The Federal Inland Revenue Service (FIRS) continued its tax compliance exercise in Abuja and Lagos, shutting the premises of defaulting companies.
In Abuja, the FIRS team, led by Chinazor Edeh, shut down the office of Taleveras, an energy firm operating from the Maitaima area of the city.
A warrant of distraint presented by the team indicated that the company is owing over N667 million in tax liabilities.
Before sealing off the company, Edeh told its the Chief Security Officer (CSO), the highest ranking official available, the firm has failed pay the balance of its tax liabilities after it paid N50 million, following the sealing off of its premises in May.
Edeh explained that the FIRS was not interested in sealing off the company, but to ensure that the tax is paid.
But the CSO said the company is incapable of defraying the liabilities, as it has not been able to pay salaries. Consequently, the enforcement team ordered the staff to vacate the premises and proceeded to seal off the company.
Also sealed by the enforcement team is Jardin Nigeria Limited, a landscaping/ project management company, with an office at Abuja’s Transcorp Hilton Hotel.
The company owes over N129million in taxes. An official of the company, who identified himself simply as Mr. Olu, admitted that the company owes, but argued that some state governments owe the company over N2 billion.
Edeh advised the company to pay 50 per cent of its tax liabilities and reach agreement with FIRS on a structured payment of the balance.
In Lagos, two companies were shut in the Ikeja area by the FIRS team, led by Anita Erinne.
First to be shut was Guarantee Petroleum Company, located at 21 Salvation Road, off Opebi Road.
Diamond Bank Plc on Thursday released its half year 2016 unaudited financial results. It revealed that its profit after tax dropped to N9.1billion at the end of June 2016, from N12.155 billion in the corresponding period of 2015. The results also showed that its profit before tax during the period under review also plunged to N10.5billion, as against the N14.193billion recorded in the comparable period of 2015.
However, the interim report and accounts of the bank for the first six months of the year also showed that its total comprehensive income rose by 13.3 per cent year-on-year to N16.3billion as against N14.4billion recorded in comparable period of 2015. Non-interest income also surged by 33.4 per cent to N26.5billion, reflecting the successful efforts targeted at improving this income line and also the focused strategy of management, which were sharpened at improving digital functionality and widening financial inclusion.
The bank improved on its credit creation by 28.6 per cent as loans and advances to customers grew from N763.6billion in the comparable period of last year to N982.3billion. Also, loans to other banks jumped by 30.7 per cent to N78.5billion in first half of 2016, from N60.1billion in the corresponding period last year, while its retail customers grew to over 13 million with seven million of these opening accounts in the last two years. Commenting on the results, its Chief Executive Officer, Mr. Uzoma Dozie, stated that despite the headwinds in the economy, the bank remained resilient and assured that it would sustain the positive growth throughout the second half of the year.
According to him, the bank’s strong liquidity and capital adequacy ratios plus its digital transformation have rightly positioned it to meet customer obligations and offer service deliveries that are beyond banking.
He said: “With the domestic economy contracting, the Nigerian banking industry has faced a number of challenges over the last six months. Nevertheless, in the first half of 2016, we have remained resilient in weathering these headwinds and there are real bright spots in our income streams, as well as noteworthy cost reduction, which gives us confidence going into the second half of the year.
“Due to actions taken and an ongoing prudent approach, our regulatory capital remains strong. This position of strength helped offset the one-off impact of the recent devaluation of the naira, as acknowledged by Fitch Ratings when they affirmed our B rating with a stable outlook. Liquidity of the bank also remains high and is well above the guidance ratio stipulated by CBN.”
Speaking further, Dozie stated that despite the catalogue of challenges facing the sub-sector, which were exacerbated by the recent devaluation of the naira and foreign exchange scarcity, culminating in backlog of unpaid salaries and wages for individuals, Diamond Bank has continued a diligent implementation of its focus on curtailing cost.
“In the last few months, evidence has shown that the new strategy and initiatives to curtail costs are proving successful and are reflected in the bank’s financial indicators. This is reassuring. Year on year, costs came in lower and as we conclude the organisational restructure, we expect to harvest more savings from operational and employee expenses.
“The primary benefits of this however are the resources that we have freed up to provide improved services to customers. Having done this, we are optimistic that the bank is in the right markets and has the wherewithal to excel and create value for shareholders in the long run,” stated Dozie.
MTN Nigeria on Thursday said that as part of a settlement arrangement with the Federal Government following its fine, it had taken steps to ensure the listing of its shares on the Nigerian Stock Exchange next year, subject to suitable market conditions.
