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FG’s Huge Debts Crippling Financial System – CBN

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Emefiele
  • FG’s Huge Debts Crippling Financial System

The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday called on the Federal Government to urgently evaluate the level of its domestic indebtedness and develop a framework for settling these debts.

The committee, in a communique issued at the end of its two-day meeting held at the headquarters of the CBN in Abuja, warned that the huge government indebtedness to economic agents had slowed down business activities.

In the communique, which was read by the CBN Governor, Mr. Godwin Emefiele, the committee noted that the development was not good for the economy as it was compromising the integrity of the financial system.

While reiterating that monetary policy alone could not address the current economic crisis, the CBN governor noted that the committee called for an enrichment of fiscal and other sector initiatives and interventions towards resolving the growth challenges in the economy.

He said these interventions were vital in order to promptly revive confidence in the economy.

Emefiele said, “Members stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations.

“The MPC urged the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitising the debts in order to settle its outstanding domestic contractual obligations, which cut across all sectors of the economy.

“These accumulated debts have slowed the business activities of economic agents, most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the bank (CBN) to commit to greater surveillance and deployment of early warning systems in managing the banking system.”

The CBN governor said the committee called on security agencies to sustain their checks on the activities of illegal foreign exchange operators in order to bring sanity to that segment of the market.

He said, “The extant foreign exchange regulation outlaws the trafficking of currency on the streets as some unlicensed operators currently do.

“Thus, to evolve an appropriate naira exchange rate that stabilises the foreign exchange market, Bureau De Change operators must strictly observe the terms and conditions of their licences.”

On whether the CBN was supporting jail terms for people hoarding dollars, Emefiele said the apex bank would not support any such move.

He said while the current foreign exchange regulations of the CBN did not in any way support jail term for people who hoard dollars, he was aware that the Nigerian Law Reform Commission was working towards reviewing the regulations.

The apex bank boss, however, added that the CBN would not support any move to prescribe jail terms for people who hoard dollars.

He said, “Let me use this opportunity to reiterate that it is not in our foreign exchange regulations that people should be jailed or their dollars confiscated. But I am aware because just today (Tuesday), I was told that the Nigerian Law Reform Commission is looking at reviewing the exchange regulations, just like it normally will from time to time depending on the exigency of the time.

“We have not been contacted regarding whether or not some of the clauses that are involved are included in the review to be conducted by the Law Reform Commission.

“But I am saying here categorically that if we are contacted, or whenever it becomes an issue for discussion, we will advise against a clause that forbids people from keeping their dollars if they chose to, or a law that says people should be jailed for keeping foreign currencies.”

When asked if the apex bank was concerned about some of the risks facing the banking system owing to the current economic crisis, the CBN governor admitted that while all players in the financial system were facing “tremendous risks,” the central bank would ensure that they would not crystalise to a point where depositors’ funds would be lost.

He said, “As a result of the current challenges being faced by the global economy, all agents in the financial system, such as banks and other players, are facing tremendous risks.

“When there is a slowdown or recession, naturally banks will face certain risks such as non-performing loans rising and different other risks, and this imposes on the regulator a greater challenge to ensure that it strengthens its prudential guidelines to ensure that the banks and particularly depositors are protected.

“Nigerian banks, like other banks in other climes, are facing risks. But those risks are surmountable, and the central bank is doing all its best to ensure those risks don’t crystalise to a point where we will begin to talk about depositors losing their deposits. So for that reason, the rumour about banking sector risks is overtly elevated.”

On whether the apex bank was considering reducing the number of BDC operators so as to better regulate their activities, the governor said the CBN might consider that option at the appropriate time.

He said, “We believe that everybody (BDC) is entitled (to have a licence) once the regulations are set; there is no need to preclude you if you meet the conditions. But of course, naturally, the regulator, which is the CBN, has a right to put in place policies that limit entry. If we want to limit entry, we know what to do.

“I can assure you we will do it anytime we decide to limit entry or even exacerbate exit from the market, and that is something we will look into at the appropriate time.”

