Corporation’s boss urges review of existing regulations The Nigeria Deposit Insurance Corporation (NDIC) has condemned the rising rate of non-performing insider loans in various banks. It said this situation, if not checked could have negative consequences on the financial system.
Managing Director/Chief Executive of Alhaji Umaru Ibrahim expressed this concern while receiving the newly elected President & Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN), Professor Segun Ajibola and his executive members who paid a courtesy call on the NDIC Senior Management in Abuja.
According to Ibrahim, the development poses credibility questions, capable of eroding public confidence in the banking system.He therefore called for strict compliance with the existing code of conduct and a review of the existing laws and regulations to provide stiffer penalties for directors who take advantage of their positions and failed to pay back their loans.
The NDIC CEO also observed with concern the practice of some banks to assign sensitive roles to casual staff; thereby exposing the banking industry to cases of fraud and forgeries. Advising restraint, Alhaji Ibrahim urged banks to exercise caution so as not to create industrial unrest in the industry, he therefore called on the CIBN to intervene by advising its members on the aim of the rationalisation which should be to weed out bad eggs from the industry.
The NDIC boss emphasized that the corporation would continue to partner with the CIBN and other professional bodies towards achieving effective capacity building among its staff.
Prof. Ajibola expressed appreciation to the Corporation for positive contributions to the activities and programmes of the Institute and also pledged to table the matter at CIBN’s next meeting with banks’ CEOs with a view to addressing the issues.He stated that efforts were being put in place by the CIBN to enhance the capacity of bank staff, particularly in credit administration.
Investors staked a total of N48.72 trillion on fixed income securities and currencies on the FMDQ OTC Securities Exchange between January and June 2016.
According to statistics obtained by the THISDAY, N22.5trillion was invested in the first quarter of 2016, N9.43trillion in April, N7.43trillion in May and N9.36trillion in June, amounting to N48.72trillion in six months.
A breakdown of the performance in June showed that activities in the Treasury bills (T.bills) market remained dominant, accounting for 38.14 per cent of total turnover while Secured Money Market (Repurchase Agreements (Repos)/Buy-Backs) came second place, accounting for 26.5 per cent.
Total Foreign Exchange (FX) market transactions accounted for 26.07 per cent, while Federal Government of Nigeria FGN bonds and Unsecured Placements/Takings accounted for 4.85 per cent and 4.34 per cent of the total turnover respectively.
FMDQ explained that milestones were recorded in the FX market as the Central Bank of Nigeria (CBN) took steps to restructure the market.
“The apex bank released revised guidelines for the FX market, effectively liberalising the market, and appointed Foreign Exchange Primary Dealers (FXPDs). Furthermore, in a very bold and decisive move, the CBN cleared the backlog of transactions in the market via a one-time Special Secondary Market Intervention Sales (SMIS) auction. Accumulated backlog totalling $4.02 billion, was cleared with $0.53 billion (13.24 per cent) settled spot and the remaining 86.76 per cent ($3.49bn) spread over one to three months forward contracts,” it said.
The exchange added that on June 27, Naira-settled OTC FX Futures product was also introduced into the Nigerian FX market with the CBN as the pioneer seller. “The CBN offered twelve (12) consecutive monthly contracts with initial notional amounts of $1.00bn each. OTC FX Futures Contracts totalling $38.80 million were executed by the end of the month,” the exchange said.
Based on the reform in the market by the CBN, transactions in the FX market settled at $7.51 billion in June, an increase of 83.82 per cent compared with the value recorded in May.
Turnover in the fixed income market settled at N4.02trillion, showing increase of 2.05 per cent above the previous month’s value, with transactions in the T.bills market accounting for 88.71 per cent of the turnover.
Outstanding T.bills closed the month at N5.28 trillion whilst outstanding FGN bonds increased 1.73 per cent to close at N6.57 trillion. Trading intensity in the Fixed Income market settled at 1.24 and 0.07 for T.bills and FGN bonds respectively, with maturities between one month to three months being the most actively traded in June.
