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Transactions: Making investor protection paramount

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Transactions: Making investor protection paramount

As a way of boosting market confidence, it is important for regulators to constantly carry investors along as regards policies and changes in transactions. Chris Ugwu writes

 

I

n stock exchanges world over, there are standard and post-listing requirements that quoted companies must constantly meet to avoid regulatory hammer.

 

 

These include regular dissemination of information about the financial performances and any changes that could affect their operations.

 

 

Conversely, in Nigeria, many listed firms have been violating this important obligation, thereby keeping investors in the dark about their financial health among others.

 

 

These lapses in adherence to the principles of corporate governance have contributed mainly to crisis at the stock exchange even as most countries have recovered from the global financial meltdown.

 

Many ignorant investors have burnt their fingers by investing in some dormant companies, which do not furnish the market with their financials.

 

 

Following serial infractions by market players, the Securities and Exchange Commission (SEC) and Nigerian Stock Exchange wielded the big stick by either giving notice to some companies on intention to delist or have completely delisted them from its official list for violating post-listing requirements.

 

 

Some have, however, chosen to delist voluntarily when they no longer have the capacity to play in the market. It was also found out that most of the companies that delisted voluntarily from the bourse had cited harsh economic climate and parent company buy-out as reasons.

 

 

According to a report obtained from the Nigerian Stock Exchange website, about 101 firms has delisted from the exchange in the last 17 years.

 

 

The reaffirmed commitment by the regulator to do anything to compel operators in the market to obey the rules guiding it informed the decision to tighten the noose on market infractions and other miscellaneous capital market crimes.

 

 

However, shareholders have continued to lament the delisting of companies by the regulatory authorities, noting that the actions have not given investors desired benefits as it lacks protection of shareholders’ funds.

 

 

Some delisted firms

 

 

Some of these companies that have been delisted due to one reason or the other include Pinnacle Point Group Plc, Afroil Plc, Starcomms Plc, Big Treat Plc, Starcomms Plc, Nigeria Wire & Cable Plc, Nigerian Sewing Machine Manufacturing Plc, Stokvis Nigeria Plc, Jos International Breweries, West Africa Glass Industries Plc, Navitues Energy Plc, Nigerin Ropes Plc, P.S Mandrides Plc, African Paints (Nigeria) Plc ,Afrik Pharmaceuticals Plc, among others.

 

 

Dissenting voices

 

 

Some shareholders in the capital market have demanded better protection for investors in the country, following the delisting process.

 

 

The shareholders, who lamented that investors, especially domestic retail investors, always suffered significant losses whenever companies were delisted, said there was need for the exchange to provide more information about how it arrived at its decision.

 

 

The leaders of shareholder groups, who spoke to our correspondent, questioned the exchange on delisting companies without engaging investors.

 

 

The Chairman, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said: “Unfortunately, the Nigerian Stock Exchange is not communicating with shareholders. As they delist these companies, they don’t care for the fate of shareholders that they are meant to protect.”

 

 

Okezie argued that although the exchange said it was protecting the shareholders, the move has been to  the detriment of shareholders in the long run, especially if the companies were going concerns but just having difficulties submitting their financials.

Okezie, who described the move as hostile, said there were many questions left unanswered.

 

 

He said: “The NSE needs to go all out to find out the exact state of the companies. To find out if they can overcome their problems in a short while rather than taking the hostile decision to delist them.”

 

 

Okezie said that market regulators must pursue friendly policies and initiatives to push the market forward.

 

 

He said that the bank nationalisation policy to a large extent affected investor confidence in the market.

 

 

He said that the current leadership of the SEC and NSE had done well with the introduction of various initiatives and zero tolerance on fraudulent capital market operators.

 

 

Shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN), who also bemoaned the delisting companies by the regulatory authorities, said it did not augur well for average investor and the nation’s capital market.

 

 

National Coordinator Emeritus, ISAN, Sir Sunny Nwosu, said: “Yes, there are some (of the companies) that look dilapidated and there are some for which I think they (the exchange) should have done a lot of consultation, especially with the shareholders because we have suffered a lot in the system.”

 

 

He said that there was need for friendly policies and regulation by capital market regulators.

Nwosu said that lack of proper compensation to investors that lost their funds during the market meltdown contributed to poor investor confidence in the market, whereas brokers were given forbearance package.

