Interbank money market to record N607bn net inflow in June

THE interbank money market is expected to record net inflow of N607 billion this month as well as frequent liquidity mop ups by the Central Bank of Nigeria, CBN, through treasury bills. According to projections by analysts at FSDH Merchant bank, the market will record inflow of about N1.36 trillion in June from the various maturing government securities and statutory allocation funds from the Federation Accounts Allocation Committee, FAAC. On the other hand the market will experience outflow of about N753 billion from various sources, leading to a net inflow of about N607 billion.

“The market is expected to be liquid in the month of June 2019, this may necessitate the issuance of OMO to mop-up the liquidity in the system”, they said.

This projection was confirmed by development in the market last week, with excess liquidity rising by 46 percent to N743 billion at the close of the week from N510 billion at the beginning of the week. The increased liquidity which was buoyed by inflow of N177.05 billion from matured treasury bills (TBs), was in spite of outflow of N476 billion through secondary market (Open Market Operations, OMO) bills issued by the CBN to mop up excess liquidity in the market. Responding to the increased level of liquidity, cost of funds moderated downwards with average short term interest rate falling by 43 basis points (bpts). Data from FMDQ showed that interest rate on Collateralised (Open Buy Back, OBB) lending fell by 28 bpts to 10.86 percent last week from 11.14 percent the previous week.

Similarly, interest rate on Overnight lending fell by 57 bpts to 11.43 percent last week from 12 percent the previous week. However, in spite of inflow of N177 billion from maturing TBs this week, cost of funds is expected to rise as the apex bank is expected to sell primary market TBs as well as issue OMO bills to mop up excess liquidity in the market. “In the new week, treasury bills worth N176.56 billion will mature via OMO; however, we expect interbank rates to rise further amid anticipated strain in financial system liquidity in the absence of FAAC,” said analysts at Lagos based Cowry Assets Management Limited. I&E attracts $2.1bn in May

The Investors and Exporters, I&E, window attracted $2.1 billion in May. This represents foreign capital importation through the window during the month. This, however, represents 15 percent decline when compared to the $2.46 billion recorded in April. The $2.1 billion recorded in May is also the lowest foreign capital imported through the window since October 2018. Meanwhile the volume of dollars traded (turnover) in the window rose by 47 percent last week to $728.4 million from $496.5 million the previous week. The naira, however, remained relatively stable in the window as the indicative exchange rate stood at N360.75 per dollar last week, as against N360.74 per dollar the previous week. But the naira appreciated in the parallel market by 40 kobo last week as the market exchange rate dropped to N359.3 per dollar from N359.7 per dollar the previous week. Meanwhile analysts have lamented the continued dominance of foreign portfolio investment in the amount of foreign capital imported into the country, saying this reduces the effectiveness of exchange rate management.

According to analysts at FSDH Merchant Bank, “Available data from the CBN shows that Foreign Direct Investments accounted for only 11 percent of the total capital importation into the country between 2010 – 2018. Foreign Portfolio Investments (FPIs) accounted for 70 percent of the total capital importation during the period while other investments accounts for 19 percent. The high FPIs reduce the effectiveness of any exchange rate management regime. This is because of the distortions that are usually associated with the Foreign Portfolio Investments particularly in a small developing country like Nigeria.”

Stakeholders challenge MfBs on regulatory compliance

STAKEHOLDERS in the Microfinance Bank, MfB sub-sector have stressed the need for operators to understand regulatory requirements in bank examination.

Meanwhile, they said that more and stiffer competition from non-banking financial players especially the financial technology (fintech) firms, would impact on the performance of the subsector. These positions were expressed at a one day capacity building programme organised by the National Association of Microfinance Banks, NAMB, Ogun State Chapter, in partnership with Bukland Global Ventures with the theme: “Understanding Regulatory Requirements in Bank Examination”. Chairman, NAMB Ogun State Chapter, Mr. Bunmi Ogunrinde, said in his remarks that corporate governance is key to the success of individual institution and the collective sector of the financial system.

