Financial and investment experts have said listed Nigerian banks are trading at huge discount relative to their emerging counterparts. The economic and financial headwinds in the country affected the performance of some banks for the 2015 financial year and six months to June30, 2016.
But in their Its Banking Industry Report, FSDH Research said out of the 13 banks analysed based on their audited 2015 results, 10 have upside potential for equity investors.
THISDAY checks showed that most of the banks are trading significantly below their opening prices. Apart from Access Bank Plc, GTBank Plc, Zenith Bank Plc, United Bank for Africa Plc, Stanbic IBTC Bank, the rest banks are trading below their opening prices.
For instance, Diamond Bank is 44 per cent lower that its opening price, ETI (33 per cent); Fidelity Bank (37 per cent); Sterling Bank (42 per cent); Union Bank (23 per cent); Unity Bank (33 per cent); Wema Bank (37 per cent); FCMB (31 per cent); FBN Holding (39 per cent).
But FSDH Research said: ”Our analysis of the Nigerian banks listed on the floors of the NSE shows that they are trading at huge discount relative to their emerging market counterparts. We analysed 13 banks based on their latest audited financial results as at December 2015 and adjusted for half year, 2016. Our valuation results show that 10 banks have upside potential for equity investors. We placed a hold rating on one bank and sell ratings on two banks.”
The experts said despite the recent challenges, there are huge banking opportunities in the Nigerian economy.
“Nigerian banks need to develop more constructive strategies to increase their share of the non-oil sector in their loan portfolios. We recognise that the current foreign exchange shortage in the country is a major problem facing the manufacturing and trading, sectors. However, lending to sectors that have local and export contents may be viable alternatives,” they said.
In their analysis of the banking sector, FSDH Research said as at December 2015, the total assets of the banking industry in Nigeria stood at N27.04 trillion, a decrease of 1.77 per cent from N27.53 trillion as at December 2014.
“The bank with the largest assets remains FBN Holdings with total assets of N4.17 trillion accounting for 15.41 per cent of the industry total assets. This was followed by Zenith Bank with total assets of N4.01 trillion and accounted for about 14.82 per cent of the industry size,” they said.
According to them, the five largest banks by assets size, FBN Holdings, Zenith Bank, UBA, Access Bank and GT Bank accounted for 59.33 per cent of the industry total assets size. The largest contributor to the industry total assets was loan and advances which stood at N12.56 trillion and accounted for 46.45 per cent of the total assets. The total customer deposits liabilities which represent depositors’ confidence in the banking industry stood at N18.07 trillion as at December 31, 2015.
In line with its determination to revive the Nigerian economy, the federal government yesterday revealed that the Development Bank of Nigeria (DBN), a financial institution that would bridge the gap between the Bank of Industry (BoI) and other commercial banks as well as meet the funding needs of the micro, small medium enterprises (MSME) would soon become operational.
In fact, the recruitment exercise for the DBN has been finalised and a total of $1.3 billion would soon be released for the take-off of the institution.
The Minister of Finance, Mrs. Kemi Adeosun, disclosed this while speaking to journalists in Washington D.C, on the outcome of the International Monetary Fund (IMF)/World Bank annual meetings, said agreement on the DBN was reached at the meetings.
This is just as the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele who was also at the briefing, assured Nigerians that the central bank would continue to look at how to fine-tune the flexible exchange rate regime so as to ensure exchange rate convergence.
The DBN is being supported by the World Bank and the European Investment Bank.
However, checks by THISDAY yesterday showed that a website has already been created for the institution, which is expected to go live soon.
“Agreement was also reached on the final steps for the take off of the Development Bank of Nigeria which had been stopped due to some issues, we have resolved all those issues, the recruitment process has now been finalised with management team put in place and this will release $1.3 billion which is aimed at supporting our SMEs and SMEs are part of the engine that will spur the growth of our economy, SME lending at low rates will now be facilitated through the DBN and we are ready to resolve the outstanding issues,” she said.
She also disclosed that the Nigerian delegation at the meetings met with the three biggest rating agencies – Fitch, Standard & Poor’s (S&P) and Moody’s in order to update them on developments in the Nigerian economy.
