The naira hit an all-time low of 409 against the dollar at the parallel market on Thursday, two days after the Central Bank of Nigeria banned nine Deposit Money Banks from the interbank foreign exchange market over their failure to remit $2.334bn to the Federal Government’s Treasury Single Account.
The naira, which closed at 402/dollar on Wednesday, was sold for 397 against the greenback on Tuesday.
Foreign exchange dealers said the demand pressure on the dollar, mounted by summer travelers and parents paying schools fees of their children studying overseas, had been exacerbated by the ban on the nine lenders.
The currency dealers said the local currency fell due to increased demand for the dollar.
The CBN on Wednesday night readmitted the United Bank for Africa Plc into the forex market, leaving eight lenders in its regulatory net.
“The suspension of some banks from transaction in the forex market has really increased pressure on the market,” the President, Association of Bureaux De Change Operators, Aminu Gwadabe, said.
He explained, “Summer travelers abroad and parents seeking to pay the school fees of their children studying abroad at this period are making the demand to be heavy. The banning of nine banks from the forex market has not also helped the matter
At the interbank market, the naira closed at 317.84, lower than 315.93/dollar and 305.5 it recorded on Wednesday and Tuesday respectively.
The naira, which hit a record low since the CBN floated the currency on the official interbank market in June, first touched 400/dollar at the black market this month.
Traders said interbank rates should ease this week when part of July’s budget allocation should enter the banking system.
The Federal Government distributes revenue from crude exports every month among its 36 states, and local and federal administrations.
The chief executive officers of banks met with the CBN on Thursday. The outcome of the meeting could not be known as of the time of filing this report.
Moody’s and Augusto & Co., have affirmed that Heritage Bank’s capitalisation remains sound in relation to its low asset risk model.
They also said it has the capacity to generate income from its core business to settle its obligation as at when due.
According to Moody, under the new methodology, the bank’s credit metrics’ ratings remain consistent with an a3 Baseline Credit Assessment (BCA), when measured against Australia’s macro profile.
The A3 rating comes after the Aaa, Aa1, Aa2, and Aa3 ratings. A rating itself shows that whatever securities rated are “upper-medium grade and are subject to low credit risk.” But the bank has said that its engagement with the rating agencies was part of efforts to furnish investors with objective analyses and independent assessments of its securities, bonds and credit assets, thereby providing superior information on credit risk and other investment instruments.
“The international and local ratings investment metrics is a welcome development to the bank and, in light of this sterling achievement, we swiftly need to improve on our performances in order to boost our subsequent ratings,” a statement from the bank noted.
According to the rating agency, relative to the bank’s asset risk profile, it maintains sound capitalisation when benchmarked against Moody’s new methodology, which confirmed long-term A3 issuer rating and affirmed its short-term issuer rating of Prime-2.
“The bank’s BCA, which encapsulates its stand-alone financial profile, and its adjusted BCA were also confirmed at a3. The outlook for all ratings is stable,” the agency stated.
The new bank rating methodology includes a number of elements that Moody’s developed to help accurately predict bank failures and determine how each creditor class is likely to be treated when a bank fails and enters resolution.
United Bank for Africa Plc yesterday reported profit before tax of N40.270 billion for the half year ended June 30, 2016, showing a marginal increase of 3.1 per cent from N39.046 billion recorded in the corresponding period of 2015. Profit after tax similarly rose from N31.999 billion in 2015 to N32.621 billion, the directors recommended an interim dividend of 20 kobo per share.
An analysis of the results showed the UBA recorded gross earnings of N165.5 billion, indicating a marginal fall from N165.7 billion in 2015. Net interest income stood at N107 billion, down from N14.9 billion, while net impairment charges rose from N2.211 billion to N6.8 billion. Fees and commission income grew from N30.357 billion to N36.936 billion, just as net trading and foreign exchange income improved from N18.217 billion to N19.637 billion.
The bank also recorded a significant growth in total assets, rising 20 per cent to N3.3 trillion, crossing the three trillion naira mark. Following the sterling performance, the bank’s Board recommended the payment of N0.20 interim dividend on every ordinary share of N0.50 each.