On the foreign exchange inflow through the CBN, the governor said the country recorded a decline of $447.5m or 31.85 per cent from $1.4bn in September to $957.37m in October.

He attributed the decrease to lower crude oil and other government revenues in the period under review, lamenting that despite the resumed Joint Venture payments in October, the total outflows also continued to decrease.

Foreign exchange outflows, according to him, dropped significantly by 58.68 per cent from $2.25bn to $1.01bn during the period.

Emefiele said the committee implored the CBN to continue to direct more focus at making foreign exchange available to the agriculture and manufacturing sectors of the economy.

This, according to him, can be achieved by enforcing its policy directing Deposit Money Banks to allocate 60 per cent of the available foreign exchange to these sectors.

On the Monetary Policy Rate, the CBN governor said the committee decided to leave it unchanged at 14 per cent.

He explained that all the 10 members who attended the MPC meeting agreed to maintain the current monetary policy stance.

Apart from the MPR that was retained at 14 per cent, the governor said the committee also voted to retain the Cash Reserves Ratio at 22.5 per cent.

Also retained were the liquidity ratio, which was left at 30 per cent; and the asymmetric window, which was left at +200 and -500 basis points around the MPR.

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

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FBN Holdings Boost First Bank CAR With N25 Billion Capital Injection

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FBN Holdings

First Bank Boosts CAR With N25 Billion Capital Injection

FBN Holdings Plc announced it has boosted the Capital Adequacy Ratio (CAR) of its commercial banking subsidiary, First Bank of Nigeria Limited by N25 billion.

According to the statement released by the bank on the Nigerian Stock Exchange website, the capital injection represents part of the net proceeds of the company’s divestment from FBN Insurance Limited.

It noted that the capital injection upped the bank’s Capital Adequacy Ratio to 16.53 percent –before capitalising year to date profit– as at June 2020.

Oyewale Ariyibi, the Chief Financial Officer of the Company, was quoted as saying “the divestment is in line with the Group’s medium to long term strategic objectives. The divestment has unlocked significant value embedded in the former subsidiary which is being leveraged to strengthen the core banking business for which the Group is renowned“.

Ariyibi further stated that the Company’s objective is to increase capital across the Group in order to drive business growth, enhance efficiency and improve overall shareholders’ value.

Uk Eke, the Group Managing Director, who commented on the company’s performance for the first half of 2020 said “The H1 2020 financial results are impressive and reconfirm our consistent focus on enhanced shareholder value. Despite the difficult operating environment, the results demonstrate our capacity to deliver exceptional services to our customers in these uncertain times. Looking ahead, we remain cautious, but confident that our business is fundamentally strong to surmount any future challenge towards delivering superior financial performance“.

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9mobile Joins MTN, Launches E-Sim Service 

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9mobile Launches E-Sim Service

Nigeria’s mobile network operators have joined the rest of the world in launching E-Sim, an embedded sim.

In July, MTN Nigeria set the ball rolling with the launching of its E-Sim trial. This was followed by 9mobile that launched its E-Sim earlier this month.

E-Sim is a form of an in-built sim that is embedded directly into a device without using a physical Sim.

Speaking on the new E-Sim, the Acting Director of Marketing, 9mobile, Layi Onafowokan, described the latest move as the most excellent experience that advanced technology provides.

According to him, the E-Sim is an in-built sim embedded in mobile devices in order to reduce the possibility of losing or damaging sim and eliminate the stress of dealing with the cutting of sim cards or finding adaptors.

It also enables multiple usage and adaptation of one subscriber profile across a broad range of mobile communication devices, internet of things (IoT) and artificial intelligence (AI) apps including smart commuting, metering, tracking, and surveillance, rather than the restricted single-device use of the conventional SIM card.

Onafowokan said: “Customers can walk into any of our select 9mobile Experience Centres to request E-Sim activation. A QR code will be provided to scan and download E-Sim profile and perform the usual SIM registration.