Renaissance Capital and CSL Stockbrokers have both placed a “BUY” rating on United Bank for Africa (UBA) Plc, saying it is capable of generating returns of more than 100 per cent in the next 12-month period.
The “buy” rating on UBA, underlines its attractiveness despite the general downward trend at the stock market.Renaissance Capital, in its recommendation forecasted that the bank’s stocks would remain bullish, adding that its share price could rise to N9.40 per share. CSL Stockbrokers, a member of FCMB Group, also expressed optimism that UBA could trade at N7.21 per share in the next 12 months.
On the average, analysts’ consensus target price is N8.50 per share for UBA for the 2016 business year. The strong investment case for UBA, according to a statement by the bank, followed the recent affirmation of its credit rating by Fitch as well as an upgrade by Agusto & Co.
Fitch International, one of the foremost global rating agencies affirmed the bank’s viability rating at “B” an affirmation of its strong risk management framework, which has helped keep non-performing loans ratio at a moderate level of 1.74per cent as at the end-March 2016, as against industry average of over 6 per cent, as reported by Fitch in its recent report on Nigerian banks. Fitch also upgraded UBA’s outlook to stable from Negative, thus reinforcing the strong outlook on the Bank, especially as its diversified network across eighteen other African countries make it relatively immune against the potential cyclical volatilities in any of its country of operations.
Also, the foremost local rating agency in Nigeria, Agusto & Co, at its rating review of UBA Plc, upgraded the Bank’s rating from “A+” to “Aa-“, with a stable outlook.
According to Agusto & Co, “the rating of United Bank for Africa Plc (UBA) is upheld by the Bank’s improved capitalization, good liquidity and large pool of stable deposits, strong domestic presence supported by the Bank’s extensive branch network and growing alternative banking channels.
“We note improvement in profitability and the Bank’s good asset quality. The Rating takes into cognizance the weak macroeconomic climate on the banking industry’s asset quality, which we do not expect UBA to be excluded.
“Nonetheless, we note positively its diversified geographical reach, which will cushion to an extent the impact of the weak Nigerian economic climate,” Agusto & Co stated in its credit rating report.”The bank also sealed a five- year deal Master Card that would enable it issue MasterCard credit, debit and prepaid cards across 19 markets in Africa.
The synergy would also focus on increased payments infrastructure across Africa, including the roll out of point-of-sale and Mobil technology, to ensure merchants accept the cards when introduced into these markets.
The Group Managing Director-Designate, of the bank, Kennedy Uzoka explained that through the partnership, the bank was able to accelerate the drive for financial inclusion and economic wellbeing across the African continent.
“As the needs of our customers change, we are adapting through strategic innovations and partnerships to provide them with excellent and convenient services.”
The Division President for Sub-Saharan Africa, MasterCard, Daniel Monehin noted that the focus on infrastructure and the roll out of easy-to-access solutions was a key driving force for financial inclusion.
He added that MasterCard’s continued innovation in the payments space with UBA’s extensive pan-African network would mean the introduction of increased competition and stronger financial sector in the regions.
The Central Bank of Nigeria (CBN), has affirmed its confidence in Skye Bank Plc., through a guarantee line which ensures that withdrawals it suffered in the wake of undue panic recently does not adversely affect its operations.
This development analysts believe lends credence to the regulator’s earlier assertion that Skye Bank is a Strategically Important Bank (SIB), with substantial market share, interconnectedness and significant relevance to the nation’s financial systems stability.
Bloomberg, reported that the central bank confirmed this development through its spokesman, Isaac Okoroafor, who stated that the undisclosed guarantee sum would assist the bank to shore up its liquidity and maintain its level of operations.
“The short-term lending facility will allow the management of the bank to ensure that some withdrawals it suffered in the wake of the undue panic of last week do not adversely affect its operations,” Okoroafor was quoted to have said.
In addition, “the CBN issued guarantees to depositors and creditors of Skye Bank as a demonstration of the bank’s health”, Okoroafor further explained.
The guarantee line is coming on the heels of CBN’s recent intervention in the bank following the voluntary resignation of the Board of Directors of the bank and the consequent re-constitution of the Board with a new management team led by Mr. M.K. Ahmad and Mr. Adetokunbo Abiru, who emerged as Chairman and Group Managing Director respectively.
