Facts have emerged that the federal government under President Muhammadu Buhari got a total N2,203,573,573,563.25 from the Federation Account as allocation between June 2015 and May 2016.
In a recent search by the Economic Confidential, the economic intelligent magazine and carefully computed, the administration under Buhari’s watch got the highest allocation in July 2015 with N412.60 billion and the lowest allocation within the period under review of N113.80 billion in May 2016.
The report further reveals that in June 2015, the federal government received N173.91 billion made up of N159.72 billion for consolidated Revenue fund, N3.27billion for share of derivation and ecology, N1.63 billion for stabilisation fund, N5.49 billion for development of natural resources, and N3.78 billion for the Federal Capital Territory Administration (FCTA).
In August, September and October 2015, it received N216.99 billion, N180.86 billion and N162.93 billion respectively.
Between November and December 2015, the federal government also got N205.15 billion and N151.64 billion to end the year.
At the start of 2016 and precisely January, it received N175.04 billion made up of N160.87 billion for consolidated revenue fund, N3.10 billion for share of derivation and ecology, N1.77 billion representing that of stabilisation fund, while development of natural resources and FCT stood at N5.46 billion and N3.82 billion respectively.
As for the month of February, March and April this year, it was the peak of “low returns on investment” as the federal government witnessed in a descending order of N150.32 billion, N139.36 billion, N120.92 billion to close the first quarter in a not too- cheering manner.
Recall that the economic intelligent magazine had recently investigated and published the allocations from the federation account to states and local governments in the country in the last one year, apart from Internally Generated Revenue(IGR) accruing to the 36 states of the federation and Abuja.
It has also published what major revenue collecting agencies have also received within the period.
The report on IGR indicated that only Lagos State generated more revenue than the allocation from the Federation Account which was about 150 per cent.
It also revealed that the IGR of N268 billion by Lagos State in 2015 is more than that of 32 other states put together that generated a total of N257 billion.
Meanwhile, it gathered that apart from the allocations from the Federation Account, as at the end of March this year, total inflows into the Treasury Single Account (TSA) of the federal government under President Buhari stood at N3 trillion while the number of ministries, departments and agencies (MDAs) rose to 976.
However, Minister of Finance, Kemi Adeosun, recently disclosed that the TSA has significantly witnessed an increase to N3.3 trillion in May 2016, noting that the Finance Ministry had continuously discovered revenue platforms that had escaped its net especially, shipping levies, airport landing charges, visa fees amongst others.
A natural consolidation in form of mergers and acquisitions is likely in the Nigerian banking sector, economic and financial experts have predicted.
They said with the myriads of challenges facing the nation’s economy, some banks were likely to experience some challenges that could only be resolved by mergers and acquisitions.
The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the economic storm gathering over the country might lead to a shake-out in the banking sector.
This, he said, was better than having a situation where a bank would collapse.
Speaking about the ongoing economic crisis and the spate of non-performing loans, Rewane said, “It will affect their profitability initially and eventually it is going to affect their liquidity and solvency.
“Because of the squeeze in profitability, there will be a natural consolidation and a shake-out.”
He, however, expressed the hope that the Federal Government’s stimulus package and other measures aimed at enhancing growth would work and help tackle the economic storm.
An economist, Prof. Pat Utomi, said good mergers and acquisitions strategy could help prevent crisis in the banking sector and avoid a regulatory risk.
Utomi, who did not state whether a consolidation was imminent in Nigeria, however, stated that it would not be construed as negative thing if it happened.
He said, “There is nothing good or bad about mergers and acquisitions on its own. The question is whether it will amount to creating value or not. It happened in the United States in the 1980s.
“A good mergers and acquisitions strategy can prevent regulatory risk. A situation where the central bank will take action on a bank and there will be panic and everybody begins to run helter-skelter to withdraw their money is not good for a bank. If the fundamentals of a bank are beginning to get challenged, it is better a discussion is held with another bank and it is acquired. What creates a problem is regulatory risk.”
According to Utomi, the economy needs to begin to produce and relevant policies that will enhance this must be put in place.
He added that banks could be a good agent in helping to stimulate domestic production.
The Executive Director, Sterling Bank Plc, Mr. Abubakar Suleiman, had said in February that a drop in naira by just 20 per cent would trigger a wave of bank mergers.
Since a devaluation last month, the currency has lost double that against the dollar, according to a report by Reuters.
Overall, 42 per cent of loans extended by Nigerian banks are in dollars. If the naira falls far enough, it will force some banks to recapitalise in order to have enough naira to stay within financial stability limits.
“There is concern around the evolution of banks’ capital adequacy if the naira continues to weaken,” the Chief Economist, Standard Chartered Africa, Razia Khan, said
She added, “As the naira weakens, FX loans are likely to be problematic.”
Non-performing loans are expected to jump to 12.5 per cent of the total loans of the banks this year, up from the central bank’s target level of five per cent at the end of last year, as lenders suffer a hangover from an oil sector credit boom that ended abruptly in 2015, according to Agusto & Co, Nigeria’s main rating agency.
The country’s 21 banks have been laying off staff, closing branches and slashing earnings forecasts, but some are unlikely to survive the storm, analysts say.
According to London-based analysts Exotix, UBA, Diamond and Guaranty Trust Bank have the highest ratio of dollar loans at 50 per cent apiece.
Diamond Bank declined to comment, while UBA and GTB said they saw no need for recapitalisation due to the devaluation of the currency.
One Lagos-based banking analyst, who asked not to be named, said three or four medium-sized banks might need to raise capital.
The central bank has said it is monitoring one or two lenders for liquidity, without naming them.
Adding to the uncertainty, GTB delayed its half-year earnings this week pending an interim audit.
Two mid-tier banks, Skye and Stanbic IBTC, the local arm of South Africa’s Standard Bank, said they had not yet released first quarter earnings.
Some banks have themselves borrowed heavily in dollars, debt that now costs much more to service.
Top of this list is GTB, which has $1.6bn in dollar-denominated debt, followed by First Bank of Nigeria, with $915m, according to Thomson Reuters data. First Bank was not immediately available to comment.
Anticipating problems from a weaker naira, investors have been selling off banking stocks for the last year, sending the banking index in January to its lowest since it was formed in 2009, and less than half its level in mid-2014.
Many banking stocks, hot foreign investor picks a decade ago during an ‘Africa rising’ boom, remain depressed after a 2009 sector meltdown stemming from the global financial crisis.
Zenith Bank’s shares are a third of their pre-financial crisis highs, Access Bank, a quarter; and First Bank, just 10 per cent. GTB, by contrast, has recovered as it has one of the lowest levels of non-performing loans and its shares are now in line with their 2008 levels.
With the International Monetary Fund forecasting a 1.8 per cent contraction in the Nigerian economy this year, the immediate prospects for the banking sector are grim, but the CBN Governor, Mr. Godwin Emefiele, was adamant that the financial system remained solid.