Mr. Moses Igbrude, ISAN Secretary, noted that the issue of penalties must be readdressed by market operators for confidence building.

 

 

Igbrude said that some companies had delisted from the exchange due to penalties while new companies were afraid to list.

 

 

He added that SEC and NSE should encourage companies to embrace share buy-back initiative instead of approving share reconstruction, which he said was being used by companies to rob investors.

 

 

He noted that market regulators should be fair in their regulations and penalties, adding that penalties were being paid from shareholders funds’ and was also discouraging investor confidence.

 

 

Regulators’ commitment to investor protection

 

 

SEC had recently restated its determination to ensure that investors were adequately protected in all transactions.

 

 

This was stated by Acting Director General of the SEC, Ms. Mary Uduk, during a meeting with the Association of Corporate Trustees in Abuja.

 

 

Uduk, who was represented by Acting Executive Commissioner, Operations of the SEC, Mr. Isyaku Tilde, said it was the responsibility of the SEC to ensure that investors are not short changed in any transactions.

 

 

Uduk said it was to this end that the commission is taking steps to reduce transaction costs in a bid to ensure that investors do not bear unnecessary costs.

 

 

“We are doing a lot to boost investors’ confidence in our market. But I want to say that both local and foreign investors are very good for the market. For instance, the foreign investors, because they trade their shares all of the time it leads to price discovery as against the local investors that just takes a long term view on their investments.

 

 

“Investors’ fears can be of two folds, firstly they could be afraid because they feel that capital market operators will mismanage their investments, secondly is looking at the volatility of the market that makes investors sceptical.

 

 

“For the first scenario, we have a number of initiatives that we have put in place to boost investors’ confidence. We have the E-Dividend mandate system, the Direct Cash Settlement as well as multiple subscription in place.

 

 

“For the second category, investors have to take ownership of their investments. They have to be able to monitor their investments, attend annual general meetings as well as read the annual reports sent out to them,” she noted.

 

 

The Acting DG said investors were also protected through the National Investors Protection Fund (NIPF) Risk Based Supervision that enables SEC to supervise the operators to ensure that they do not do what they are not supposed to do.

 

 

According to her, the complaints management framework enables investors to know where to complain to and how long it takes for such complaints to be resolved. For those of the investors that are averse to risk, they should get their financial advisers to advise them properly on where to invest.

 

 

“We also advise retail investors to invest in Collective Investment Schemes and Mutual Funds because those are managed independently by professionals and they are diversified thereby reducing risks. We are committed to protecting investors in the work we do.

 

 

“We will keep working on our rules and the possibility of amending them when the need arises, we want more transparency in the market so that investors will feel comfortable and the market can be better,” Uduk added.

 

 

The NSE in an effort to achieve a world class capital market had also reiterated its commitment to maintain zero tolerance posture on dealing member firms and quoted companies on violations of rules and regulations.

 

 

This on the back of the exchange’s determination to shift gears to drive innovations centered on increasing global visibility for the Nigerian capital market in the current year.

 

 

The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, while speaking at an investors’ forum, said the exchange would sustain a zero-tolerance stance on dealing member firms and listed companies’ violations.

 

 

Last line

 

The regulatory action is necessary in order to protect the investing public from trading in securities of entities with no current information regarding their financial status.

 

 

It is, therefore, advisable for the regulators to carry shareholders along on all market activities in order to boost market confidence.

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Malaysia to cut export duties for crude palm oil in 2020

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Malaysia to cut export duties for crude palm oil in 2020

Malaysia will reduce duties on exports of crude palm oil, its first review since the current tax rate was imposed in 2013, Finance Minister Lim Guan Eng said on Monday.

Under the new tax regime, the export duty rate will be set at 3% when prices are between 2,250 ringgit ($538.54) and 2,400 ringgit per tonne, down from the current duty of 4.5%, reports Reuters.

The export duty rate will go up to 4.5% at the next price tier of 2,401 ringgit to 2,550 ringgit, and rise at 0.5% increments to a maximum of 8% should prices reach over 3,450 ringgit per tonne.

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Foreign airlines lobby govs, others for more flight services

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Foreign airlines lobby govs, others for more flight services
  • Domestic carriers fret, bleed

 

  • Capital flight could rise to N600bn yearly

 

 

A

t a time Nigerian carriers are shouting themselves hoarse to cut down on multiple designations to foreign airlines, the carriers are clandestinely lobbying the Ministry of Aviation for more flights into the country, New Telegraph has learnt.