The CBN guarantee will not only enhance Skye Bank’s interbank trading and activities; but will also provide assurance to the other banks to continue to deal with and trade with the bank’s instruments in the interbank market.
The CBN had similarly introduced a bank credit guarantee package for some banks in 2009 in the wake of the global economic crisis which affected both the local and global financial markets. The bank guarantee programme enables financial institutions to meet their financing needs during a period of record high credit spreads and aids the successful return of the credit market to near normalcy, despite the recession and slow economic recovery.
The affirmation of confidence in Skye bank continues to grow as no fewer than two state governments have expressed confidence in the bank’s ability to deliver on crucial mandates in the last two weeks. First, it was the Lagos State government, which directed its ministries, departments and agencies to establish business relationship with the bank on account of its track record and pedigree in mandate execution.
For the first time in the 2016 fiscal year, the monthly allocation from the Federation Account crossed the N500bn threshold with the Federation Accounts Allocation Committee distributing a total sum of N559.03bn to the three tiers of government on Thursday.
This is even as the gross revenue accruing to the federation increased by N301.32bn, the highest in a long time.
Addressing journalists shortly after the FAAC meeting, which was held at the headquarters of the Ministry of Finance in Abuja, the Minister of Finance, Mrs. Kemi Adeosun, attributed the increase in revenue to efficiency in collection by the revenue generating agencies.
Specifically, she said there was an increase in non-oil tax collection by the Federal Inland Revenue Service, as the agency recorded an increase of N165bn in tax collections, while the Nigeria Customs Service raised its revenue by N12.6bn
Adeosun said, “The big cause of the increase is the improvement of non-oil revenue from the FIRS. The FIRS improved its performance between last month and this month by N165bn. And that accounted for the change in revenue; and also, there was an improvement of N12.6bn by the Nigeria Customs Service, as well as the exchange rate gain of N79.2bn
“This is a significant improved performance, especially by the Customs that was able to do so despite the scarcity of foreign exchange and the restrictions on the 41 items. So, we are quite encouraged by that because it means that some of the reforms that we have started around collection improvement are beginning to bear fruit.”
This increase in revenue, according to her, led to an improvement in the amount allocated to the three tiers of government from N305.12bn in May to N559.03bn for the month of June.
Giving a breakdown of the amount shared, the minister said N412.3bn was distributed under statutory allocation; N67.4bn under Value Added Tax revenue; while the balance of N79.27bn was allocated from the gain made from exchange rate differentials.
Out of the N412.3bn shared under statutory allocation, Adeosun said that after deducting the costs of collection to the Customs and the FIRS, the Federal Government received N199.75bn; the states, N101.3bn; local governments, N78.11bn; while the sum of N17.12bn was shared to oil producing states based on the derivation principle.
For VAT, she said the Federal Government received N9.7bn; states, N32.35bn; and local governments, N22.67bn.
The minister said, “The gross statutory revenue of N538.78bn received was higher than the N237.46bn received in the previous month by N301.32bn. The average price of crude oil increases from $32.26 in February to $38.64 in March, resulting in $92.99m increase in federation export revenue.”
The naira weakened against the dollar from 294.37 at the interbank market on Wednesday to 310.43 on Thursday, crossing the 300 mark for the first time at the interbank market after the Central Bank of Nigeria floated the naira.
The naira fell by 5.4 per cent against the greenback to 309 at 1224 GMT on dollar supply shortages, Reuters reported.
It later recovered to close at 292.40 on the interbank market on thin trades. The interbank market traded a total of $7.27m.
Traders were expecting the central bank to intervene to ease dollar shortages, which did not materialise.
They said the CBN had not intervened for most of this week. Instead it was mopping up naira liquidity to support the currency.
After market closed at 1300 GMT, a total of $7.10m trades were done as low as 330.50 naira to the dollar.
“Now that the market has adjusted upwards it seems people are comfortable and that’s why we are seeing some trades,” one trader said.