“We met with the rating agencies. As you know they recently had some rating actions on Nigeria. We met with Moody, Fitch and S&P had interactive session with them updated on our economic plans and giving them the picture of what we are doing, overall , it was very positive engagement we have some takeaway and we remain very confident that that the strategy we are pursuing will result in some quick recovery to the Nigerian economy.
“We had validation of our economic strategy. That is, our strategy to transform Nigeria from consumption driven to and investment driven model and while in the short term, there has been some pain and some dislocation, the long term economic outlook for Nigeria remains confident.
“We had a number of specific bilateral meetings with UK Department for International Development, the US treasury and other partners,” she revealed.
Furthermore, the finance minister disclosed that based on the federal government’s commitment to reverse the trend of illicit financial flows which had seen significant money flow out of Nigeria, some high level agreements on a number of initiatives, which she declined to disclose, were reached at the meeting.
Adeosun explained: “This, we believe can bring significant repatriation of money into the Nigerian economy, particularly money that has flown out as a result of tax evasion. And we would be briefing Mr president on specifics and I would be able to provide you with more detailed information when I have Mr President’s final and formal approval.
“The key attainments from this trip – we met with the World Bank and the country team as a group and one of the discussions was that there was an unacceptable low level of disbursement of funds on Nigerian projects.
“Indeed, the rate is 13 per cent at the moment which is unacceptably low. We agreed on a number of measures to reverse this, and these include, we would review process of originating projects, project designs and implementation issues to understand why certain projects are performing at such a low rate. We would consider restructuring, reallocating or even canceling irredeemable project components. We would strengthen our implementation capacity including our capacity for monitoring and evaluation.
Continuing, she said: “We would have regular monthly meetings now with the World Bank Group and there would be regular briefings of Federal Executive Council and the National Economic Council on the performance of Nigeria’s portfolios. And that’s because some of these projects are at state governments’ level.
“So its very important to bring to the attention of the governors failing World Bank projects in their states so that we can actually access this money which ofcourse is concessional money and is aligned to our development goals. We believe it is unacceptable that Nigeria should be drawing down on such a low rate especially at time like this when we really need these investments.”
In addition, she said the federal government has made counterpart funding on the $500 million irrigation project covering Bakalori, Kano River and Hadeja valley, which would enable the immediate take-off of the project, adding that agreement was also reached to expedite action for the take-of the $500 million North-east social safety net project.
Responding to a question, Adeosun dismissed the insinuation that there was lack of harmony between the central bank and the ministry of finance, saying that both agencies are always working for the greater benefit of the economy.
“For the foreign loans, we are through with the AfDB, ready to go to the Eurobond. It is just to appoint the parties. It is particularly the issue of pricing, not the volume. We are going to look into how we can refinance some of our existing Naira debt into the international market to take advantage of the low international rate now.
“This would less the pressure on the domestic market. We have spoken with a lot of lenders and the market is really very attractive now. The Eurobond issue is an issue of pricing, not volume, but on the top of that and back to the issue that I talked on interest rates, we are going to look at how we can refinance some of our existing naira debt into the international market, to take advantage of the fact that there are negative interest rates in a lot of markets, and we think we can significantly lower our cost of funds,” she said.
On his part, Emefiele said meetings were held with some group of foreign investors who have shown interest in coming in to Nigeria.
“Like I always say, the flexible exchange rate policy is not cast in stone. We can always go back and look at them. But we will make sure that they are policies that are done in the interest of Nigeria as well as Nigerians because that is what is important to us is how do we protect Nigerians, what do we do to ensure that we reduce the level of unemployment what do we do to ensure that manufacturers continue to improve their industrial capacities, how do we make it possible them to get foreign exchange for them to run their actories so that prices can be moderated at the level that the purchasing power of our people don’t look totally eroded.
“Like I said, the flexible exchange rate regime document that we have in place is a very sound document and truly speaking, I have not seen one person that has criticised the document,” Emefiele added.
Responding to a question by THISDAY on contingency measures being put in place to protect the banking system in view of the weak global economic environment, Emefiele pointed out that the central bank was closely monitoring the banks as part of its function.
“But I must say that for the Nigerian banking environment, it is not as bad as people may think, given that we have strong prudential guidelines and ratios in place. I think we can only continue to strenghten the banks by putti
The value of shares held by investors in the Nigerian capital market (equities category) fell by N432bn in the third quarter of 2016 when compared with the performance of the market in the second quarter, STANLEY OPARA reports
Within the space of three months, investors in the Nigerian capital market have lost N432bn, statistics from the Nigerian Stock Exchange have indicated.