 

Besides, the carriers are lobbying influential people in government and some state governors for help to extend flight operations to many states in Nigeria, a situation that has far more implications for the growth of domestic airlines.

 

Not a few have lamented that foreign airlines are now designated to multiple routes within Nigeria, but this development threatens the survival of local airlines.

This newspaper gathered from a source close to some European carriers that they, in conjunction with their home countries, are mounting so much pressure to expand their operations in the country; a situation that defeats the Bilateral Air Services Agreement (BASA) Nigeria has with many of the countries.

BASAs are treaties signed between Countries to allow international commercial air transport services between territories.

BASAs promote international air link between countries, which supports and enables movement of persons, cargo, trade and tourism. These agreements provide the framework under which identified airlines from the two countries fly into designated ports in each other’s country.

 

Nigeria loses over N500 billion in capital flight yearly due to the lopsided air pact the country has with many countries. Nigeria’s carriers do not have the capacity to compete with their foreign counterpart. They are equally not protected by government policy, leaving predator foreign carriers that are having a field day in the country.

There are indications that the ticket sales of foreign airlines out of Nigeria could rise to N600 billion in no distant time, as more foreign airlines have been granted permission to operate to Nigeria, while many are taking away the domestic market from local airlines.

 

Nigerian airlines have been muscled, as they only make less than two per cent from the huge sales in the country.

For example, Ethiopia Airlines operates in five cities namely Enugu, Kano, Kaduna, Abuja and Lagos. Turkish Airlines operates in four cities: Abuja, Kano, Lagos and Port Harcourt, while Emirates Airlines operates two frequencies daily into Lagos and one to Abuja.

 

For instance, Turkish Airlines has just started Istanbul to Abuja, Abuja to Port Harcourt, Port Harcourt to Abuja, then Abuja to Istanbul. Lufthansa and Air France are also doing the same, thereby running indigenous airlines out of business.

 

While Emirates has two frequencies into Lagos and one to Abuja, it has announced plans to introduce a third flight in and out of Lagos to commence very soon, making it three flights daily to Lagos.

Indigenous airlines have the capacity to cover all the domestic routes being operated now by these foreign airlines. The practice in international aviation is for foreign airlines to partner with local airlines to help them distribute their passengers within the domestic routes.

 

Besides multiple designations, foreign airlines are being encouraged to do multiple frequencies into the country and within the country, a practice not allowed in other countries.

A few days ago, Rivers State Government and Ethiopian Airlines were said to have reached an agreement for the operation of permanent international flights from the Port Harcourt International airport subject to the approval of the relevant federal authorities.

 

The two parties reached the pact at the headquarters of Ethiopian Airlines in Addis Ababa after a meeting attended by the Group Chief Executive Officer of the airline, Dr Tewolde Gebremariam and other top managers.

Aviation safety consultant, Group Capt. John Ojikutu (Rtd), said Wike’s position is at variance with the position of the National Assembly on the matter.

He stated that while the National Assembly is planning to curtail foreign airlines’ incursion into “our domestic routes and reduce their multiple destinations in Nigeria, the state governors are thinking differently.

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‘Why mobile money may not grow in Nigeria’

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‘Why mobile money may not grow in Nigeria’

C

urrent moves to deepen mobile money in Nigeria may not yield positive results except the country builds a credible national identity database, an industry expert has said.

 

Executive Director, Financial Business at Inlaks, Mr Olufemi Muraino, who stated this, noted that national identity plays significant roles in countries where the payment system has succeeded.

While many had blamed the slow growth of mobile money in the country on the bank-led approach as opposed to telcos-led, Muraino said some countries have also succeeded with the bank-led system, as there is always synergy between banks and telecoms.

 

According to him, lack of national identity database is the main challenge inhibiting growth of mobile money in Nigeria.

 

“In Kenya, you can request loan through your mobile phone, the operator looks at your data through the national database and is able to ascertain whether you are credit worthy or not. The database also shows record of anybody that has defaulted in loan payment before and such person would be denied,” he said.

