The suspension of the usage of naira payment cards to withdraw foreign currencies abroad and for online transactions has created problems for Nigerians, who are looking up to their banks for solutions, OYETUNJI ABIOYE writes
In the last three weeks, Deposit Money Banks have recorded an unprecedented surge in new domiciliary account holders, it has been learnt.
Top bank executives told our correspondent that following the suspension of foreign currencies’ withdrawals via Automated Teller Machines abroad using naira debit cards, the DMBs had recorded a sharp increase in the number of customers coming forward to open domiciliary accounts.
The banks had about three weeks ago stopped their customers from using naira debit cards to withdraw foreign currencies via the ATMs in foreign countries, especially European nations, the United States and Canada.
While majority of them also stopped online transactions dominated in foreign currencies and usage of the cards on Point of Sale terminals overseas, a few limited the PoS and online transactions to just $100 per customer in a month.
The decision by the banks followed the acute dollar shortage ravaging the economy, a situation that has made it difficult for Nigerian lenders to settle their counterparts abroad transactions arising from use of the ATMs and PoS machines abroad, as well as online transactions that are denominated in foreign currencies.
Following this development, top bankers told our correspondent that the rate at which the DMBs were recording requests for new domiciliary account openings was alarming.
In order to be able to carry out transactions in foreign currencies, they said many bank customers were now opening domiciliary accounts, which were also being accompanied with applications for dollar debit cards.
“It has been alarming in the last two to three weeks; there are days we record over 200 fresh applications for domiciliary account opening and dollar debit cards,” a top official of a tier-1 bank told our correspondent on condition of anonymity.
Aside from new customers applying to open domiciliary accounts and get dollar debit cards, bankers told our correspondent that they had recorded a sharp increase in the number of existing domiciliary account holders who were now applying for dollar debit cards to enable them to carry out transactions denominated in foreign currencies.
The DMBs had on October 14 announced the suspension of the use of their naira debit and credit cards in foreign countries, citing the acute dollar scarcity in Nigeria as the reason.
Stanbic IBTC Bank, Standard Chartered Bank Nigeria and Guaranty Trust Bank, while making the announcement, advised their customers to apply for dollar or pound sterling cards to enable them to do foreign exchange denominated transactions.
The decision by the banks has made thousands of United Kingdom and Canadian visa applicants and intending travellers wanting to book hotels online to be stranded.
Many of them have had to rely on travel agents, who use their partners abroad, to make payment for visa fees and hotel bookings.
Reacting to the development, the Chairman, Committee of e-Banking Industry Heads, the umbrella body for heads of electronic banking and payment cards in all the commercial banks in Nigeria, Mr. Dele Adeyinka, said until the dollar situation in the country improved, the banks would find it difficult to increase the limit for online and the PoS transactions, or lift the ban on the ATM withdrawal abroad.
He said, “For cards, we also considered that if we allow our customers to continue to go outside the country to use these cards, it will naturally get to a state that will further reduce our FX position as a country. This is because those other countries will need to be settled and they will not be settled in our national currency; they will be settled in foreign currencies (dollars or pounds).
“Of course, if anything is going to affect our country, it is in our interest as a country to put it on hold. We are not stopping it outright, we are only saying let us put a limit to the number of what our consumers can use for transactions outside the country.
“So, it is a temporary restrictive measure. It is hurting not just the consumers, it is hurting the practitioners, all of us; but it is a temporary pain we all have to bear now in the interest of our nation. Once we clear this hurdle and have enough FX reserves to be able to settle our bills, the cards will continue to work.”
The former Chairman, CeBIH, Mr. Tunde Kuponiyi, who is also the Group Head, Cards and e-Banking, Ecobank Nigeria, said most banks were no longer funding naira debit cards due to the scarcity of dollars.
As a result, he said most customers having obligations to settle in foreign exchange were applying for dollar debit cards.
According to industry experts, the development will lead to a marginal increase in the number of payment cards (debit and credit cards) in circulation in Nigeria.
Currently, industry data indicate that there are about 40 million payment cards in circulation in the country.
Unconfirmed banking sources said international payment card technology companies operating in the country, Visa Incorporated and MasterCard Incorporated, might record a sharp decline in their revenue from Nigeria following the naira payment card crisis.