The data specifically showed that the NSE’s market capitalisation slid from N10.165tn to N9.733tn in the third quarter of 2016.
Experts said the continued drop in the value of most equities in the nation’s capital market must have dampened the spirits of investors.
Between September 28, 2015 and September 28, 2016, the NSE’s market capitalisation dropped by N873bn from N10.572tn to N9.699tn. The All-Share Index also fell to 28,236.23 basis points from 30,762.29 basis points.
There was also a significant drop in the volume of transactions in the market, as this dropped to 159.046 million from 266.652 million.
In the same vein, the value of market transactions and deals plummeted; compared to last year’s figures. In 2015, while the value of transactions and market deals stood at N3.179bn and 3,366, respectively, the figures dropped to N1.454bn and 3,237, respectively in the third quarter of 2016.
Experts noted that the fall of the nation’s capital market indices had persisted for some period.
For instance, between August and September this year, the stock market recorded a drop in liquidity to the tune of N0.411bn.
The drop reflected on the volume and value of shares traded in the period under review, which also plummeted.
The NSE ASI as of June 30, 2016 was 29,597.79 basis points; but at the close of the third quarter (September 30), the NSE ASI stood at 28,335.40.
There was a slide in the turnover of shares traded on the floor of the NSE during the period under review. For instance, the third quarter report showed that a total of 1.183 billion shares worth N10.300bn in 16,522 deals were traded in September 2016 by investors.
This, however, was in contrast with a turnover of 1.361 billion shares worth N10.711bn in 16,070 deals traded in August 2016 by investors on the Exchange’s floor.
Share turnover is a measure of stock liquidity calculated by dividing the total number of shares traded over a period by the average number of shares outstanding for the period. Thus, the lower the share turnover, the less liquid the shares of companies quoted on the Exchange, vice versa.
The National Bureau of Statistics had in the second quarter of this year said the country recorded its lowest investment inflow in nine years.
The participation of foreign investors in the NSE fell by 15 per cent between January and February this year, according to data from the bourse.
The NSE had put the level of participation by the foreigners at 51.57 per cent for January 2016. But in February 2016, the number dropped to 36.48 per cent.
Investors in the country’s capital market (equities category) lost over N1.053tn in the first quarter of 2016.
Within three months (January to March), the equities market had depreciated by 10.79 per cent, according to the NSE data.
As of the first day of trading this year (January 4), the NSE’s market capitalisation stood at N9.757tn, while the ASI was 28,370.32 basis points.
But as of the last day of trading in the first quarter of 2016 (March 31), the market capitalisation and ASI had crashed to N8.704tn and 25,306.22 basis points, respectively.
In the light of these developments, the Chartered Institute of Stockbrokers said although Nigeria had been an attractive domain for investment, there was the need for well-thought-out policies to drive businesses and the economy at large.
The institute said foreign investors would be further encouraged if the country could be consistent with its monetary policies in line with the global best practices.
It noted that the participation of local investors remained very critical to the growth of the market, adding that they (local investors) were the people that would bring stability to the equity market.
Commenting on the current market situation, the Chief Executive Officer, Alpha African Advisory, Sanyade Okoli, said the Nigerian equities market lacked the needed depth.
According to her, the market needs a significant inflow of funds to make it relatively stable to withstand traditional shocks that will always confront it.
She stressed that the market had yet to recover from the global financial crisis of 2007/2008 given its current value.
A former Managing Director, Asset Management Corporation of Nigeria, Mustafa Chike-Obi, in an interview, said the value of most equities in the country’s capital market had significantly been eroded, leaving most investors with little or nothing in terms of investment worth.
This development, he noted, had given rise to investor scepticism as far as the Nigerian equity market was concerned.
He described the situation as pathetic and grave, saying all stakeholders must come together to decide the way forward and redirect the trends in the market.
Chike-Obi said the beating the stock market had received would be better understood if the stock market value could be graded in dollar terms, considering the current foreign exchange rate.
“There is the need to encourage investors. Nobody is going to put their money in a place where they will lose the money. This is one thing that must be changed for us to move forward,” he added.