 

 

“You can request and get a loan under 10 minutes using your phone, that is one of the benefits of mobile money and this thrives on Kenya’s national identity database. In Nigeria, we have different biometric databases, which include the banks’ Biometric Verification Number (BVN), the Immigration database for passport owners and Federal Road Safety database,among others, while the National Identity Management Commission (NIMC) is also building a national database, all of which need to be harmonised.”

 

The Inlaks ED added that with a single national identity database, Nigerians will be able to transact any business on their phone, as it would be easy to identify each person.

In a recent report, global body of mobile network operators, GSMA, listed Nigeria among three countries tagged as ‘Africa’s mobile money sleeping giant’.

According to the body, the country, alongside Egypt and Ethiopia, has huge potential for mobile money growth, but has not harnessed it.

 

 

GSMA, however, noted that with the use of agents, mobile money would sustain its growth trajectory across the countries. “The agent distribution network, which has been vital to the growth of the mobile money industry over the last decade, shows no sign of diminishing. In 2018, the global number of registered mobile money agents grew by 18 per cent to reach 6.6 million, 57 per cent of whom are active on a monthly basis. The role of the agent network is evolving to support adjacent service offerings,” it said.

Recall that the Central Bank of Nigeria (CBN) and deposit money banks, early last year, launched a new initiative tagged the Shared Agent Network Expansion Facilities (SANEF). The initiative is touted as one that will empower 500,000 agent networks to offer basic financial services such as cash-in, cash-out, funds transfer, bill payments, airtime purchase and BVN, among others, to an estimated 50 million Nigerians who are currently under-banked.

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Flooding: Averting farmers’ yearly losses

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Flooding: Averting farmers’ yearly losses

As the rainy season gradually gets to its peak with attendant flooding, stakeholders in agric and insurance sectors are expected to step up efforts to minimise losses that are peculiar to the season. Sunday Ojeme reports

 

 

L

ast year, some agric sector stakeholders in the country lamented the grave losses by farmers to attacks on various crops and livestock attacks.

Although they put the estimated loss from livestocks alone at over N20 billion annually, efforts to stem the tide appear not to be enough as agric investors are continually being exposed to series of natural disasters, especially flooding that keeps ravaging their investment.

 

 

Stakeholders’ worry

According to the stakeholders, absence of insurance cover for smallholder farmers is part of the reasons livestock agriculture was not growing in the country.

Although they acknowledged the importance of insurance in their business, they, however, lamented the absence of specific products tailored along their investment.

According to the Executive Director, Zynosism Nigeria Ltd, Dr. Kolade Adebayo, the insurance sector should create products that capture small farmers.

 

“The absence of insurance products for small farmers is costing the agricultural sector over N20 billion annually. We need insurance products that will aggregate small farmers cooperatively and provide cover for them. As such, insurance companies need to deal with poultry associations, rice farmers association and so on so that agricultural produce can be enhanced.

 

“Risk is an integral element of the farming industry, but the challenge we are having is that we don’t have the insurance partnership to cover most of our risks. The association of livestock farmers usually organize annual agric forums where we come together to discuss issues. For years we have always invited stakeholders from other sectors to rob minds together on ways of moving agric business forward. For over 10 years that we have been having this forum, while we have had many representatives from other sectors, we only see one person from the whole of the insurance industry. This is not good for the insurance sector.”

 

Similarly, the Chairman, SME Trade Group, Lagos Chamber of Commerce and Industry (LCCI) Mr. Biodun Oladapo, echoed Adebayo when he said that livestock business was still stunted in Nigeria because over the years there has not been insurance support to give it a boost.

 

 

Oladapo said: “We have seen little growth in livestock business in the country because we have not had adequate insurance support. Any farmer that has any insurance cover today got it because they wanted bank loans. Unfortunately, no bank in Nigeria will give any farmer loan without insurance cover.

 

 

“For the farmers that have insurance, when cows enter a rice farm and eat up the rice, the insurance companies will tell you that ‘cow eating rice’ was not covered. At the end of the day, no claim will be paid and the farmer is abandoned to his fate. Such incidents have contributed in impoverishing many farmers and the experience is causing apathy between us and insurers. So there is need for the insurance sector to introduce products that will cover all our risks.”

Touched by the outcry, the President of the Nigerian Insurers Association (NIA), Mr. Tope Smart, promised that the insurance industry would partner the agricultural sector going forward as part of measures to survive and thrive, saying that even the insurance sector was under threat of survival, and as such, should re-strategize and innovate to continue to exist.