Commenting on the results, the Group Managing Director/CEO, UBA Plc, Mr. Kennedy Uzoka, said; “The results have been achieved amidst waning economic fundamentals. We delivered profit in excess of N40 billion and grew balance sheet by 20 per cent, with our on-balance sheet total assets crossing the N3trillion mark. Even as Naira depreciation and inflationary pressure increased the cost of doing business in Nigeria, we leveraged our economics of scale, enhanced operational efficiency and Group shared service structure to moderate our cost-to-income ratio by 90bps.”
UBA achieved several strong positives in its performance for the half year. The bank’s net loan position rose 29 per cent to N1.29 trillion partially boosted by the depreciation in the value of the Naira. UBA also recorded a significant 16 per cent growth in deposits to N2.41 trillion already surpassing the 15 per cent target growth in deposits set at the beginning of the year. “UBA will sustain its culture of keeping a healthy balance sheet, with strong liquidity and capitalisation, as reflected in the liquidity and BASEL II capital adequacy ratios of 45 per cent and 18 per cent respectively,” Uzoka assured.
The Federal Executive Council on Wednesday approved the Medium Term Expenditure Framework and Fiscal Strategy Paper for 2017 to 2019, thus kick-starting the preparation of the 2017 budget.
The approval was given at a meeting of the council presided over by President Muhammadu Buhari.
The Minister of Budget and National Planning, Senator Udo Udoma; the Minister of Industry, Trade and Investment, Mr. Okechukwu Enelamah; and the Special Adviser to the President on Media and Publicity, Mr. Femi Adesina, briefed State House correspondents about the meeting’s outcome.
Udoma gave the highlights of the approved document to include oil price benchmark of $42.50 for 2017; $45 for 2018; and $50 for 2019.
In terms of oil production, he said the government would retain this year’s 2.2 million barrels per day for 2017; 2.3 million barrels per day for 2018; and 2.4 million barrels per day for 2019.
He added that the government was targeting three per cent growth for 2017; 4.26 per cent for 2018; and 4.04 per cent for 2019.
He explained that the growth rate for 2019 would be slightly lower than 2018 because as an election year, 2019 was expected to come with some uncertainties.
The minister said the government would use N290 to $1 as the exchange rate, with the belief that naira would stabilise.
He said, “As you know, the Fiscal Responsibility Act requires the executive to prepare the MTEF and send it to the National Assembly for their consideration and it is on the basis of the MTEF that the next budget will be fashioned.
“So, in short, we started the process of preparing the 2017 budget.
“Before the MTEF was presented to FEC for consideration, there was an extensive consultation with the private sectors, governors and Non-governmental Organisations.
“In the 2017-2019 MTEFF, the government intends to intensify efforts in pursuing manpower-driven economy. So, we intend to intensify effort to diversify the economy; we intend to go on with the implementation of ongoing reforms in public finance; we intend to enhance the environment for ease of business so as to generate private sector and private investment.
“We intend to continue to pursue gender sensitive, pro-poor and inclusive social intervention schemes similar to what we did in 2016. Our social intervention programmes is going to be sustained.”
When asked why a government that planned to diversify would still be benchmarking oil price, the minister said the government needed to use a particular number to plan in terms of revenue from crude oil.
“We have numbers for everything; we have numbers we expect to get from Customs, VAT, independent revenue. So, we have numbers for all the things we expect, but because oil is volatile and is an area that has caused us to be where we are today, we want to assure Nigerians that we are not going back to using high estimates. Even though we sense that prices may be moving towards $60 per barrel in the next year or so, we are still going to use conservative number,” he said.
Answering a question on the performance of the 2016 budget, Udoma said the government had released over N400bn of capital projects.
He said the government was also up to date in terms of the recurrent, saying all salaries had been paid, overheads released and statutory transfers made.
Enelamah said the council also approved the ratification of the World Trade Organisation’s Trade Facilitation Agreement that was approved by all members of the WTO in the ministerial conference that was held in 2013. The agreement sought to lower the cost of trade, he said.