A statement by the telecommunications company’ Public Relations and Protocol Manager, Mr. Funso Aina, read in part, “The Board of Directors has resolved to proceed with preparations for a listing of MTN Nigeria on the NSE as soon as commercially and legally possible, and has established a management task team with the responsibility to guide the company towards a listing.
“At present, MTN Nigeria is targeting that the listing takes place during 2017, subject to suitable market conditions.”
He said that the telecoms firm had appointed Stanbic IBTC Capital Limited (together with its affiliates, The Standard Bank of South Africa Limited and Standard Advisory London Limited) and Citigroup Global Markets Limited as joint transaction advisors and joint global coordinators, with Stanbic acting as the lead issuing house.
Aina added, “A full syndicate, including Nigerian receiving agents, Nigerian receiving banks and other advisers will be appointed in due course as appropriate.
“The proposed listing will be subject to suitable market circumstances and conditions, and the appropriate approvals from relevant regulators and other stakeholders.”
Bank customers with existing loan obligations must brace for higher levels of indebtedness as the Deposit Money Banks have begun an upward review of the interest rates on all outstanding loans.
The development followed Tuesday’s increase of the Monetary Policy Rate from 12 per cent to 14 per cent by the Central Bank of Nigeria’s Monetary Policy Committee.
Multiple banking sources told one of our correspondents on Thursday that the lenders would as early as next week begin to dispatch letters to their customers, informing them of the upward review of the interest rates on their loans.
“Banks don’t waste time on matters like this. The increase in the MPR means interest rates on loans have to go up. We have started writing letters to our customers. A few may go this week, while more will go next week. Customers will get the letters in emails and hard copy,” a top executive of a tier-1 bank told one of our correspondents under condition of anonymity on Thursday.
Other top bank officials, who confirmed the development, did not state the rate of increase in the interest rates on the outstanding loans.
They said the upward reviews of the rates were being done with keen consideration for certain conditions relating to each bank customer.
“What applies to customer A may not apply to customer B. We take keen look at each customer and their peculiar situation, including their loan history with us, before making the review. But the fact is that an increase is inevitable with the hike in the CBN’s MPR,” another top bank official said.
Banking experts say the MPR, often called the benchmark interest rate, is the yardstick for other interest rates bank charges on loans advanced to their customers.
The MPC had after its bi-monthly meeting on Tuesday increased the MPR from 12 per cent to 14 per cent. The measure was meant to reduce the amount of cash in circulation and thus fight inflation, which hit 16.5 per cent in June.
A financial analyst at BGL Plc, a research and investment advisory firm, Mr. Femi Ademola, said banks usually reviewed interest rates on loans whenever the CBN raised or lowered the MPR.
This, he said, was why banks usually included the clause: ‘Subject to prevailing interest rate’ on their offer letters for loans.
Officials said the latest review by the banks might move the interest rate on some loans from between 25 per cent and 27 per cent to around 30 per cent.
Ademola said while the banks would enjoy more interest income from the upward review, a small part of this amount would be paid to savings account customers as interest on their deposits.
In line with the CBN regulations, savings account customers are paid 30 per cent of the MPR as interest on their deposits. With the increase in the MPR, about 0.6 per cent of each customer’s savings account deposit will be credited to their account as accrued interest on their savings.
Analysts described this as negligible compared to what the banks would earn from the additional interest rate imposed on loans.
Meanwhile, manufacturers said the decision of the CBN to raise the MPR was a deadly blow to an already comatose manufacturing sector, adding that more sector operators were bound to close shops.
A local manufacturer of envelopes and Managing Director, FAE Limited, Princess Layo Okeowo, said, “I just pray that we do not all close our doors. The foreign exchange situation is already becoming unbearable with manufacturers having to wait for ages after bidding to get dollars. The increase in interest rate is a bitter pill to swallow and it has made an already bad situation worse.
“It is certain that the banks will readjust their interest rates even for people who have outstanding loans. It is certain that within the next one week, the banks will start writing letters to their debtors notifying them of increased interest rates on loans.
“Manufacturers will have to increase prices and already, the purchasing power is very low and the number of our customers has reduced drastically.”
An executive director in one of the leading aerosol firms in the country, Mr. Kingsley Oni, said because of the scarcity of dollars, his company had to lay off workers for the first time in its more than 20 years’ of existence.
Oni said, “We have over 2,000 workers; because we are not getting dollars, for the first time, we are retrenching. The point is, when they keep raising these interest rates, the impact on the manufacturing sector is very negative.
“The CBN cannot control inflation, but a situation where a country is in this situation and you still find a lot of private jets all over Abuja is what baffles me. One of those jets can be sold and the money ploughed back into the real sector to create jobs if the government is really serious.”