The Central Bank of Nigeria (CBN) yesterday, raised the hope that the lingering Naira-Yuan swap deal will be achieved as part of strategies to reducing the huge dollar demand pressure on the local currency.
The CBN Governor, Godwin Emefiele, gave the indication at the ongoing International Monetary Fund/World Bank Group yearly meetings in Washington DC.
According to him, there is a lot of “networking meetings going on, and I can assure you that meetings are going on with some of our partners, particularly, China.”
Expressing optimism that there would be positive outcome, he noted that some of the meetings included the Managing Director of IMF as well as the World Bank Group, in an effort to achieve some of the objectives. “I believe in the course of time, we would achieve it. Nigeria happens to be one of the foremost countries in the world that adopted the Remimbi as a reserve currency. We would work together with China, to ensure that we also get our fair share of the benefit from this arrangement,” he said.
In another development, the Minister of Finance, Kemi Adeosun, reiterated that the planned massive investment in critical infrastructure can improve the country’s productivity, create jobs and bring comfort for our people.
“Nigeria is too big to fail. We are too significant in the region to underperform. So, what we are trying to do is to reset the Nigerian story so that we can grow. To grow, we need to have the enabling infrastructure.
“We need to have power and we have gotten some commitments. We also need to improve transport, rail, and housing. We are really confident that we would get back to growth,” she said.
Meanwhile, Emefiele has affirmed that monetary, fiscal and structural reforms are the directions the country has been undergoing, adding that it is also accompanied by serious coordination and collaborations.
He raised the hope that if the direction is sustained, the country would achieve that desired objective, pointing out that the reforms include the flexible exchange rate regime, which he said, is picking up gradually.
“When you are in the type of situation that we are in, naturally you find out that people are a little bit sceptical. But with time, as we develop the confidence, we would begin to see more of them coming into the country,” he said.
But the World Bank President, Jim Yong Kim, said the institution has effected some changes to help it better deliver results for its stakeholders and the low income countries.
Already, the reforms had helped it receive funding support to the tune of $52 billion, cut $400 million in administrative costs and reinvested savings in the bank’s business. These reinvestments are allowing us to deliver results to our clients more quickly.
But to make headway in mobilising private sector funds for infrastructure and growth support, the bank chief warned of the unpredictable nature of government policies and actions, corruption, and tax regulations, which continue to present the largest obstacles for investment in developing countries, including Nigeria.
“We want to continue working with you to make real progress as you tackle corruption, build stronger institutions, and reform tax structures, which will remove the constraints to private sector investment, foster better service delivery and promote better governance.
“We also want to work with you to make investments more attractive by lowering real and perceived risks, both in established and in emerging sectors,” he said.
The economic recession and prolonged downturn in the capital market have induced significant divestment by foreign investors, while lingering tight liquidity , waning public confidence, among others have led to significant losses by investors.
The stock market, which remained bullish between December 2005 and March 2008, suddenly became bearish in April 2008, and has remained nearly so since then with only marginal recovery.
Unfortunately, with the unprecedented lull in the market, many investors have fallen victim of scams and various ponzi schemes that suggest invested money will yield quick capital appreciation sometimes as high as 90 per cent of the original deposit.
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. The organisers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. Here, investment funds are pooled with others, and investors receive returns that are paid from the deposits of new investors. Rarely is the money invested in real investment vehicles, much less ones that actually can return what is being offered.
In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.
SEC worried about proliferation Indeed, the proliferation of these unlawful investments outfits in the nation’s capital market has become a source of worry to the Securities and
Exchange Commission (SEC). Efforts to flush them out of the market have remained futile, as the organisers of the schemes have continued to dupe thousands of investors under the guise that such investment would yield high financial returns or dividends.
SEC has issued several warnings to the investing public, urging them to refrain from investing their money in outfits not registered with it. The commission has also advised the public not to subscribe to any financial investment plan without first checking the registration status of the operating company on its website.
The commission maintained that even if the company was registered with SEC, the potential investors should endeavour to find out whether it had approved the company’s activities.
Specifically, SEC had recently issued a warning to Nigerians over the activities of an investment fund tagged ‘MMM Federal Republic of Nigeria’ declaring it to be fraudulent.