It was learnt that the drop in the payment card usage abroad by Nigerian bank customers would have negative impact on the companies’ revenue.
Meanwhile, it was learnt that some Nigerians who travelled overseas without obtaining dollar debit cards had challenges making payments.
Findings by our correspondent revealed that the travellers were calling their banks from overseas, asking to know why they could not make payments with their cards via the Point of Sale terminals.
For some banks, which only limited their online and the PoS transactions, it was gathered that customers were calling from overseas to query why they could not make transactions above $100.
Many of them, it was learnt, were disappointed to be told that they had exceeded the $100 monthly limit permitted by the banks.
The ban and limit imposed on the usage of the payment cards overseas by Nigerian banks, experts said, would continue to dominate the banking space for the next few months.
Moody’s Investors Services has assigned national scale ratings to six Nigerian banks.
The lenders are: Guaranty Trust Bank Plc, Zenith Bank Plc, Access Bank Plc, Sterling Bank Plc, United Bank for Africa Plc, First Bank of Nigeria Limited and the Bank of Industry.
According to a statement by Moody’s, the rating action follows the publication of new national scale rating maps for Nigeria, Kenya and Morocco which provide a measure of relative creditworthiness within a single country; and are derived from global scale ratings using country-specific maps.
The global rating agency assigned A1.ng/NG-1 national scale local currency deposit ratings to Sterling Bank.
Sterling Bank also confirmed this in a statement on Sunday.
Moody’s said, “These ratings were underpinned by a standalone baseline credit assessment of b3 and one notch of government support uplift, which results in a global scale long-term issuer and deposit rating of B2.”
The agency also assigned A2.ng/NG-1 national scale foreign currency deposit ratings to Sterling Bank, the lender confirmed in the statement.
“The A1.ng rating is the second highest of three national scale ratings categories corresponding to the bank’s local currency deposit global scale ratings,” it added.
Commenting on the development, the Executive Director, Finance and Strategy, Sterling Bank, Mr. Abubakar Suleiman, was quoted as saying that the ratings affirmed the lender’s business model and resilience amidst challenging operating conditions.
The European Union (EU) wednesday disclosed that it had committed a total of €700 million grant to support Nigeria’s power sector between 2014 and 2020.
The Ambassador/Head of Delegation of the EU to Nigeria and the Economic Community of West African States (ECOWAS), Mr. Michel Arrion, disclosed this at a media briefing in Lagos, ahead of the fifth EU-Nigeria Business Forum (EUNBF) schedule to hold in Lagos next week.
Arrion said between 2008 and 2013, under a programme he termed the 10th European Development Fund, the global envelop of grant earmarked by the EU for Nigeria between 2008 and 2013 was about €750 million.
But he explained that for the period, 2014 and 2020, the amount for Nigeria was reduced to about €512 million, adding that an additional financial instruments of about €200 million was also created.
He said the fund was expected to help improve power situation in Nigeria. “So, on the average, you can consider that we are spending €700 million in the period in six years. So, we are talking about €100 million per year. Energy is really a perquisite for any kind of development. You cannot develop health without energy; you cannot develop water and sanitation with energy. You cannot develop infrastructure in general, and of course it is also going to affect your trade.
“We believe that lack of energy is probably the major hurdle to the economic development of Nigeria and that is certainly a sector where the EU would intervene efficiently in Nigeria in the coming years. But EU alone would not be able to fix the problems in the energy sector in Nigeria.
“It is primarily for Nigeria to fix the country’s problems. But we can support the authorities. We believe that it is not only the public sector that can fix the problem, what we need is more private investments and more partnership between public and private companies. The missing element to fixing the problems in the energy sector is obviously the access to finance,” the EU official said.
According to Arrion, the EUNBF, would also focus on the diversification of the economy. He stressed that Nigeria’s comparative advantage is in the agriculture sector.
“As you know, Nigerian farmers are producing a lot of agricultural products. But a lot of that is just subsistence farming, nothing is processed, nothing is transformed and no added value in the process. So, we believe a lot of diversification needs to take place, of course not taking away subsistence farming,” he added.
Responding to a question on the outcomes of the previous EUNBF, he said at previous discussions, it was a general consensus that Nigeria has great potential.