The Chairman, Qualitek Industries, Chief Olayinka Kufile, said although the CBN was trying to control inflation, the reality was that many industries in the country had become comatose.
He said, “Most activities in the manufacturing ector have been grounded. In the basic metal industry where I operate, everything is flat, because while we were trying to get out of the problem of the dollar increasing from N158 to a dollar to N200 to a dollar, we lost a lot of money. Before we could even get out of that, the dollar kept increasing and now it is more than N300 and the people who took loans at the exchange rate of N197 to a dollar are in heavy debts.
“If the government is hoping to earn money in taxes from the non-oil sector, they cannot get those taxes where companies are not producing and making money. Most industries today are not producing and they have reduced their staff strength to near zero.”
For the Director-General, Manufacturers Association of Nigeria, Mr. Remi Ogunmefun, within the concept of economics, the CBN was right to increase the benchmark rate in order to spur savings and investment as well as control inflation.
He said, “The implication of the increase for manufacturers is that the cost of borrowing will rise higher than it is already. It is quite unfortunate because over the years, we have been clamouring for a single digit interest rate.”
The quest to tame inflation and bridge the negative real rates, attract investments and raise savings may be a mirage, if oil crisis persists and monetary-fiscal measures cannot converge in the shortest period.
This captures the positions of financial analysts and real sector operators, who projected a varying outcomes in months to come, as the nation’s benchmark interest rate, currently put at 14 per cent, begins to generate mixed feelings.
According to the real sector operators, manufacturers are in a fix, as access to foreign exchange remains limited while their woes have been compounded with the hike in interest rate.The Monetary Policy Committee of the Central Bank of Nigeria (CBN), on Tuesday, favoured the increase of the Monetary Policy Rate by 200 basis points, saying it is to curtail negative rates against inflation level and attract foreign investment.
The decision, which came as a surprise to majority of financial analysts who had projected unchanged rates, however, said the development, which has effectively reduced negative real interest rate from -4.5 per cent to -2.5 will attract foreign portfolio inflows. But an economist, Dr. Ogho Okiti, said although the decision would add to the currency stability, it is very unlikely to curtail the inflationary pressures largely attributed to cost-shocks.“We are of the view that tightening the interest rate, which will reduce negative real interest rate will come as good news particularly for foreign portfolio inflows. But given the nature of Nigeria’s financial system, interest rates generally paid on savings by commercial banks in Nigeria are usually not dependent on the benchmark rate.
“We think that savings account holders, who have seen the real returns on their savings wiped out by rising inflation are unlikely to be beneficiaries. We also think the move could not only help to exacerbate the current difficult operating environment for firms, but would also lead to an increase in cost of funds for net borrowers and thus, dampen corporate investments,” he said.
President, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs noted that the only way to industrialise and encourage diversification is when loans are less than 10 per cent, adding that the MPR at three per cent might transform the banking sector to fund SMEs and other vibrant sectors of the economy.
“The overall effect of the MPR is not good for the manufacturing sector. No one is investing in the economy, both local and international investors. Access to cheap funds is key in driving investments in the real sector. What this means is that many manufacturers may close down and this may lead to job loss”, he added.
For the Lead Director of Centre for Social Justice, Eze Onyekpere, there seems to be a debilitating fixation with monetary policy and what happens to the value of the naira, with all eyes on the Central Bank of Nigeria and its Monetary Policy Committee.
“While monetary policy is important, it will not achieve the desired results if it is not complemented by fiscal policy. The expectation and promise of the administration to reflate the economy with a stimulus package would have matched the monetary policy positions of the CBN. We may not have exactly seen Nigeria in this recession.
“There is unusual delay in implementing the budget, may be, due to paucity of resources which raises issues around budget planning and revenue forecasting for the 2016 federal budget. The full implementation of the capital components of the 2016 federal budget is imperative,” he said.
Meanwhile, a currency and Research analyst at FXTM, Lukman Otunuga, who expressed his surprise over the decision, noted that this is the second time interest rates have been raised within six months in an effort to mitigate the mounting pressures on a weakening Naira. “With the current rates at 14 per cent, this has been the highest level ever and displays how the central bank will do all it must to guide the nation back onto the path of economic recovery.
“Sentiment still remains bearish towards Nigeria, and the recent decline in oil prices may punish the nation further. As of now, Naira vulnerability may be a theme and further declines in value could be expected as the local currency is guided by the natural forces of supply and demand.“It should be kept in mind that the nation’s problem remains depressed oil prices and the key is diversification, which could throw up some benefits in the longer term,” he added.