 

 

This is not the first time that farmers would come out openly to bemoan losses to disasters, especially following their failure to take advantage of benefits provided by government through insurance.

Recall that last year, President Muhammadu Buhari had personally promised compensation to farmers whose investments were lost to flooding. It has, thus, become an annual ritual for the few farmers now in the business, as bandits and cattle herders have scared others out, to agonise over losses to flooding and other disasters including strange insects.

 

 

Raising the alarm

As a matter of caution and the need to be prepared, the management of Nigerian Agricultural Insurance Corporation (NAIC) has again drawn their attention to the ‘Red Flood Alert’ issued by the Nigerian Hydrological Services Agency (NHISA) with respect to some states of the federation.

NAIC’s alarm to farmers is to enable them prepare early by arranging insurance cover for their investments.

According to the Managing Director/CEO of the Corporation, Mrs. Folashade Joseph, the reminder underscores the need for farmers to keep abreast of the impact of the heavy rains, which is expected to peak between the months of August and October, 2019.

She advised all farmers, especially those covered by NAIC, to strictly adhere to best agricultural practices, as they have already been educated by the Corporation during various farmers sensitisation programmes on how to maintain sound house-keeping on their insured projects, thereby closing gaps of risk occurrence.

To consolidate on Federal Government’s seriousness in putting an end to the farmers’ plight, the National Insurance Commission (NAICOM), issued licences to more operators for agric insurance business.

FG’s commitment

In the past, about  $5 million was approved by Federal Government to enhance the activities of NAIC for adequate crop and livestock insurance, a gesture that was meant to support NAIC’s institutional reforms, strengthen operations and roll out agricultural insurance products.

The Federal Government said then that it understood the importance of risk management in agricultural investment and, therefore, decided to build its capacity and prepare it to effectively meet the insurance needs of the agricultural sector.

“As we continue to modernise the agricultural sector, we will ensure that farmers are protected from the effects of climate change. The devastating flood of 2012 was a wake-up call for the need to develop policies and risk transfer systems to protect the government and farmers from effects of climate change,” it said.

Apprehension

Last year, the rainy season, which typically runs from March to September, brought with it inevitable flooding, killing over 100 people.

The flooding, which submerged houses, farmland and other businesses, is always exacerbated by poor infrastructure and lack of planning to protect against the waters.

Already, flood has started taking over some parts of the country with houses and farmlands being submerged, thus exposing farmers to risk of losing their investment, considering the heavy rains still expected within the next few weeks into the month of October.

To further encourage the farmers, the management of NAIC had emphasised that the underwriting firm would always pay appropriate compensation to insured, whose agricultural farmlands were ravaged by the flood disaster across the country.

She urged insured farmers to make all efforts possible to avert and minimise the untoward effects of the torrential rains and floods on their farms by promptly informing the nearest NAIC office in their states of their travails so appropriate support will be extended to them in a timely manner with emphasis that the succour would be strictly for farmers insured under its policy.

Expert’s opinion

Despite efforts by government and insurance firms, a practicing farmer, Mr. Anga Tonya, had blamed the poor utilisation of agric insurance on ignorance on the part of farmers.

He described agric insurance as the best form of support for farmers to recoup their investment in the case of losses.

He said: “Agric insurance is very good. Over the years, farmers have not utilised crop insurance adequately and as a result they suffered colossal losses. The reason actually is due to ignorance and that is still the same reason a lot of farmers are not involved in it.

“Another reason is the cost implication. Most of the farmers don’t know what it costs. They think it is very expensive whereas it is something they can afford if only they take time to find out.

“I believe the best thing to do, moving forward, is to sensitise farmers on the benefits. Basic knowledge and information would make a lot of difference. When they know it will protect their interest and crop, they will go for it.”

Last line

As the raining season typically sets in again with all the threats already being visible through early signs of disasters as typified by flooding, it is expedient for farmers to tow the path of wisdom by approaching any of the licensed agric insurer for advice and the best insurance product to ensure his investment does not end in vain.

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FSB, IMF publish 2019 report on G20 data gaps initiative

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FSB, IMF publish 2019 report on G20 data gaps initiative

T

he Financial Stability Board (FSB) and International Monetary Fund (IMF), at the weekend, published the Fourth Progress Report – Countdown to 2021 on the implementation of the Second Phase of the G20 Data Gaps Initiative (DGI-2).