Banks had been quoting the dollar at 281 to 285 naira after the central bank lifted its 16-month-old peg of N197 to the dollar last month.
According to traders, the lack of liquidity at those levels has curbed activity, leaving the central bank as the main supplier of dollars.
The naira traded flat on the black market to 375 against the dollar on Thursday.
Oando Plc, Diamond Bank Plc and Transnational Corporation of Nigeria Plc on Thursday emerged as the top three losers at the close of trading on the floor of the Nigerian Stock Exchange (NSE).
The market posted a loss of N77bn, with a total of 34 losers.
The NSE market capitalisation slid to N9.615tn from N9.692tn, while the All-Share Index closed at 27,997.29 basis points from 28,221.18 basis points.
On the aggregate, 227.134 million shares worth N1.801bn were transacted in 3,426 deals.
The highest index point attained in the course of trading was 28,806.45 basis points, while the lowest and average index points were 27,997.29 and 28,449.28 basis points, respectively.
Oando shares depreciated by N0.47 (8.92 per cent) to close at N4.92 from N5.39, while those of Diamond Bank lost N0.15 (8.62 per cent) to close at N1.59 from N1.74.
The share price of Transcorp plunged by N0.12 (8.51 per cent) to close at N1.29 from N1.41.
Honeywell Flour Mill Plc and Cadbury Nigeria Plc also recorded losses as the share price of the former closed at N1.38 from N1.50, losing N0.12 (eight per cent), while the latter recorded a loss of N0.89 (5.53 per cent) to close at N15.20 from N16.09.
Other losers include Stanbic IBTC Holdings Plc, Fidson Healthcare Plc, Learn Africa Plc, Champion Breweries Plc, Dangote Sugar Refinery Plc, Ecobank Transnational Incorporated and Academy Press Plc.
The list also include Livestock Feeds plc, NPF Microfinance Bank Plc, Unity Bank Plc, Aiico Insurance Plc, UAN Property Development Company Plc, Guaranty Trusts Bank Plc, Access Bank Plc, Johnholt Nigeria Plc, Fidelity Bank Plc, Africa Prudential Registrars Plc and FBN Holdings Plc.
United Bank of Africa Plc, UACN Plc, Nestle Nigeria Plc, Zenith Bank Nigeria Plc, Eterna Plc, Flour Mills Nigeria Plc, Guinness Nigeria Plc, FCMB Group Plc, AxaMansard Insurance Plc, Vitafoam Nigeria Plc and Lafarge Africa Plc also recorded losses of various degrees on their share prices.
Only six firm recorded appreciation in their share prices. Skye Bank Plc, Wema Bank Plc, AG Leventis Nigeria Plc, CAP Plc and Tiger Branded Consumer Goods Plc were the top five gainers.
The share price of Skye Bank soared by N0.07 (8.97 per cent) to close at N0.85 from N0.78, while that of Wema Bank closed at N0.78 from N0.73, recording a gain of N0.05 (6.85 per cent).
AG Leventis shares gained N0.04 (4.30 per cent) to close at N0.97 from N0.93, while those of CAP closed at N36 from N35, gaining N1 (2.86 per cent).
Tigerbrands shares also appreciated by N0.08 (2.08 per cent) to close at N3.93 from N3.85, while the shares of Nigerian Breweries Plc fell in value.
Commenting on the market performance, analysts at Vetiva Capital Management Limited, said the Nigerian equity market extended its negative run fuelled by sustained losses among key sectors, with the financial services sector completing a seven-session decline.
On the global scene, Asian markets were mostly up after the Bank of Japan hinted at the introduction of stimulus packages worth $188bn, exceeding expectations of about $94bn. The United States stocks rallied as investors continue to cheer a slew of upbeat earnings releases. However, European markets traded lower following the decision of the European Central Bank to keep interest rate at zero per cent.
The financial services (-256bps) and oil and gas (-92bps) sectors weighed most on the NSE ASI following significant losses in the share of Diamond Bank, Stanbic IBTC, GTB and Oando.