SEC in a statement on its website, described the facilitators as online fraudsters, who carry out their illegitimate business via Nigeria.mmm.net portal/platform, and are promising investors a monthly investment return of 30 per cent. SEC said the venture had no tangible business model as returns would be paid from other peoples’ invested funds making it a Ponzi scheme, a fraudulent investing scam promising high rates of return with little risk to investors that generates returns for older investors by acquiring new investors.
“The attention of SEC, Nigeria has been drawn to the activities of an online investment scheme tagged ‘MMM Federal Republic of Nigeria (nigeria.mmm.net). “The platform has embarked on an aggressive online media campaign to lure the investing public to participate in what it called ‘mutual aid financial network’ with a monthly investment return of 30 per cent.
“The Commission hereby notifies the investing public that the operation of this investment scheme has no tangible business model hence it is a Ponzi Scheme, where returns are paid from other people’s invested sum. Also, the commission does not register its operation.
”SEC, therefore, advises the general public to distance themselves from the online scheme. Please note that anyone that subscribes to this illegal activity does so at their own risk.”
Also in a recent forum, the SEC warned members of the public against buying ponzi or pyramid schemes not approved by the Commission. According to the Director General of SEC, Mounir Gwarzo, “Those pyramid schemes have not been approved by SEC, and we have been telling investors that anybody that is selling any scheme that is not approved by SEC, investors should not buy.
“If they buy, then they are on their own because people are being pushed to buy those kinds of schemes. And I think it is also a fault on our own parts because by the time somebody tells you that if you buy this thing you will get 50 per cent discount, you know it is not true. “So we too as individuals do not have to be greedy, because it is all driven by greed. How can somebody give you 50 per cent return? Where is he going to get the 50 per cent? where is he going to put the money? What is he going to do?
“And this has been the trend that we have seen in recent times and we have been continuously telling people through radio jingles not to accept all those schemes not sanctioned by SEC.”
The SEC DG advised Nigerians not to subscribe to any financial investment plan without first checking the registration status of the operating company on the commission’s website.
He added that the Commission was collaborating with the police and other relevant law enforcement agencies to check the activities of the operators of such schemes.
Investors’ ignorance, greed boost proliferation Reacting to the development, the Managing Director, Cowry Asset Management Limited, Johnson Chukwu, explained that investors patronize ponzi schemes due to ignorance and greed.
According to him, a lot of people that invest in the scheme do so for lack of knowledge of basic economics or business expertise.
“People invest in Ponzi schemes for two principal reasons; ignorance and greed. A lot of people that invest in Ponzi scheme do so for lack of knowledge of basic economics or business common sense.
“For instance, I am not aware of any business venture that consistently generates 50 per cent net annual return (Net Profit Before Interest and Taxes – NPBIT) on a yearly basis. So if a scheme is offering someone a monthly return of 5 per cent which amounts to an effective annual yield of over 60 per cent, it becomes obvious that such scheme cannot sustain the payment from its income and therefore must be creating a deficit, which can only be funded from contributions from other investors.
“The illusion of meeting such payments becomes punctured once the rate of contributions slows down, hence the crystallisation of the always impending default. The second reason is that of greed which makes informed people to believe that they can earn the return and exit the scheme before the bubble will burst but sometimes they also get trapped.
“The most appropriate way to checkmate Ponzi schemes is to create enough awareness of the modus operandi of such schemes so that the general public will understand that the rewards offered by Ponzi schemes are not sustainable and only serve as bait to attract uninformed investors.
“It may also be necessary for SEC to set up toll-free lines for investors to confirm the registration status of Investment houses seeking for their patronage,” he added.
The Managing Director of InvestData Limited, Ambrose Omordion said: “Many people are patronising the outfit because the stock market is down. They don’t have knowledge of what the capital market is all about. SEC should warn Nigerians to be careful about investing in these fraudulent outfits and should go a step further to arrest people that establishes these outfits.
“People that put their money in wonder bank are still complaining. Government should go and find out who are behind this scheme. Again, government should make capital market liquid so that people will not look for alternatives.”
He urged SEC to roll out enlightenment campaigns to educate investors on what capital market investment is all about and the risks of associated with patronising these schemes.