Th minister added, “There was a clear understanding that everybody benefits from lowering the cost of doing trade. It is particularly beneficial to developing countries that want to be able to access the international market.”
LAGOS—A heated blame game, yesterday trailled suspension of nine banks from the foreign exchange market as a result of alleged non remittance of NNPC fund into the Treasury Single Account, TSA. The banks, however, issued statements absorbing themselves of culpability. They stated that NNPC management had been kept in the picture on the funds in their possession.
The NNPC is claiming credit for the suspension, accusing the banks of holding back the funds.
CBN had listed the suspended banks as United Bank for Africa (UBA) $530m; FirstBank of Nigeria (FBN) $469m; Diamond Bank Plc. ($287m); Sterling Bank Plc. ($269m); Skye Bank Plc. ($221m); Fidelity Bank ($209m); Keystone Bank ($139); First City Monument Bank (FCMB) $125m; and
Heritage Bank ($85m). The CBN on its part has said it is not ready to join issues with any of the parties saying it would rather let sleeping dogs lie as the process is an ongoing administrative routine. A CBN official said CBN does not want to join issues with those running to the media. This is an administrative thing; it should not be harped to heat up the market. Every body is trying to defend himself, now who is right and who is wrong. For some of the banks issuing statements ,why did they hold the money back in the first instance? Why we reported non remitted fund to presidency —NNPC The Group General Manager, Public Affairs Division of the NNPC, Mallam Garba Deen Muhammed claiming credit for the suspension of banks from foreign exchange market said that the corporation realised that some money were stashed in the banks which were not remitted to TSA and that was how they quickly alerted the authorities’ concern to take the necessary action. Muhammed said NNPC management discovered the delay and prompted the President on the issue. He said the management of NNPC believes in transparency and due process in the remittance of government funds.
FCMB However, FCMB one of the banks affected by the suspension in a note to its customers yesterday said “the Central Bank of Nigeria announced a temporary suspension of FCMB along with eight other commercial banks from access to the foreign exchange market. This suspension is based on the Treasury Single Account Directive, which stops banks from holding funds on behalf of government entities and instead, effect daily remittances to the CBN. For our bank, this suspension is based on our non-payment/transfer of the remaining $125million NNPC fund with us to TSA. “As a financial institution with strong corporate governance rules, we have always fully disclosed the outstanding TSA funds in our books and have continued to work assiduously to fulfill our outstanding obligations. The members of the NNPC Management Team have been kept fully in the picture on the funds. This scenario is really because of lack of foreign exchange availability and the prevailing fall in oil prices rather than concealment or willful non-compliance by FCMB. It is actually a widespread industry issue.
UBA UBA in a statement yesterday said “The CBN had earlier on Tuesday announced the suspension of 9 banks from all foreign exchange transactions until they remitted into the TSA over $2 billion in variousNNPC/NLNG accounts in the banks as ordered by President Muhammadu Buhari last year”. Further to our press statement of yesterday, “we are pleased to inform our valued customers, stakeholders and business partners as well as the public that the CBN has re-admitted us into the Foreign Exchange Market following our remittance of all NNPC/NLNG dollar deposits. UBA wishes to thank you all for your continued support and patronage”
Diamond Bank Diamond Bank reacting to the suspension reassured its customers of enhanced quality service delivery and commitment to meet its banking obligations despite the announcement by the CBN that nine commercial banks (inclusive of Diamond Bank) have been barred from foreign exchange transactions for alleged infringement on the Treasury Single Account (TSA) directive last year. Meanwhile, the Association of Senior Staff of Bank, Insurance and Financial Institutions, ASSBIFI, yesterday, said the CBN’s ban on nine banks could further weaken the banks and lead to mass sack of workers. The umbrella body for senior workers in the financial sector, contended that though the ban might be necessary, the timing was not right for this present economy. It called for the ban to be lifted and more placid aproach be engaged in settling the matter .In a statement by President of the association, Mr. Sunday Salako, ASSBIFI said: “Research shows that CBN owed Nigerian banks up to $3 billion from unfunded letters of credit (LCs) since last year, i.e. before the TSA regime. This may leave one to wonder if the banks accusation that the CBN is trying to de-stabilise the market holds waters.”