 

 

In a statement, IMF said the report will be submitted to the G20 finance ministers and central bank governors ahead of their meetings in Washington D.C. in mid-October.

IMF explained that data gaps limit the ability of policymakers and market participants to assess financial stability risks and economic developments in a timely and accurate manner. It noted that addressing these gaps has been an important priority for the G20 economies.

 

 

The report, which provides an overview of the progress since September 2018 and the challenges that remain in implementing the DGI-2 recommendations until the final deadline of 2021, shows that participating economies made additional progress in closing the identified data gaps. It also indicates that overall improvements were noted in coverage, timeliness, or periodicity of: securities statistics, derivatives data, sectoral accounts, international investment position, international banking statistics, and government finance statistics.

 

 

IMF, however, stated that challenges remain in fully implementing the DGI-2 recommendations by 2021.

“While substantial achievements have been made in promoting data sharing, continued efforts are still needed. Retaining high-level political support is essential to overcome remaining challenges,” the report stated.

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CBN: Banks’ capital adequacy ratio rises to 15.8%

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CBN: Banks’ capital adequacy ratio rises to 15.8%

D

espite the tough economy, Nigeria’s banking industry continues to show resilience as latest Central Bank of Nigeria (CBN)’s data indicates that lenders’ Capital Adequacy Ratio (CAR) further improved to 15.8 per cent in August 2019 from 15.60 per cent in April 2019.

 

 

Dr. Robert Asogwa, a member of CBN’s Monetary Policy Committee (MPC), disclosed this in his personal comment in last month’s MPC meeting communiqué, which was released by the apex bank at the weekend.

Asogwa, who cited CBN staff report, also noted improvements in the industry’s financial soundness indicators, with non-performing loan (NPL) ratio reducing from 11.0 per cent in April to 9.4 per cent in June and stability in key profitability indicators, such as Return on Equity (ROE) and Return on Assets (ROA).

 

 

CAR is a measurement of a bank’s available capital expressed as a percentage of its risk-weighted credit exposures.

CBN mandates systemically important banks and lenders with international subsidiaries to maintain CAR of 16 per cent and 15 per cent respectively, while banks without international subsidiaries should maintain CAR of 10 per cent.

Asogwa said: “Between last MPC meetings, key credit risk and bank performance indicators remained largely stable. CBN staff report shows that capital adequacy ratio as at August 2019 stood at 15.8 per cent (against a regulatory minimum requirement of 10-15 per cent).

 

 

“The non-performing loan ratio reduced from 11.0 per cent in April to 9.4 per cent in June and maintained the same level in August 2019 and this decline has progressed apparently since August 2018. The key profitability indicators ROE and ROA have also remained stable between the last MPC meeting and now, reaching 24.3 per cent and 2.3 per cent respectively as at August 2019,” he added.

According to him, further evidence of improvement in the industry’s financial soundness indicators is reflected in the modest increase in total bank credit in the months of July and August compared with the decline in June.

“Interestingly, the total bank credit, which had reduced in June 2019, recorded modest increases in July and August 2019 and partly attributed to the modest declines in the prime lending rate as well as new CBN directives on minimum loan to deposit ratio,” he said.

Also in his comments, another member of the MPC, Prof. Dahiru Balami, stated: “The Nigerian banking sector is resilient as presented by data on the Capital Adequacy Ratio (CAR), NPLs, Liquidity Ratio (LR), and Return on Equity (ROE) and Return on Assets (ROA).”

He attributed the resilience of the banking industry to, “the effectiveness and efficient regulation and monitoring efforts of the CBN policies.”

 

 

He, however, noted that exchange rate risks arising from banking industry exposure to foreign assets and liabilities and cyber-risks were headwinds of the industry.

According to him, “with the performance recorded by the financial sector in August 2019, CBN therefore, should continue to monitor closely the working of such financial institutions for early corrective measures to enhance the stability of the financial system.”

 

 

Similarly, in his comments, the Deputy Governor (Operations) of CBN, Mr. Folashodun Shonubi, opined that “growth in credit by the banking sector seems to have found a new impetus, probably in response to recent measures by the CBN. Sustained moderation in financial soundness indicators highlights the resiliency of the banking sector.