A Finance and Economics lecturer at the Pan Atlantic University, Prince Osaro, said: “The system itself has no regulation, there is no law guiding such financial practices in Nigeria. Just start a small financial system and coin it under a financial name and use it to rob people. “Government has the regulatory power to check them but government is leaving it open because nobody is really shouting about it, nobody is taking anyone to court about this and this is corruption. And corruption in Nigerian constitution is death. If they can catch one of those people and trial him legally, and the person goes to jail for life or being hanged to death, I think others will learn their lessons.
“But nobody is saying anything. Nigerians will just say ‘let him go, God will judge him’, and the person will run to Dubai or where nobody can trace him. People who are gullible keep putting their money in such outfit and they keep loosing their money. We have that greed to double our money but if you get into it, you will see the problem you will get your friends and families. It is crazy.”
Shareholders of PZ Cussons Nigeria Plc yesterday approved a N1.99 billion dividend for the 2016 financial year. This translated to 50 kobo per share.
The company’s total assets increased to N74.4 billion compared to N67.4 billion the previous year. Speaking in Abuja at its annual general meeting (AGM), Chairman of the company, Chief Kolawole Jamodu said despite the deteriorating operating environment, the company had remained focused and managed to deliver a steady performance for the period to grow shareholder value.
According to him, notwithstanding, the present exchange rate crisis among other unfavourable variables limited the optimal performance of the company.
Jamodu disclosed the company recorded an exchange loss of N2.9 billion, cutting its group profit after tax (PBT) by 52 per cent to N3.15 billion from N6.56 billion in 2015 while its consolidated revenue decreased by 4.9 percent to N69.5 billion from N73.1 billion.
However, the chairman said: “Improved planning and execution in supply chain and targeted investments in key brands helped to limit the negative impact of the scarcity of foreign currency and other adverse effects.” He said in the overall assessment, the company “did well to hold its position in the market, reducing the negative impact of the prevailing adverse conditions and performing satisfactorily against peers in the sector.”
He said there are future prospects for the company given that the presently economic predicament is transient. According Jamodu: ”We regard current economic challenges as transitory and we remain excited about the future of the company. Our confidence has been emboldened by positive policy changes being adopted by the government such as the new foreign exchange regime that has been introduced by the Central Bank of Nigeria. Our brands remain strong and popular with consumers which leaves us well placed to hold our market and exploit any emerging opportunities.”
Meanwhile, shareholders unanimously commended the board for the performance and declaration of dividend amid the current economic uncertainties. They however, urged the company to surpass the current record in subsequent financial years. Meanwhile, Nigerian Stock Exchange All Share Index (NSE ASI) appreciated marginally by 0.08 per cent to close at 28,031.90 yesterday as heavily capitalised stocks lifted the equity market. The appreciation recorded in the share prices of United Bank for Africa Plc, Dangote Cement, Seplat Petroleum Development Company Plc, NASCON Allied Industries Plc and Forte Oil Plc were responsible for the marginal gain recorded in the NSE ASI.
In a related development, in view of the need to foster financial system and economic growth and development, as well as complement the efforts of government at various levels, the Central Bank of Nigeria (CBN) yesterday unveiled the guidelines for granting liquid asset status to Sukuk Instruments issued by state governments.
The central bank stated in the document listed on its website, that the move was to enhance the diversification of sources of funding for development at the sub-national levels. Consequently, members of the public and relevant stakeholders were requested to note the guidelines for operations in the Nigerian financial markets.
It explained that the Sukuk issuance by any state shall be backed by a law enacted by the relevant State House of Assembly, specifying that a sinking fund to be fully funded from the consolidated revenue fund account of the state be established. Also, the state government shall have in place a fiscal responsibility law, with provisions for public debt management, in order to enhance investor confidence.
In addition, the state government shall establish a debt management department in order to ensure transparency and professional management of debt issues.
“The Sukuk shall, at inception and throughout its tenor, be of investment grade as determined by a rating agency accredited by the Securities and Exchange Commission (SEC). A SEC confirmation that the proceeds have been disbursed in line with the provisions of the prospectus shall be submitted to the Director, Financial Policy and Regulation Department (FPRD) of the CBN at the anniversary of the Sukuk issuance.
“Subsequently, SEC confirmation shall be required on amounts that have not been disbursed by the first anniversary. Repayment structure shall be from a funded sinking fund account (supported by a legislated irrevocable standing payment order (ISPO) and/or other legislated sources of repayments disclosed in the offer documents).