The Nigerian stock market (equity category) depreciated by N438bn between August 24, 2015 and August 24 this year.
The Nigerian Stock Exchange All-Share Index also slid from 29,214.13 basis points to 27,880.46 basis points within the same period.
Data compiled by our correspondent also showed that the volume of transactions, value of transactions and number of deals for 2015 were 257.73 million, N2.775bn and 4,247, respectively; while those for 2016 were 230.29 million, N2.955bn and 3,002, respectively.
Between January and March this year, the equities market depreciated by 10.79 per cent – as of the first day of trading this year (January 4), the NSE market capitalisation stood at N9.757tn, while the ASI was 28,370.32 basis points.
But on the last day of trading in March, the market capitalisation and the ASI crashed to N8.704tn and 25,306.22 basis points, respectively.
Equity investors had in the first seven trading days of the year lost N804bn of their investment value.
A few weeks into the year, the downward trend in the Nigerian stock market prevailed with 10 out of the 12 indices of the NSE turning out negative.
The market capitalisation of the NSE fell by N811bn in the first 10 weeks of the year.
Market capitalisation is the total market value of the shares outstanding of all traded companies on the floor of the Exchange.
It dropped from N9.75tn on January 4, 2016 to N8.939tn 10 weeks into the year, while the ASI also closed at 25,988.40 basis points in the same period from the 28,643.67 basis points recorded on the first trading day of the year.
Meanwhile, as the ongoing economic recession continues to affect the financial market with dire consequences on the income streams of the capital market operators, stockbrokers have set agenda on their options to remain in the business.
Stockbrokers have consistently expressed deep concern that the current operating environment characterised by high interest rate, weak purchasing power, poor corporate earnings, unstable exchange rate, high inflation rate and investor apathy, among others, is fast eroding their dwindling income, fueling speculation that many of them may be pushed completely out of business .
The Managing Director and Chief Executive Officer, Standard Union Securities, Mr. Sehinde Adenagbe, said it would be difficult for stockbrokers to break even under the current climate.
“Overhead cost is rising steadily yet workers are clamouring for higher pay to cope with the high cost of living. Office rent, epileptic power supply and transport costs are of great concern to us and there are other contending issues that are eating into the income of stockbrokers,” he said.
Speaking on the survival strategy, the President and Chairman of Governing Council, Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, advocated personal development on the part of the stockbrokers in order to expand their income streams.
“Recession is a time to take a breath. Invest on knowledge this time and be moderate. Stockbrokers should be multitasking to be relevant on all platforms and Exchanges,” he said.
In the same vein, the Registrar and Chief Executive Officer, CIS, Mr. Adedeji Ajadi, advised stockbrokers to be more creative and ready for diversification in order to remain in business, adding, “This is not the time to limit business opportunities to trading listed securities. What about bonds, unlisted equities and foreign exchange?
“Stockbrokers are also investment advisers. This is the right time to work with governments at various levels as consultants and advisers on how to create alternative sources of revenue, and better manage scarce resources to ride through the challenges of the economy at this time.”
The Managing Director and Chief Executive Officer, Network Capital Limited, Mr. Oluropo Dada, stressed the need for stockbrokers to leverage their wide professional latitude to peep into money market instruments by way of portfolio switching in favour of money market instruments such as Treasury bills.
Access Bank Plc has recorded Profit After Tax (PAT) of N39.5 billion in its Half-year operations, against N31.3 billion posted in the corresponding period in 2015. Specifically, the bank’s unaudited result for the second quarter ended June 30, 2016 showed that the bank’s PAT for the period rose to N39.489 billion, representing a 26.21 per cent growth when compared to N31.287 billion in Q2 2015.Profit before tax (PAT) was up 27.89 per cent to N50.022 billion in half year 2016 from N39.113 billion in Q2 2015.