Industrial goods (-32bps) and consumer goods (-24bps) sectors also closed in the negative on the back of declines in WAPCO (Lafarge), Honeywell Flour Mills, Dangote Sugar and Guinness.
Skye Bank topped the volume chart, trading 54 million unit, while WAPCO topped the value chart, trading eight million units worth N479m.
The NSE ASI and NSE 30 lost 79bps and 107bps, putting year-to-date returns at -2.25 per cent and -4.02 per cent, respectively.
“We see the market completing an all week loss at week close amidst sustained bearish sentiment for bellwether stocks,” the analysts said.
Yesterday, 27 stocks depreciated in price, led by Oando, shedding 9.56 per cent to close at N5.39 per share. Law union and Rock followed with 7.27 per cent to close at N0.51 per share. Trans National Corporation shed 7.24 per cent to close at N1.41 per share. Stancbic IBTC dropped 4.83 per cent to close at N14.20 per share. Fidson lost 4.72 per cent to close at N2.02 per share. Honeywell flourmills dropped 4.46 per cent to close at N1.50 per share.
First City Monument Bank and Zenith Bank shed 4.41 and 3.97 per cent to close at N1.30 and N15.50 per share. TigerBrands shed 3.51 to close at N3.85 per share. Livestock shed 3.09 per cent to close at N0.94 per share.
On the other hand, eight stocks made the gainers table, as Skye bank emerged the highest price gainer with 8.33 per cent to close at N0.78 per share. Premier Breweries gained 4.98 per cent to close at N2.95 per share.
TransNational Express added 4.95 per cent to close at N1.06 per share. Dangote Sugar Refinery garnered 2.26 per cent to close at N6.80 per share. NPF Micro finance Bank gained 1.06 per cent to close at N0.95 per share.
Flourmills added 0.93 per cent to close at N21.70 per share. Ikeja Hotel gained 0.53 per cent to close at N1.90 percent. Nigerian Breweries also garnered 0.04 per cent to close at N135.10 per share.
Cement and building solutions provider, Lafarge Africa Plc, recorded a loss of N30.184bn as of June 30, 2016, according to figures provided by the company to the Nigerian Stock Exchange.
The firm’s revenue also dropped to N107.364bn from N152.178bn recorded the same period last year.
Courteville Business Solutions Plc, which also submitted its result to the NSE, recorded a significant drop in its profit after tax. Its profit after tax slid to N4.764m compared to last year’s figure of N210.530m. Courteville’s revenue fell to N618.234m from N822.174m (H12015).
Lafarge, in a statement, said it recorded a cash generation of N20bn, completed the 100 per cent ownership of United Cement of Nigeria Limited. It recorded success in its N60bn bond issuance, as the funds were fully utilised to refinance Unicem’s third party naira debt.
The firm said its industrial operations were significantly impacted by gas supply shortages in the South-West and the South-East operations with occasional plant repair works. As a result, its earnings before interest, tax, depreciation and amortisation stood at N12bn, as against N48bn in H1 2015.
Given the current exchange rate environment, it said actions were being implemented to restructure and refinance the United States dollar denominated debt, adding, “These loans were largely used to fund the expansion projects which will add 2.5 metric tonnes per annum cement capacity to the current production capacity of Unicem as well as that of the group.
“We are at the final stage of the voluntary tender offer issued to increase our shares in Ashakacem from 82.46 per cent presently. The shares acquisition is expected to conclude before the end of the year.”
Its South African cement operations reported solid volume growth, with cement sales volume by eight per cent compared to H1 2015, and a steady aggregates volume in H1 2016.
Commenting on the results, the Chief Executive Officer, Lafarge Africa Plc, Mr. Michel Puchercos, said, “In spite of the macroeconomic challenges and market uncertainties, our company will continue to deliver good performance with significant upside to come as we conclude on the integration journey to form Lafarge Africa Plc. The new organisation is much stronger and better positioned to deliver operational excellence and improve value to our shareholders.”
Meanwhile, the NSE market capitalisation dropped to N9.692tn from N9.784tn on Wednesday, while the All-Share Index also slid to 28,221.18 basis points from 28,488.56 basis points.