He added that customers that activate E-Sim service will enjoy up to 7GB data-free while those who want to change to E-Sim will only do a SIM swap at approved centres.

E-Sim is compatible with Google Device like Pixel 3, 3 XL, 4, and Pixel 4 XL. Apple Device like Iphone 11, 11 Pro, 11 Pro Max, Xs, Xs Max and Iphone XR. Samsung S20 Series.

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Access Bank Enters Into Definitive Agreement With Cavmont Capital

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herbert wigwe

Access Bank Signs Definitive Agreement With Cavmont Bank Ltd

Following July 8, 2020 announcement, the Board of Access Bank Plc on Thursday said its subsidiary, Access Bank Limited (Zambia) has entered into a definitive agreement with Cavmont Capital Holdings Zambia regarding the acquisition of Cavemont Bank Ltd.

In the statement released through the Nigerian Stock Exchange, the bank said the proposed acquisition will position Access Bank as one of the top 10 banks in Zambia and improve the bank’s momentum to advance its strategic objectives.

The bank said “This is a highly complementary transaction, combining ABZ’s wholesale and trade finance capabilities with Cavmonth Bank’s retail and commercial banking operations. Customers of the enlarged bank will benefit from greater security offered by what will be one of the most capitalised banks in Zambia with a more diversified product and service offering and a broader geographical footprint and infrastructure. The enlarged bank will be well-placed to participate in the long-term economic growth of Zambia, predicated on the country’s vast reserves of natural resources and fast-growing young population.

The transaction agreement showed Access Bank Zambia will acquire the entire issued share capital, assets and liabilities of Cavmonth Bank while Capricorn Group Limited, majority shareholder of Cavmonth Capital Holdings, will invest around $16.5 million or ZMW300 million of preference shares into Access Bank Zambia.

According to the bank, the transaction is expected to be completed in the fourth quarter of 2020.

Speaking on the transaction, Herbert Wigwe, the Group Managing Director, Access Bank Plc, said “Access Bank is focused on building the scale needed to become a leading bank in its key operating markets through leveraging the right partnerships. This transaction underscores our approach and is another stepping stone towards delivering on our strategic aspirations of becoming the World’s Most Respected African Bank and Africa’s Gateway to the World. It will strengthen our presence in Zambia, while furthering our footprint for growth in the COMESA region, Africa’s largest free trade area.

“Over the years, we have worked hard to build a sustainable international bank of African origin that can expand the potential of businesses, support economic prosperity, facilitate trade and investment and extend the power of banking to millions of people who do not yet have the financial tools to achieve their dreams. This proposed transaction aligns with that strategy”.

Thinus Prinsloo, Managing Director of Capricorn Group, also said: “Access Bank is an African banking group with an impressive growth trajectory and geographic reach across Africa and internationally. This transaction is an excellent strategic fit with Cavmont Bank’s presence in Zambia and will strengthen the capital base from which to achieve long-term sustainable growth. Zambia is an economy with th potential that is poised for a robust recovery, and this combination best positions the combined bank to harness these opportunities“.

Peet van der Walt, the Managing Director of Cavmont Bank, explained that: “Cavmont Bank’s vision is to be a world-class bank, rated amongst the best in Zambia. This proposed merger with Access Bank Zambia accelerates our strategy and positions us as a top ten bank in the country. As a subsidiary of one of the largest banking groups in Africa, Access Bank Zambia has the scale, capabilities and ambition to enable the combined bank to pursue exciting strategic opportunities in Zambia.

“Our customers will benefit from greater security offered by one of the most capitalised banks in the country, increased scale in Zambia, access to a broader digital and retail offering, and a geographic network across the continent. We look forward to working closely with Access Bank to deliver the benefits of the merger to all the stakeholders.” Shareholders should note that the cautionary announcement dated July 8, 2020 is hereby withdrawn and shareholders are no longer required to exercise caution when dealing in the group’s shares in relation to the potential transaction.”

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