The bank attributed the improved performance to significant growth in its retail market share, occasioned by its resolve to leverage innovation and technology to create lifestyle products and enhance customer experience.
“This growth has led to significant increase in our transaction volumes and fee-related income. In addition, our cost of funds dropped by 170 bps y/y reduction, reflecting the increase in our low cost funding base.”The bank’s gross earnings for the period under review stood at N174.069 billion in H1 2016, up 3.22 per cent from N168.641 billion in H1 2015.
The directors of the bank are proposed an interim dividend of 25 kobo each payable to shareholders on register of shareholding at the closure date. It added that withholding tax would be deducted at the time of payment. The Group Managing Director/Chief Executive Officer, Herbert Wigwe, said: “Access Bank’s performance continues to be resilient in the face of a challenging macro-economic environment, which has been further exacerbated by double-digit inflation, amidst an untimely devaluation.“Despite these macro uncertainties, we delivered gross earnings of N174 billion, while pre-tax profits grew 28 per cent to N50 billion in the period.”
The results underscore our continued ability to grow sustainably whilst effectively adapting to a challenging operating landscape.“The prevalent macro-economic conditions put a strain on business performance across the industry, with increased concerns about asset quality deterioration.
He pointed out despite these challenges, the bank’s asset quality remained stable, as non-performing loans remained below industry average, in line with its guidance, while capital and liquidity levels were also sustained above regulatory limits.
“During the period, we grew our retail market share, leveraging innovation and technology to create lifestyle products and enhance customer experience. This growth has led to significant increase in our transaction volumes and fee-related income. In addition, our cost of funds dropped by 170 bps reduction, reflecting the increase in our low cost funding base.”
Furthermore, the bank explained that operating cost remained stable due to its cost management initiative assuring that optimising operational efficiency would remain an imperative for the second half of the year.
“We believe that macro conditions will remain challenging. Nonetheless, our priority in the coming months will be to strengthen our position in the industry; increasing focus on risk and operational efficiency, with customer-centricity at the heart of our strategy.”
The capital market provides an array of opportunities for the youths to develop entrepreneurship spirit, the Chartered Institute of Stockbrokers has said.
The position of the CIS was contained in an address presented to Economics students of Wesley University of Technology, Ondo, during the school’s career day at the school campus recently.
The institute’s Head, Education and Training, Mr. Chukwudi Nga, who made the address, explained that the financial market comprises the capital market and money market, adding that the capital market which is the medium and long term end of financial market, remained opened for young entrepreneurs.
Nga stated that the CIS occupied a critical platform for training of manpower through various levels of professional platforms, of which the latest is the newly introduced Diploma in Security and Investment.
He advised the Economics students to take advantage of the Institute’s Diploma Programme in Securities and Investment to become employable in the financial market.
He explained that the new programme had been specifically packaged to create a robust and seamless opportunity for the young and talented youths to make a life-long career in the financial market.
He advised the students to take advantage of the flexibility and frequency of the Diploma Programme to make careers in the financial market.
Speaking on the activities in the capital market, Nga explained that the market provided a platform through which individuals could do capital formation while companies and governments at various tiers could mobilise medium and long term funds.
He stated that the cardinal role of the market was to mobilise funds from the surplus economic unit and channel it to the deficit one and that every economy requires a vibrant capital market.
The Securities and Exchange Commission has proposed that companies and registrars in custody of dividends, which remain unclaimed by shareholders 12 years after the date of declaration or subsequently attain the 12 years threshold shall upon the coming into effect of the new rule transfer such monies into the Nigerian Capital Market Development Fund.
The Commission, on its website on Tuesday, said the move was in pursuant to the provisions of Section 313(1)(n) of the Investments and Securities Act 2007.
The notice read in parts, “All companies and registrars shall not later than 30 days after the end of every calendar year forward to the Commission a report of unclaimed dividends in their custody, which shall specify compliance with sub rule (1) of this rule.
“Companies shall disclose details of compliance with this Rule in their annual reports.