A total of 309.719 million shares worth N2.083bn exchanged hands in 3,934 deals.
Economists on Wednesday advised the Federal Government and the Central Bank of Nigeria to review their policies and introduce measures that would turn around the dwindling fortunes of the nation’s economy.
They spoke against the backdrop of the persistent fall of the naira against the dollar, with the local currency exchanging for 375 against the greenback at the parallel market on Wednesday; the imminent economic recession; and the spike in inflation to 16.5 per cent in June.
The Chief Executive Officer, Economic Associates, Dr. Ayo Teriba, who noted that the global fall in crude oil prices had made the nation’s oil revenue to nosedive, said there was a need for the Federal Government to seek foreign exchange from alternatives sources in order to cover for the shortfall.
He said Nigeria and its economic managers could not afford to fold their arms and allow the situation to get worsened. Rather, he said efforts must be geared towards implementing policies that would fight negative growth and inadequate liquidity at the interbank market.
Teriba said, “There are a number of things we can do as a country to boost our forex supply. Just the way India did some years ago, we can tap Nigerians in the Diaspora to contribute forex to save the situation at home. We can’t say we have done all when we have not done this.
“Billions of dollar can be raised through this. Saudi Arabia has just raised billions of dollars by issuing an Initial Public Offering on government agencies. Nigeria can raise billions of dollars in Foreign Direct Investment by issuing IPOs on government monopolies in critical infrastructure like rail, power transmission, oil and gas pipelines. There are a whole lot of things we can do to save the economy.”
A professor of Economics at the Olabisi Obabanjo University, Sherriffdeen Tella, who emphasised the need to stop the speculative attack on the naira, said the Federal Government needed to review its policies and boost local production.
He said, “All attempts must be made to increase local production, especially food items, and reduce importation of such. These, coupled with resistance to price hike, will keep prices down as the economy picks up gradually from reflationary economic policies and stable oil and electricity outputs.”
An economic analyst at Ecobank Nigeria, Mr. Kunle Ezun, said there was the need to close the gap between the exchange rates at the official and parallel markets.
He said the government must also address the spike in inflation, negative GDP growth and naira depreciation effectively and urgently.
Meanwhile, the naira tumbled further against the dollar at the parallel market on Wednesday and closed at 375, down from 368 on Tuesday.
Foreign exchange dealers said the lingering scarcity of forex at the interbank market was shifting dollar demand to the black market.
The local currency had lingered between 346 and 348 at the parallel market before tumbling to over 360 this week, following the total floating of the naira by the CBN on Friday.
The local currency, however, eased slightly against the dollar at the official interbank market and closed at 294.23 on Wednesday, up from 294.87 on Tuesday.
Dealers said the local currency was stuck at 294.23 after just one transaction was carried out, with the supply of dollars drying up and no intervention by the CBN, Reuters reported.
Highlighting the state of the interbank market, an economist at Exotix, Mr. Alan Cameron, said, “Recent FX reforms have been enough to re-open the investment case for Nigeria, but there is still some uncertainty about the functioning of the market.
“The absence of volatility at N283/$ was interpreted as a sign that administrative controls were still in place; it remains to be seen if those will be fully removed.”
According to some analysts, foreign investors have welcomed the removal of currency controls by the CBN but many are still steering clear of the Nigerian economy until it shows signs of a concrete recovery.
“Most investors would like to see a more liquid FX market before resuming purchases of local assets,” the Head of Africa Strategy at Standard Chartered Bank, Samir Gadio, told Reuters.
He, however, added, “Given the significant discount of naira-settled futures, a number of offshore financial institutions and hedge funds could be tempted to get involved in the foreseeable future.”
The Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, said the naira was falling at the parallel market because demand had shifted there due to lack of liquidity at the interbank market.
However, the National President, Association of Bureau De Change Operators, Aminu Gwadabe, said the naira was not sustainable at 375 to the dollar at the parallel market.
He described the demand as artificial, saying, “I think the parallel market has been taken over by some forces. Where is this demand coming from? I think this is not sustainable.”