“It is gratifying to note the sustained improvement in the various measures of banking sector resilience. The industry capital adequacy and liquidity ratios remained above the minimum threshold, just as the non-performing loans ratio fell to 9.4 per cent in August 2019, from 11.0 per cent in May 2019, though it remained above the regulatory minimum.”

In her contribution, the Deputy Governor, Financial System Stability, CBN, Mrs. Aishah Ahmad, said: “Bank staff reports clearly indicate marked progress with the LDR Policy, introduced in July which prescribed minimum loan to deposit ratios for banks over a three-month period. Gross credit grew five per cent on average (N15.44 trillion at end June 2019 to N16.23 trillion on September 13, 2019); the highest figure in 19 months, without compromising asset quality (industry NPLs remained flat at 9.4 per cent).

 

 

“Significant portions of the new credit were channelled into key sectors like manufacturing, retail and commerce and agriculture. This brightens the prospects for output expansion, creating much needed growth momentum for the rest of the year.”

 

 

Interestingly, the International Monetary Fund (IMF) had, last week, cautioned CBN over its new LDR policy. In a statement it issued at the conclusion of the latest visit to Nigeria by an IMF staff team, led by the Mission Chief for Nigeria, Amine Mati, the Fund stated: “Banking sector prudential ratios are improving. However, new regulations to spur lending – which has recently increased – should be carefully assessed and may need to be revisited in view of the potential unintended consequences on banks’ asset quality, maturity structure, prudential buffers and the inflation target.

“Continued strengthening of banks’ capital buffers would enhance banking sector resilience,” the IMF added.

In a recent report, one of the global rating agencies, Moody’s Investors Service, had predicted that NPLs in Nigeria’s banking sector would decline to between seven and eight per cent this year, from 11.7 per cent at end of 2018.

 

 

The agency stated: “Higher oil prices will constrain new NPL formation while high loan-loss reserves will allow banks to write off some of their bad debts. These credit positives will be moderated by lingering risks from high loan concentrations and high delinquency levels.”

 

 

It added: “System-wide tangible common equity will be stable at 16 per cent of risk-weighted assets at year-end 2018, which will be sufficient to absorb losses under our baseline scenario. We expect subdued loan growth and prudent dividend pay-outs to support banks’ capitalisation metrics.”

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Border closure: FDC expects inflation to rise in Sept

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Border closure: FDC expects inflation to rise in Sept

C

iting shortages of some smuggled commodities occasioned by the closure of the Seme border, Financial Derivatives Company Limited (FDC) has predicted that Nigeria’s inflation rate is likely to climb to 11.22 per cent in September.

 

The firm stated this in a report obtained by New Telegraph at the weekend. If the prediction comes to pass, it will be the first increase in inflation after three months of consecutive decline.

As the FDC put it: “Our survey shows that headline inflation in September is likely to spike to 11.22 per cent. This is coming after three months of consecutive decline. This spike in the general price level would be driven partly by the closure of the Seme border, which has resulted in shortages of smuggled commodities, especially rice, turkey, chicken and baking margarine. The price of a 50kg bag of rice increased by almost 30 per cent to N24,000 per 50kg in September from N18,000 per 50kg in August. Also, consistent with this, is the monthly inflation which is projected to increase by 0.02 per cent to 1.01per cent (12.87per cent annualised).”

It, however, stated that the core sub-index (inflation less seasonalities) is likely to decline to 8.60 per cent from 8.68per cent in the month of August, supported by the stability of the exchange rate. The firm noted that the naira was relatively stable within a band of N358-N360/$ in the parallel market during the period.

 

Aside from the impact of the border closure, other inflation stoking factors noticeable in September, according to the FDC, include, a 5.65 per cent increase in Broad money supply in the month of August, as stated in the Monetary Policy Committee (MPC) communiqué; credit to the private sector rising by 2.22 per cent to N24.83 trillion during the period, due to the mandatory 60per cent Loan to Deposit Ratio (LDR) and the decline in lending rates (18-20per annum).

 

Furthermore, the firm pointed out that “the exchange rate was relatively stable across all market segments in September, supported largely by the CBN’s continuous intervention in the forex market (an increase of 7.25 per cent to $845.11 billion).”

However, it stated that the frequency and amount of intervention in subsequent months could be limited by the steady depletion of the gross external reserves, adding that: “The gross reserves lost approximately $2.09billion in the last month (and) now at $41.52billion.”