“The Trustee(s) to the Sukuk shall submit to Director, FPRD, CBN every six months: (a) a statement of accounts of the sinking funds’ investments and (b) a statement of declaration on the sufficiency of the sinking funds’ investments and investment income in meeting maturing and redemption obligations.
“The Trustees shall advise the Director, FPRD, CBN on the action taken in the event that the Trustees are of the opinion that the sinking fund may be insufficient or there may be the likelihood of default, in line with Sections 255 and 256 of the Investment and Securities Act, 2007 or any amendment thereto.
“The Accountant General of the State shall issue an Irrevocable Letter of Authority to deduct at source from the statutory allocation due to the state, approved by the Federal Minister of Finance, in the event of default by or failure of the state to meet its payment obligations,” the central bank stated in the 11-page document.
In addition, it stated that the maximum investment a bank shall make in any Sukuk issuance of a state government or its agencies is limited to 10 per cent of the total amount outstanding of that Sukuk. This is an investment limit per issue and not per issuer.
Also, the aggregate portfolio of a bank in Sukuk issued by state governments and their agencies shall not exceed 30 per cent of the bank’s total portfolio in debt securities.
The Nigerian Communications Commission (NCC), said it had begun the process of retrieving the N50 billion fine, which MTN Nigeria erroneously paid into the federal government recovery account that is with the Central Bank of Nigeria (CBN).
The Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta, made the disclosure in Abuja on Monday, while addressing a press conference on his one year anniversary and achievements since he assumed office. He said the money ought to have been paid into the federal government consolidated account, which the NCC operates with the CBN, and not the federal government recovery account that is also operated by the CBN.
He explained that he had already written a letter to the office of the Attorney General of the Federation (AGF), that would facilitate the transfer of the N50 billion from the recovery account to the federation account.
He said NCC had also remitted N30 billon into the federation account, as part payment of the N330 billion fine imposed on MTN by the NCC, for violating the regulator’s directive on SIM card registration.
He said the additional N30 billion paid by MTN and the N50 billion earlier paid, which summed up to N80 billion, explaining that the amount was based on the payment agreement reached between the NCC and MTN. The payment agreement stipulated that MTN would spread payment of the total N330 billion fine within three years, starting with N80 billion in 2016. Danbatta told the journalists that MTN fulfilled its own part of the payment agreement for 2016, leaving it with a total of N250 billion that would be paid in 2017, 2018 and 2019.
NCC had in October 2015, fined MTN a whopping N1.04 trillion for violating its directive on SIM card registration, and gave it up-till November 16, 2015 to pay the fine.
According to NCC, it gave a standing order that all telecoms operators should deactivate all unregistered and improperly registered SIM cards on their networks, but discovered 52 million unregistered and improperly registered SIM cards on the MTN network. Each unregistered SIM card attracts a fine of N200,000 and MTN had 5.2 million unregistered SIM cards on its network, amounting to N1.04 trillion. After much plea on the part of MTN, NCC reduced the fine by 25 per cent, bringing it to N780 billion. Unsatisfied with the reduction, MTN went to court to challenge NCC over the fine in January 2016, but withdrew the case in February 2016, and paid N50 billion, as part payment for the fine.
The fine was again reduced to N330 billion and MTN was asked to pay the amount in three tranches.
The Central Bank of Nigeria’s (CBN) Financial Stability Report (FSR) has revealed that in terms of size of assets and deposit of banks, the market share of the five largest banks in the country, declined to 43.30 per cent and 51.96 per cent in the first half of 2016, from 60.61 per cent and 52.94 per cent in the second half of 2015 respectively.
The FSR for June 2016 posted on the central bank’s website showed that the market share of the largest bank’s deposits and assets stood at 12.84 and 13.52 per cent respectively in the first half of 2016.
The remaining 18 banks had market shares ranging from 0.21 per cent to 6.58 per cent in deposits and 0.26 per cent to 6.41 per cent in assets, reflecting low competition in the market. This finding, according to the CBN, was supported by the Herfindahl-Hirschman Index (HHI) of the industry of 743.37 and 751.17 for deposits and assets, at end-June 2016, compared with 788.09 and 781.40 at end-December 2015, respectively.