“But what is really missing is good governance and good management. Nigeria has enough land, enough labour to produce to substitute importation. But bureaucracy, bad governance are preventing people from doing more. The establishment of the Presidential Committee of the Ease of Doing Business by Nigeria is a very good thing.
“It is good to create a committee, but there have to be practical recommendations. If you need 14 stamps to have access to land, you will never want to invest in Edo or Ondo states to produce more Palm oil. I know those people, they are European investors, they would rather go to Cameroun or Liberia.
“Today, they are investing in Cote d’Ivoire. Why are they investing in Cote d’Ivoire and not in Nigeria? Perhaps the Ease of Doing Business in that country is a bit better than Nigeria. Nigeria is just one country in the world, so if you want to attract foreign investors, you have to be better,” he added.
Arrion was joined at the briefing by the EU Head of Trade and Economics Section, Filippo Amato.
The African Development Bank’s Board of Directors on Wednesday approved a $600m loan for Nigeria, several months after the Federal Government had approached the lender for a budget-support facility.
The loan is meant to help Nigeria plug its budget deficit as the nation grapples with its first recession in more than 20 years.
The $600m loan is the first tranche of a total $1bn budget support package, according to a Reuters report quoting a senior bank official.
The second disbursement of $400m would be dependent upon the implementation of reforms and expected early next year, the bank’s Nigeria country director Ousmane Dore, said
The President, AfDB, Dr. Akinwunmi Adesina, had on September 26 said the bank was working on giving Nigeria loan facilities of $4.1bn between now and next year for critical sectors of the economy.
The loans include $1bn at a concessionary interest rate of 1.2 per cent for Nigeria to address the 2016 budget deficit and aid her economic recovery.
Adesina said this after a meeting with Vice-President Yemi Osinbajo and other members of the Economic Management Team at the Presidential Villa, Abuja.
According to the AfDB president, the package includes $1bn in budget support; $300m to create jobs for 185,000 youths; $250m towards infrastructure development in the North-East; $1m grant to deal with challenges of Internally Displaced Persons; $300m for infrastructure development around Abuja, and $200m for the Transmission Company of Nigeria to improve its facilities, among others.
Stressing that Nigeria was the largest shareholder in the bank, Adesina said that the bank was in the country to offer its support in the face of the current tough times.
He said, “I think the times are difficult but I want to commend the government for being bold in taking the right decisions.”
I think that the fact that the price of crude oil has gone down is a big challenge, because you have 98 per cent external forex revenue coming from the sector.
“So, it has created calibrations; I’m not going to go into the details of all the problems, but what is important is what we are going to do about it.
The Nigerian National Petroleum Corporation recorded a total loss of N127.73bn between January and August this year, its latest group financial report released on Wednesday showed.
The report for the month of August, however, indicated that the national oil firm reduced its losses to N11.22bn in the month compared to the N24.18bn recorded in July.
It further revealed that pipeline vandalism in the country was reducing following the Federal Government and the NNPC’s sustained engagements with the Niger Delta militants.
“In August 2016, there was 28.94 per cent drop in the number of pipeline vandalised points relative to July 2016; that is, from 311 vandalised points in July to 221 in August 2016,” the report stated.
It added that the largest single loss of N76.33bn came from the corporation’s headquarters during the eight-month period, adding that the total loss by the country’s refineries during the same period was N48.69bn.
The report showed that from January to August, the NNPC recorded a total expense of N1.14tn, against a total revenue of N1.02tn.
On the improvement in August, the corporation explained that it was largely due to the increase in Pipelines and Products Marketing Company’s coastal sales and the significant improvement in the Nigerian Petroleum Development Company’s revenue for the month.
It noted that the average crude oil spot price stood at $44.87 barrel per day in August, up from $44.13bpd in the preceding month, and down from $45.69bpd a year ago.
This, it said, represented an increase of 1.68 per cent from the previous month and a decrease of 1. 75 per cent from a year ago.
The NNPC said in July, crude oil production stood at 1.65 million barrels per day, adding that this was a 6.47 per cent decrease relative to June and 22.43 per cent lower than the July 2015 performance.