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British regulator reviews JPMorgan metals trading amid U.S. probe

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ritain’s financial services regulator is examining allegations of precious metals market manipulation by JPMorgan Chase & Co traders following criminal charges by U.S. authorities, Reuters reported at the weekend.

The UK Financial Conduct Authority (FCA) is one of the various authorities that JPMorgan has previously said were investigating its metals trading, according to one of the people, who declined to be named due to the sensitivity of the matter. The watchdog has requested documents and other information from JPMorgan, the source said.

The exact scope of the FCA scrutiny or whether it will result in any charges was unclear.

The U.S. Department of Justice (DOJ) has charged five current and former JPMorgan metals traders, who worked in New York, London and Singapore, with alleged price manipulation between 2007 and 2016. Two of them have been charged in parallel by the Commodity Futures Trading Commission (CFTC). The joint investigation is ongoing, a DOJ official has said.

One of the traders was charged in 2018, and four this year. Two have pleaded guilty to manipulating prices. The lawyers for the three most recently charged, in September, said their clients would contest the allegations against them.

JPMorgan said in an Aug. 6 regulatory filing that it was “responding to and cooperating” with various investigations relating to trading practices in the metals markets.

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Business

Africa Re wins NAIPCO insurance development award

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frican Reinsurance Corporation (Africa Re), a leading pan-African reinsurance company and the largest reinsurer in Africa in terms of net reinsurance written premiums has received the ‘2018 Outstanding Insurance Development Promoter Of The Year’ award of the National Association of Insurance and Pension Correspondents (NAIPCO).

 

 

NAIPCO, a body of insurance and pension journalist in Nigeria, after a critical analysis of Africa Re’s immense contribution to the growth of insurance industry in Nigeria, nominated the reinsurer for the award.

The award was received on behalf of Africa Re by Ken Aghoghovbia, deputy managing director/COO of the company.

 

 

“This award is in further recognition of your strong commitment to the development of insurance in the African Continent and Nigeria specifically exemplified by your recent partnership with the IFC, a member of the World Bank Group to help insurers in Nigeria develop innovative agricultural insurance products for small holder farmers, the organizers said.

 

 

“Again next month between September 3rd and 5th you are partnering with the College of Insurance and Financial Management to train and build capacity for Nigerian insurers on product pricing and development, among other capacity building efforts you are doing in the Nigerian market.”

“These are efforts that we believe will unlock opportunities in the agricultural sector for growth of the insurance business in Nigeria, and other business lines in the market,” the organizers said.

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N5trn debt: Finance minister, BPP others back AMCON’s recovery drive

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inister of Finance, Mrs Zainab Shamsuna Ahmed, has charged the management of Asset Management Corporation of Nigeria (AMCON) led by Mr. Ahmed Kuru, to do everything with the powers of its newly-amended Act to recover the N5 triilon debt owed the Corporation by a few individuals and organisations in the country.

Also, the Director-General, Bureau of Public Procurement (BPP), Mr Mamman Ahmadu, has declared BPP’s willingness to collaborate with AMCON in the quest to recover the debt, which he said will help liberate the economy as well as improve the commonwealth of the nation. The BPP boss said, the bureau has intensified its due diligence process and will ensure that those seeking contract from the government are scrutinised to establish the fact that they are not on the list of AMCON debtors before contracts are awarded.

The finance minister who made the call in Abuja at the weekend during the quarterly briefing of the Ministry of Finance, attended by agencies under the supervision of the ministry, while commending AMCON on the national assignment, however, said she expects a lot more from the Corporation, especially now that President Muhammadu Buhari has signed the amended 2019 AMCON Act into law, which gives additional powers to AMCON to deal with the obligors.

“AMCON must ensure that the debts are recovered before the sunset, which is around the corner. If AMCON at sunset AMCON fails to recover the huge bad loans, the debt will become government problem, which the government is not willing to carry. Therefore, everything must be done to ensure that AMCON recovers the debt from the obligors because it will have a huge positive impact on the economy,” the minister said.

While urging all the agencies under the ministry’s supervision to always remember the 11 priority areas of President Muhammadu Buhari’s administration in the discharge of their duties, the Minister added that the quarterly meeting had become critical because it creates the enabling platform for sister agencies of government to cross-fertilise ideas for improved collaboration and delivery.

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