“All comments and input should be forwarded to the Secretariat, Rules Committee of the Commission, via, firstname.lastname@example.org or through the Director General, SEC, not later than two weeks from the date of publication.”
SEC recently issued a directive mandating registrars operating in the Nigerian capital market to end issuance of electronic dividend warrant to investors by June 31, 2017.
Condemns hike of MPR by 200 bps, fiscal indiscipline
To fasten recovery of the Nigerian economy, renowned economist, Dr. Biodun Adedipe, has suggested that individuals and corporate entities in the country turnsed inward for development strategy design and funding initiated by locals, to overcome the boom-bust cycle, saying that it is what the 56-years historical performance and the trajectory demands.
Adedipe who spoke on the theme: “Challenges in the Nigerian Economy: Change and the Anti-Corruption Fight” at the 2016 Nigerian Institute of Management (NIM) Members week, Ikeja Chapter, explained that by discarding redundant assets, getting everybody involved in cost savings strategies, joining the fight against corruption as well as restrategising on the population and its distribution spatially, socially and age-wise, the economy could be prepared for recovery and normalisation.
“Business is about buying and selling, there a few questions to ask as pointers; what were Nigerians buying up until end-July 2016? What are they buying now? What will they be buying going forward? Are there demographic patterns in what they buy? Are there differences in public and private consumption? What determines what they buy, how and where they buy? And how can we produce or buy and sell profitably in the evolving environment?”
He told the gathering that nothing remarkable happens until someone has paid the price for it;”If you want to see real change in your company’s performance, you and your people MUST PAY the price. An economic outlook is based on two premises; the structure and trajectory of the key sectors and the direction of government policy. My expectations for the rest of 2016 include; GDP growth rate of 0.54percent caused by delayed implementation of budget, interest rates at double digits, Inflation rate will remain double digit and exchange rate will remain top N320/US$. Slight Improvement in power supply, renewed road infrastructure development and the revival of rail transportation and start of privatization of viable airports”, he stated. Fadipe recalled that the economy started slowing down in Q3 2014 and began to shrink in Q1 2016 noting that apart from dampened GDP growth rate, real income was on the decline as inflation was rising, unemployment rate was rising, industrial production declined, wholesale/retail trade slowed and capital importation has dropped significantly, blaming the thwarting of high expectation for early recovery in 2016 on the National Assembly delayed processing of the reflationary Budget.
On global economic trends, he said Brexit yes-vote has increased uncertainty that compounds the already weakening global economy; at a time the Nigerian economy was struggling with its own peculiar risks. He explained:” The International Monetary Fund (IMF) in July 2016 projected the Nigerian economy to contract by 1.8percent this year due to: Foreign currency shortages following lower oil receipts. Low power generations and weakened investor confidence. There are uncertainties and geopolitical tensions all around the world, and there is a lot of experimentation in policy formulation and sequencing.”
On policy rates of most central banks aimed to stimulate growth, he revealed that out of the 28 OECD/G20 countries only seven which include; Argentina (13percent), Brazil (14.25percent), Chile (3.5percent), Iceland (5.75percent), Mexico (3.25percent), South Africa (6.75percent), and USA (0.5percent) raised their policy rates from 2009 till date adding that among the 76 countries surveyed, only 12 countries (including Nigeria) have policy rates in the double digits. “It is thus spurious to argue that central banks have no business with economic stimulation, and the CBN has done well towing this global, sensible line. The CBN has however, raised MPR by 200 bps, contrary to all rational expectations during a recession.” He stated that the economy is troubled for several reasons, and the signs began to show since early 2013 with the following indicators; economy is diversified by GDP contributions, but over dependent on hydrocarbons for foreign earnings and government revenue, threatened source of foreign earnings (77percent) and government revenue (74percent).
In addition, he listed other indicators to include; bloated government recurrent expenditure, high unemployment rate (12.1percent) and 19.1percent underemployment), dominated by youth (42.4percent). Low, but stable external reserves ($25.78b), high cost of doing business and high cost of living and (inflation at 16.48percent in June 2016).