The Central Bank of Nigeria (CBN) has directed banks to review and provision for non-performing loans denominated in foreign currencies.
CBN Director, Banking Supervision, Mrs. Tokunbo Martins, who made this known in a letter to all the banks titled: Provisioning for foreign currency loans, said the exercise was in continuation of the regulator’s efforts to enhance efficiency, facilitate liquidity and transparency in the foreign exchange market.
This is happening as the naira yesterday weakened to an all-time low of N334.50 against the dollar on the interbank market, a day after the CBN hiked interest rates to lure foreign investors back into local assets, traders said.
The naira fell by 5.8 per cent from its opening rate, and $10 million was traded at the new record low. Traders said investors were pushing the currency lower to test the limit of how far it can fall, given a spread of almost 12 per cent between the official and black market naira rates.
At the parallel market, the naira was, however, exchanging at N376 to dollar.
“If we have more people trying to buy the naira then it should strengthen. I think we will keep seeing the trickles … I don’t think we will see large inflows until the fundamentals of the economy improves,” one trader told Reuters.
On the foreign currency loans, Martins explained that the CBN issued the Revised Guidelines for the Operations of the Nigerian Inter-bank Foreign Exchange Market meant to liberalise the foreign exchange market and increase balances on foreign currency-denominated loans and advances in the books of banks.
The target loans also include those that had been fully provided for under the previous exchange rate regime, but were yet to be written off, per our extant regulation under Section 3.21(a) of the Prudential Guidelines for Deposit Money Banks in Nigeria of July 1, 2010.
Global oil benchmark, Brent crude, extended its declines on Wednesday, trading around $43 per barrel, down from a 2016 peak of $52.54.
Oil prices plummeted over $1 per barrel within minutes after official United States energy data showed an unexpected glut of oil in storage, according to The Telegraph.
The price of Brent crude quickly dropped from around $44.90 per barrel to $43.68, a decline of more than two per cent, after the surprisingly high storage data was revealed, dragging the market deeper into multi-month lows.
US crude oil stocks rose by 1.7 million barrels to 521.1 million barrels last week, according to the US Energy Information Administration, a development that shocked analysts who had expected the weekly report to show that stocks had fallen by 2.3 million barrels.
Separate data from the American Petroleum Institute had also buoyed hopes that oil stocks might be waning, stating on Tuesday that stocks fell by 827,000 barrels.
Brent crude had on June 8 climbed by as much as 2.1 per cent to touch $52.54, the highest price since last October. The US oil benchmark, West Texas Intermediate, also rose by nearly two per cent to $51.34 per barrel, its highest intraday price since last July.
The oil price had already seen its tentative recovery threatened by the rising US dollar and jittery demand forecasts, falling to $44.75 per barrel on Monday, its lowest level since oil traded at $43.63 per barrel on May 9.
Oil prices have rallied from lows of under $28 per barrel in January to trade above the $50 per barrel mark in June, spurred by a string of international oil production outages in the second quarter that offered temporary respite from the global glut.
The return of oil production in Canada and Nigeria after supply disruptions, combined with a strengthening US dollar, has pushed the market into reverse and sparked fears that further losses could undermine the global price recovery.
The Treasury bills market traded slightly bearish on Wednesday with yields up by 30 basis points on the average.
This development, analysts at Vetiva Capital Management Limited, said, was a reaction to the Monetary Policy Committee decision to raise the Monetary Policy Rate.
The most significant yield changes were recorded on the longer end of the space as yields on the 267 days to maturity, 281DTM, and 323DTM bills rose to 19.04 per cent, 20.35 per cent, and 19.68 per cent respectively.
The bond market however traded largely mixed with yields up by an average of six basis points. While sell pressure was evident on the 9.35 per cent Federal Government of Nigeria August 2017 bond with yield up by 33bps to close at 19.57 per cent, modest demand was observed on the 12.50 per cent FGN Januray 2026 bond as its yield declined by 14bps to 15.26 per cent.
“Amid weak market sentiment (following the rate hike), we expect the bearish trading pattern to persist in today’s session,” the analysts said.
After bouncing off a six-day losing streak in the last trading session, the Nigerian equity market maintained positive momentum, adding 93bps on the back of sustained gains in some key sectors.
The Nigerian Stock Exchange market capitalisation rose to N9.687tn from N9.597tn, while the All-Share Index closed at 28,205.62 basis points from 27,945.02 basis points.
A total of 488.899 million shares worth N4.827bn exchanged hands in 4,713 deals.