“The shrinkage in the July production is due to subsisting force majeure at the Forcados terminal, which accounts for 300,000bpd. Other factors that negatively impacted on production include the force majeure at the Que Iboe terminal following sabotage on the export loading line 2, sabotage of the Trans Niger Pipeline, Claugh Creek-Tebidaba pipeline and Escravos terminal delivery pipelines,” the corporation said.
It stated that production from the deep water assets, which are beyond easy reach by militants, remained steady.
Despite the country’s raging economic downturn precipitated by the free-fall in global oil prices, Fidelity Bank Plc, one of the country’s highly diversified financial institutions recorded gross earnings of N110.3 billion in its unaudited financial results for nine months ended September 30, 2016.
The bank’s gross earnings rose to N110.3 billion from N107 billion, representing a growth of 3.0 percent. This result is contained in a statement issued by the bank and made available in Lagos yesterday. Fidelity also said that it grew its deposit base by 3.4 percent to N795.6 billion from N769.6 billion in 2015 Financial Year (FY). According to the lender, the devaluation of the Naira accounted for N53.6 billion of its deposit growth.
Commenting on the financial results, the Managing Director/Chief Executive Officer of the bank, Nnamdi Okonkwo, pointed out that the bank’s performance was indeed reflective of the recessionary environment characterised by lower government revenues, rising inflation, lower consumer disposable income, significantly tougher operating environment in all sectors and the impact of these headwinds on asset quality and foreign trade transactions. According to the Fidelity boss, “We continued with the disciplined execution of our medium term strategy and recorded decent growth on some key operational metrics while moderating the impact of the headwinds above on other financial indices.”
The unaudited financial statement also stated that Profit before Tax (PBT) decreased by 28.7 percent to N9.8 billion from N13.8 billion in the period under review. Giving cogent explanations for the relatively poor performance in this regard, the Fidelity helmsman noted that PBT declined largely due to “a 102.0 percent Year-on-Year (YoY) growth in impairment charge (N4.0bn) driven significantly by increased provisions made in the second quarter (Q2) and third quarter (Q3) of 2016 (N4.1 billion and N3.2 billion respectively) due to the impact of the devaluation of the local currency (naira) on our trade finance portfolio and some critical sectors affected by the weaker macroeconomic indices.”
He further added that a 95.7 percent YoY (N1.3bn) decline in dividend income on equity investments as well as a 8.9 percent YoY growth in operating expense were also responsible for the decline in profit. According to him, growth in operating expenses was driven essentially by increased technology and advert costs. On a Quarter-on-Quarter (QoQ) basis, he stated that gross earnings grew by 10.7 percent to N39.9bn driven by a 22.6 percent growth in Interest Income. “The Interest Income growth was largely driven by 25.6 percent (N5.4bn) growth in Interest Income on Loans while Interest Income on Liquid Assets increased by 13.5 percent (N0.9 billion) for the quarter,” Okonkwo said.
On a QoQ basis, the report stated that NIM increased to 7.0 percent from 6.5 percent in H1 2016 as the increase in the bank’s average yield on earning assets (0.8 percent) outpaced the growth of its funding cost (0.4 percent). “The increased yields on earning assets were driven by the re-pricing of the loan book and higher yields on liquid assets. Deposits grew by 3.4 percent (N26.0bn) from Dec 2015…,” he explained. Low cost deposits, according to Okonkwo currently accounts for 78.4 percent of total deposits, adding that savings deposits grew by 20.4 percent from December 2015 as the bank continued to implement its retail banking strategy which is being driven by its electronic products and channels.
“We have crossed the half a million customer base on subscribers to our flagship Instant Banking product:*770# (Mobile Phone USSD Technology) and we will be launching payment services to merchants using our Instant Banking product (*770#) in Q4, 2016,” Okonkwo disclosed. Risk assets grew by 26.1 percent (N150.8bn) from Dec 2015 with the devaluation of the naira accounting for 20.4 percent (N118.2bn) of our loan growth. Foreign currency loans now constitute 45.3 percent of total loans up from 40.4 percent in Dec 2015 due to the currency devaluation. The organic loan growth of 5.6 percent was principally driven by on-lending facilities to the public sector. Cost of risk increased to 1.5 percent in 9M 2016 due to the N7.2bn impairment charge taken in Q2 and Q3 2016.