” Despite the improvement recorded relative to the first half of the year, the structure of the banking industry in the first half of 2016 remained oligopolistic. Net domestic credit (NDC) of the banking system grew by 12.52 per cent to N24, 318.14 billion at the end of the first half of 2016, compared with the growth of 12.13 and 11.08 per cent at the end of the preceding and the corresponding periods of 2015, respectively.
“This reflected the increase in net claims on the private sector. In terms of growth in M2, NDC contributed 13.51 percentage points, compared with 12.27 percentage points at the end of the preceding half year,” it added.
According to the report, the structure of bank credit in the first half of 2016 indicated that short-term credit remained dominant. Credit maturing within one year accounted for 46.0 per cent, compared with 47.1 per cent at the end of the second half of 2015. The medium-term7 and long-term8 credit stood at 18.1 and 35.9 per cent, compared with 16.9 per cent and 36.0 per cent at the end of the second half of 2015.
Although the report stated that the central bank’s efforts towards maintaining a stable foreign exchange rate were sustained in the first half of 2016, it revealed that external shocks, speculative demand pressure and low accretion to external reserves remained the major challenges to the stability of the exchange rate.
” Consequently, the CBN introduced the Flexible Exchange Rate regime on June 20, 2016 and revised guidelines to strengthen the operation of the foreign exchange market were issued. The objective of the new policy was to enhance efficiency, boost liquidity and promote stability in the market. “In the review period, the average exchange rates at the interbank and BDC segments depreciated by 15.00 and 26.58 per cent from N196.99/US$ and N258.30/US$ as at end- December 2015 respectively, to close at N231.76/US$ and N351.82/US$ at end-June 2016, respectively,” it added.
“Although the outlook for the rest of the year appears to be challenging, the current measures put in place … are expected to minimise the impact of shocks to the domestic economy.”
Total bank loans and advances to the private sector of the economy grew by 17.62 per cent to N15, 677.68 billion at the end of the first half of 2016, in contrast to the decline of 1.44 per cent at the end of the second half of 2015. Relative to the second half of 2015, the amount of credit extended to the various sectors by banks during the review period showed an upward trend. Credit to the oil and gas sector accounted for the highest share of total credit, as it accounted for 28.78 per cent of the total, compared with 24.82 per cent in the second half of 2015 The manufacturing sector accounted for 12.95 per cent of the total credit, compared with 13.91 per cent in the second half of 2015. Agriculture, forestry and fishery accounted for 3.08 per cent of the total, indicating a 0.69 percentage point decline compared with 3.77 per cent in the preceding half year.
The Nigerian National Petroleum Corporation on Wednesday announced that it had commenced the integration of biofuels production from selected energy crops through its agriculture development programme.
It stated that it had started mobilising to site on a first large-scale commercial biofuels venture in Nigeria, adding that it would plant an energy crop known as Jatropha and convert the extracted oil from its seeds to biodiesel to fuel diesel engines.
The Group Managing Director, NNPC, Dr. Maikanti Baru, disclosed this during the Environment Dialogue on the Diversification of the Nigerian Economy – the Role of Jatropha.
The GMD explained that the increasing negative impact on the environment due to the exploitation of fossil fuels was promoting a global search for alternative energy that could be obtained from renewable sources.
Baru, who was represented by the Group General Manager, Renewable Energy Division, Mr. Rabiu Sulieman, said, “As one of its key focus areas, the NNPC is currently diversifying its products portfolio for enhanced and sustainable energy mix. This, we are doing by integrating biofuels production from selected energy crops with a robust agric development programme.
“Based on commercial considerations, Jatropha ranks second to oil-palm as the biofuel of choice for biodiesel production in the NNPC biofuels programme.
Baru said, “Though the feedstock for this first project slate is sugarcane, we intend to cultivate Jatropha plants around the peripheries of the plantation and sidelines of the internal road network.
“This will safeguard against livestock encroachment, while the oil that will be extracted from the Jatropha seed will be converted to biodiesel to fuel the diesel engines of the plantation machineries.”
Meanwhile, Global oil benchmark, Brent crude, traded above $52 per barrel on Wednesday for the first time since June, as data showed a fifth straight weekly decline in the United States crude inventories.