The market recorded 24 gains with Okomu Oil Palm Plc, MRS Plc, Axa Manasard Insurance Plc, Dangote Flour Plc and Unilever Nigeria Plc emerging as the top five gainers.
On the global front, European markets closed higher amidst some upbeat earnings releases and a better-than-expected United Kingdom second quarter Gross Domestic Product report (output grew by 0.6 per cent, ahead of consensus 0.4 per cent).
The naira fell against the dollar at the interbank foreign exchange market to an all-time low of 334.50 on Wednesday, a day after the Central Bank of Nigeria’s Monetary Policy Committee hiked interest rates to lure foreign investors back into local assets.
The naira had closed at 310 against the interbank market on Tuesday.
About $10m was traded at the new record low, Reuters reported.
Foreign exchange traders said investors were pushing the currency lower to test the limit of how far it could fall, given a spread of almost 12 per cent between the official and black market naira rates.
“If we have more people trying to buy the naira then it should strengthen. I think we will keep seeing the trickles … I don’t think we will see large inflows until the fundamentals of the economy improves,” one trader told Reuters.
Economic analysts said the fall in the value of the naira against the dollar at the interbank market had nothing to do with the increase in the Monetary Policy Rate.
A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said the exchange rate was reacting to the interplay of demand and supply at the interbank market.
He said, “This is what the interbank forex market really wants, that is, a situation where only the forces of demand and supply will determine price. So far, the CBN has not intervened this week. The rate at the interbank market today has nothing to do with the increase in the MPR.
Ezun said a depreciating naira might attract some foreign portfolio investors into the economy but would cause higher inflation in coming months.
“There is no shortcut. Rising inflation will affect consumer demand and the value of the naira,” he added,
An expert and Partner, Transaction Advisory Services, Ernst and Young Nigeria, Mr. Bisi Sanda, said the CBN’s Monetary Policy Committee should have reduced the interest rate in order to stimulate economic growth, instead of increasing the MPR.
He said, “The inflation we are experiencing is not caused by a shift in demand curve, but a shift in the supply curve. Instead of hiking the interest rate, we should have reduced it in order to stimulate growth through increased spending.
The voting pattern at the MPC shows that not all the members are actually in support of the increase in the interest rate.”
According to the Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chuwkwu, the CBN needs to act fast and restore confidence back to the market.
This, he said, could be done by ensuring that the exchange rate stability is achieved as soon as possible.
Chukwu said, “As it is, there is no amount of depreciation or devaluation that happens that will give foreign portfolio investors confidence. They want to see stability. They want to be able to predict the naira.
Once there is stability, confidence will return. The CBN may do this by accessing a lifeline from the International Monetary Policy Committee.”
Fidelity Bank Plc has disclosed that it was recently adjudged the “Best Green Partner 2015” by the Lagos State Government at the recently concluded 2016 Tree Planting Day.
The organisers of the event said Fidelity Bank was given the award in recognition of its contributions towards the protection and improvement of the environment.
A statement quoted organisers of the event to have said the bank showed relentless support for initiatives aimed at identifying and promoting the preservation, protection and beautification of the environment.
Speaking at the event held at the National Youth Service Corps (NYSC), Camp in Lagos, Managing Director/Chief Executive Officer of Fidelity Bank Plc, Nnamdi Okonkwo, reaffirmed the bank’s commitment to support the State’s laudable greening policy as it aligns strongly with the bank’s Corporate Social Responsibility (CSR) focus on conservation and environmental protection.
“Fidelity Bank works in collaboration with public institutions – state and local governments – to create and maintain green parks in chosen locations. The beautification of the Falomo Roundabout in Lagos State, in partnership with the Lagos State Government, is a typical example of what the Bank seeks to achieve in this area,” he said.
While promising to work with the State to create and maintain green parks in chosen locations Okonkwo noted that the bank has successfully executed several beautification projects across the country. Some of these projects included Onikan, Milverton, Dopemu and Matori Roundabouts in Lagos State; RSUT in Rivers State, Rangers Avenue junction in Enugu State, Mbaise Road in Owerri, Imo State, Abia Towers in Umuahia, KrikaSama Roundabout in Maiduguri, Borno State amongst others.
In his keynote address themed, “Lend a Hand to Save Trees”, Governor of Lagos State, Akinwunmi Ambode, noted that planting of trees was crucial for the environment as trees provide oxygen, helps conserve energy, saves water, and prevents erosion among others.
He disclosed that the state plans to plant 10 million trees by 2020. The Governor who was represented by the Secretary to the State Government (SSG), Tunji Bello commended Fidelity for initiating the drive for a greener environment.