“We have continued to take a very prudent view of the impact of the currency devaluation, tougher operating environment and declining consumer disposable income on selected sectors of our loan portfolio. “NPL ratio increased to 4.5 percent largely due the macro-economic weakness which has negatively impacted on our asset quality metrics. “We are still focused on keeping our NPL ratio below 5.0 percent in this very challenging operating environment. Our other regulatory ratios (Liquidity Ratio/CAR) remained above the set thresholds, though Capital Adequacy Ratio improved from 16.4 percent in Q2 2016 to 16.8 percent in Q3, 2016, we expect CAR to revert to 18 percent+ once we adjust for the excess non-distributable reserves (N23bn) in our 2016FY audited accounts.”
The bank’s key objectives for the 2016 Financial Year (FY) remains: redesigning its systems and processes to enhance service delivery, cost optimisation initiatives to moderate expenses in a rising inflation environment, proactive risk management, increased customer adoption/migration to our digital platforms and increasing our retail banking market share.”
Shareholders of Wapic Insurance Plc should expect improved returns in the current year, going by the performance of the company for the nine months ended September 30, 2016. The insurance firm announced gross written premiums of N6.406 billion, up by 13 per cent from N5.673 billion in the corresponding period of 2015.
Net underwriting income improved by 12 per cent to N3.676 billion, from N3.268 billion, while total underwriting expenses rose by 56 per cent to N1.953 billion to N3.050 billion. Net investment and other income soared by 121 per cent from N1.488 billion to N3.282 billion, while profit before tax jumped by 1,293 per cent from N108 million to N1.508 billion in 2016.
Commenting on the results Managing Director of Wapic Insurance Plc, Yinka Adekoya, said: “Despite the macro-economic headwinds constraining growth in Nigeria and the policy challenges within both Nigeria and Ghana, we recorded N6.4 billion in Q3 2016 group gross premiums, a 13 per cent growth from Q3 2015. Our pre-tax profits also soared by 1293 per cent over the corresponding period of 2015.
We remain focused on deepening our retail distribution, improving operational efficiencies and projecting the Wapic brand in order to achieve our stated goal of regional leadership in the insurance sector.”
Giving more highlights of the company’s performance during the review period, he said the N2.1 billion paid out in claims, a 111 per cent increase in payout experience as against Q3 2015. He added that the company got AM Best financial strength rating (FSR) of B- and issuer credit rating (ICR) of bb-, while it established a global depositary receipts(GDR) programme with Bank of New York Mellon as depositary bank, offering enhanced access to global capital markets and a measure of currency stability for shareholders.
Meanwhile, the equities market rebounded yesterday with the Nigerian Stock Exchange (NSE) All Share Index (ASI) gaining 0.12 per cent to close at 27,252.48. Similarly, market capitalisation added N11.1 billion to close at N9.4 trillion.
Performance in the market was mainly driven by bargain hunting in Tier-1 banks – Guaranty Trust Bank Plc (+1.3 per cent) and Zenith Bank Plc (+0.8 per cent). The performance was also bolstered by strong buy sentiment in Okomu Oil Palm Plc following investors’ reactions to its impressive nine months results.
Access Bank Plc plans to use part of a $300 million eurobond it issued last month to help repay an existing eurobond due to mature next year, the bank said on Tuesday.
The lender issued the five-year paper with a 10.5 percent coupon last month in the face of dollar shortages owing to oil price slump which has pushed the economy into its first recession in 25 years.
Reuters quoted the CEO of Access Bank, Herbert Wigwe to have said the “essence of the eurobond was to make sure that we have enough buffer and to refinance our current one maturing,” he said, adding that the bank would also increase dollar lending to businesses generating hard currency.
“On the pricing alone 10.5 percent looks high but if you put it in context of the background of dollar shortages then you will see that it was successful,” he told analysts on a call. In addition to last month’s issue, Access has a $350 million 7.25 percent bond maturing in July 2017 another $400 million with a coupon of 9.25 percent due in 2021. Wigwe said the bank was confident it would meet all obligations.
Foreign correspondent banks to Nigerian lenders have been worried this year about a risk of default on their trade lines due to dollar shortages in Nigeria and as the central bank rationed its own hard currency to save its dwindling reserves.
