 2018.

The Nigerian economy which has been performing sub-optimally recorded slim Gross Domestic Product (GDP) growth of 1.93 per cent in 2018, with businesses facing a myriad of domestic challenges. Some of the major constraints businesses faced include insecurity, high interest rate, unstable power and poor infrastructure.

To the Head of Research and Strategy at FSDH Merchant Bank Limited, Mr. Ayodele Akinwunmi, credit creation would remain low in a fragile economy.

He explained: “Banks lend to businesses with the view that the money would be repaid to enable the banks pay their depositors and reward their shareholders. So, if the economy is not expanding, banks would not be encouraged to lend.

“If economic activities are not expanding, the way we have seen in the last few months, there would not be activities to lend money to.

“Most of the international oil companies don’t borrow from Nigeria for long-term projects because we don’t have the capacity.

“For me, we expect that in 2019, loan would grow, because our projection for GDP growth rate in 2019 is higher than what we had last year. Our forecast for GDP growth for this year is 2.5 per cent.

“Our economy is not growing at the level that it should be growing. So, the banks are being careful, because in a fragile economy, credit creation would remain low.”

Also, the President, Risk Management Association of Nigeria, Mr. Magnus Nnoka, pointed out that banks were set up to facilitate intermediation, hence they need to lend in order to make returns to investors.

He said: “I think the challenge most banks face in lending is signing on quality credit or borrowers’ ability in meeting the risk acceptance criteria for accessing loans.

“This is not also to rule out the challenges borrowers face in meeting certain lending conditions and of course relative cost of financing, which can still be considered high particularly when you look at some economic sectors.

“I, therefore, think that some of the measures to enhance lending will require improving quality of the obligors. Among issues to be addressed are encouraging strong corporate governance, transparent financial reporting on the part of borrowers as well as strengthening regulatory and judicial system for loan disputes settlement.

“A culture of credit discipline, information asymmetry and self-disclosure are critical elements of any environment that seek to enhance credit creation activities.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market.

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Illegal Withdrawals: Rep To Investigate NNPC, NLNG Over $1.05bn



House of representatives

Rep To Investigate NNPC, NLNG Over Illegal Withdrawal of $1.05bn from NLNG Account

The Nigerian House of Representatives has concluded plans to investigate illegal withdrawal of $1.05 billion from the account of the Nigerian Liquefied Natural Gas Limited (NLNG) by the Nigerian National Petroleum Corporation (NNPC).

The decision followed the adoption of a motion titled ‘Need to Investigate the Illegal Withdrawals from the NLNG Dividends Account by the Management of NNPC’ moved by the Minority Leader, Ndudi Elumelu, on Tuesday.

The House adopted the motion and mandated its Committee on Public Accounts to “invite the management of the NNPC as well as that of the NLNG, to conduct a thorough investigation on activities that have taken place on the dividends account and report back to the House in four weeks.”

Elumelu said, “The House is aware that the dividends from the NLNG are supposed to be paid into the Consolidated Revenue Funds account of the Federal Government and to be shared amongst the three tiers of government.

“The House is worried that the NNPC, which represents the government of Nigeria on the board of the NLNG, had unilaterally, without the required consultations with states and the mandatory appropriation from the National Assembly, illegally tampered with the funds at the NLNG dividends account to the tune of $1.05bn, thereby violating the nation’s appropriation law.

“The House is disturbed that there was no transparency in this extra-budgetary spending, as only the Group Managing Director and the corporation’s Chief Financial Officer had the knowledge of how the $1.05bn was spent.

“The House is concerned that there are no records showing the audit and recovery of accrued funds from the NLNG by the Office of the Auditor-General of the Federation, hence the need for a thorough investigation of the activities on the NLNG dividends account.”

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FG Gives Radio, Tv Stations Debt Relief, Writes Off 60 Percent Debt




FG Reduces Tv, Radio Stations Licence Fee by 30%, Writes Off 60% Debt

The Federal Government has reduced the existing licence fee paid by all open terrestrial radio and television stations by 30 percent.

The Minister of Information and Culture, Lai Mohammed, disclosed this at a press conference in Abuja on Monday.

He said the Federal Government has also decided to write off 60 percent of the N7 billion loan owed the government by television and radio stations.

He explained that the N7 billion is the total outstanding from television and radio stations on the renewal of their operating licences.

Mohammed, however, said for any station to benefit from the 60 percent debt relief, such a station must be ready and willing to pay the remaining 40 percent within the next three months.

According to him, the debt relief offer would open on July 10th and close on the 6th of October.

Mohammed said, “According to the NBC, many Nigerian radio and television stations remain indebted to the Federal Government to the tune of N7bn.

“Also, many of the stations are faced with the reality that their licences will not be renewed, in view of their indebtedness.

“Against this background, the management of the NBC has therefore recommended, and the Federal Government has accepted, the following measures to revamp the broadcast industry and to help reposition it for the challenges of business, post-COVID-19:

“(a) 60 per cent debt forgiveness for all debtor broadcast stations in the country; (b) the criterion for enjoying the debt forgiveness is for debtor stations to pay 40 per cent of their existing debt within the next three months.

“(c) Any station that is unable to pay the balance of 40 per cent indebtedness within the three-month window shall forfeit the opportunity to enjoy the stated debt forgiveness.

“(d) The existing license fee is further discounted by 30 per cent for all open terrestrial radio and television services effective July 10, 2020.

“(e) The debt forgiveness shall apply to functional licensed terrestrial radio and television stations only. (f) The debt forgiveness and discount shall not apply to pay TV service operators in Nigeria.”

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Nigeria’s Inflation to Average 12.2 Percent in 2020 Says PwC




PwC Says Inflation Will Average 12.2% in 2020

PricewaterhouseCoopers (PwC) has predicted that the nation’s inflation rate will average 12.2 percent in 2020.

In the report titled ‘Demand and supply shocks from COVID-19 keep inflation higher for longer’, the company based its projection on the rising cost of goods and services due to the supply shocks to commodity and the COVID-19 negative impacts on the economy.

The report explained that the supply disruption brought about by lockdown measures put in place to mitigate COVID-19 spread pushed headline inflation to its highest in 23 months in the month of May 2020.

Nigeria’s headline inflation rose by 12.4 percent year-on-year in the month of May. Its fastest pace of increase in 26 months, according to the National Bureau of Statistics (NBS).

However, PwC said because of the growing global uncertainty due to the projected second wave of COVID-19 and declining household incomes, headline inflation will increase from the average of 11.4 percent recorded in 2019 to average 12.2 percent in 2020.

“Barring a second wave of the pandemic, which could further threaten outlook for global economic growth, coupled with the absence of major shocks to food supply in Nigeria, inflation outlook for rest of the year could be influenced by two factors. Firstly, the elevated base effect, and secondly, waning household incomes. The first factor is likely to have a greater impact.”

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