The Manufacturing Purchasing Manager’s Index (PMI) stood at 44.1 index points in October 2016, compared with the 42.5 recorded the preceding month.
The Central Bank of Nigeria (CBN), which disclosed this in the PMI report for October posted on its website yesterday, said the current position of the PMI indicated a slowing decline in the manufacturing sector during the review period.
According to the report, 14 of the 16 sub-sectors surveyed recorded declines in the review month in the following order: electrical equipment; primary metal; fabricated metal products; petroleum & coal products; transportation equipment; computer & electronic products; printing & related support activities; nonmetallic mineral products; plastics & rubber products; furniture & related products; paper products; textile, apparel, leather & footwear; cement and chemical & pharmaceutical products. The remaining two sub-sectors grew in the order: appliances & components and food, beverage & tobacco products.
Also, it showed that at 42.3 index points, the production level index for manufacturing sector declined for the 10th consecutive month, but at a slower rate than the index recorded in September 2016. In the same vein, 13 manufacturing sub-sectors recorded declining production level during the review month in the following order: transportation equipment; petroleum & coal products; electrical equipment; primary metal; computer & electronic products; fabricated metal products; plastics & rubber products; furniture & related products; nonmetallic mineral products; printing & related support activities; paper products; textile, apparel, leather & footwear and chemical & pharmaceutical products.
The appliances & components and cement sub-sectors remained unchanged, while the food, beverage & tobacco products sub-sector grew in the review period.
Meanwhile, the naira appreciated to N465 to the dollar on the parallel market as was predicted last week. But on the interbank FX market, the spot rate of the naira closed at N304.75 to the dollar.
The stock market (equities category) appreciated by N11bn as 18 stocks recorded gains amid 16 laggards.
A total of 187.602 million shares valued at N1.312bn were traded in 3,065 deals.
The Nigerian Stock Exchange market capitalisation rose to N9.36tn from N9.349tn, while the NSE All-Share Index closed at 27,252.48 basis points from 27,220.09 basis points.
The NSE ASI advanced by 0.12 per cent, bringing the year-to-date return to 4.85 per cent (negarive). However, volume traded and market turnover declined by 14.69 per cent and 30.08 per cent, respectively.
Topping the gainers’ chart was Eterna Plc, which appreciated by 9.96 per cent to close at N3.09. The counter was trailed by Okomu Oil Palm Plc, which rose by 9.18 per cent; Redstar Express Plc gained five per cent; Unity Bank Plc appreciated by 4.76 per cent, and Learn Africa Plc posted a 4.29 per cent gain.
On the other hand, UAC Property Development Company Plc led the decliners’ chart, depreciating by 4.92 per cent to close at N3.09. Union Bank of Nigeria Plc, Oando Plc, International Breweries Plc and Sterling Bank Plc recorded 4.87 per cent, 4.86 per cent, 4.62 per cent and 4.44 per cent losses, respectively.
Market performance measured by the NSE sector indices showed that the banking, insurance and food and beverages sectors indices appreciated by 0.39 per cent, 0.11 per cent and 0.03 per cent accordingly, while the oil and gas sector index declined by 0.46 per cent.
“We attribute Tuesday’s positive mood to investors’ reactions to the impressive results released after the close of trading on Monday. We expect this mood to be short-lived in the absence of any positive news inflow,” analysts at Meristem Securities Limited said in a post.
In a related development, the Central Bank of Nigeria conducted an Open Market Operation auction on Tuesday, selling N4bn and N47bn on the 198-day and 345-day bills at respective stop rates of 18 per cent and 18.5 per cent (effective yields: 19.95 per cent and 22.42 per cent).
Despite this, the interbank call rate moderated slightly to 14.50 per cent (previous: 15.50 per cent). At the foreign exchange interbank market, the naira appreciated N4.06 against the dollar to close at N304.75 at the spot market whilst the one year forward rate remained unchanged at N348.14.
Trading in the Treasury bills market remained mixed (albeit with a slightly bullish bias) as yields moderated four basis points on the average.
Analysts at Vetiva Capital Management said, “Considering trading has been tepid so far this week (particularly in the bond space) amid the CBN’s liquidity mop up stance, we expect very cautious trading session ahead of the result of the monthly Primary Market Auction scheduled for Wednesday (today).”