Ogunrinde stated: “Regulation between the regulator and the operators is very important to the success of the sub sector in the financial system. In our industry the issue of corporate governance is key to the success of individual institution and the collective sector of the financial system. The regulator and the operator are collaborators toward the success of the financial system.” Speaking on the topic, “Regulatory Compliance Model for MfBs”, former managing director, Bancorp Microfinance Bank, Mr. Jola-Michael Samson, pointed out that the regulators expect the MfBs to render regular and timely returns of operations, install robust and experienced boards of directors, employ competent and committed management and staff, develop a robust enterprise-wide risk management framework for their operations and also develop innovative products that would suit the needs of their target clients. He added that the MfBs sub sector would experience stiff competition from non-banking financial players especially the fintech which would be prominent in the industry, advising practitioners to brace up to the new challenges by partnering with reliable fintech companies while embracing technology for wider outreach and sustainability. Noting that the sub sector would be highly capitalised with fewer players left , he said “Microfinance banking is a concept that has great potentials to alleviate poverty in a large country like Nigeria.

The emergence of fintech is to facilitate the achievement of the financial inclusion goals that will eventually aid poverty alleviation.” In his lecture titled “Corporate Governance and Risk Management,” former Director of the Nigerian Deposit Insurance Corporation, NDIC, Mr. Olalekan Jinadu, said that corporate governance and ethics have become real necessities for enterprise development in Nigeria. He said: “Company executives can no longer afford to pretend that business is not bound by any ethics other than abiding by the law. The isolation of ethics or ethical behaviour from business dealings have in so many instances in the past led to business and system failures with catastrophic consequences.” Also, senior bank examiner, Mrs. Kehinde Osifeso, said that the success of Risk Based Supervision, RBS, as an effective supervisory tool depends on its ability to assist regulators in the timely identification of weak financial institutions in the banking industry so that prompt corrective intervention can be applied in order to prevent contagious effect on other sound banks. Osifeso said that the effectiveness of the risk management control functions will improve the risk profile of an institution, if the board could put relevant policies in place that would assist in addressing the various identified inherent risks in operations. “The importance of capital and earnings in the assessment of the institution’s risk rating cannot be overemphazied.

Adequate capital plus quality earnings will enhance the bank’s ability to absorb any unexpected shocks that may arise from the risks the institution may have been exposed to”, he added. In his paper titled “Ethics of Lending and Credit Management in Microfinance Institutions,” managing director, Alekun Microfinance Bank, Mr. Joshua Ukute, said that the purpose of credit management is to ensure that all loans granted are repaid as and when due, adding that microfinance institution must review the credit management policies and procedures in line with the dynamics of financial markets and changing environment and technology.

 

 

Source: Vanguard

Banks CEOs Decry Debtors’ Smear Campaign

The Committee of Banks’ Chief Executive Officers in Nigeria has condemned the action of bad debtors who now resort to smear campaigns against banks and their chief executives in order to either delay repaying loans or avoid meeting their debt obligations completely. The Body of Banks CEOs, as the group is known, during a meeting in Lagos, to review what it described as the “harassment and criminalisation of banks’ CEOs by law enforcement agencies”, noted that chronic bank debtors are now in the habit of enlisting law enforcement agencies including police, judiciary and state security to harass members.

It added that this was unacceptable, especially when these loan defaulters are known to have abused court processes, as well as using social media to propagate their smear campaign against the banks.
In a communique issued after the meeting, they noted that these activities by the law enforcement agencies and the bank debt defaulters were capable of adversely affecting the banking system through the CEOs reputation among international banks, destroy the economy, and called for these to be checked and managed.
To tackle the assesses emerging threat to banking business in Nigeria, the Committee of Banks’ CEOs, therefore, outlined a five-step resolution of actions that banks would need to take, which were arrived at after members discussed and considered different options for dealing with the issue. Specifically, the banks’ CEOs said there was an urgent need for all banks to cooperate and collaborate to identify and ex-communicate chronic debt defaulters.

“This goes beyond publishing names of such defaulters in national media (which is inevitable), but involves all banks speaking with ‘one voice’ and sharing information about those entities, and refusing to do further business with them until they settle their obligations”, the communique noted. To avoid the kind of crisis that rocked the banking sector 10 years ago, the CEOs urged all agencies and stakeholders to step up and help fight the inherent menace of chronic loan defaulters. According to them, the banking industry is the backbone of the Nigerian economy, therefore, it is the responsibility of all stakeholders – regulators, police, judiciary, corporate organisations and media to help save it from activities of delinquent debtors.

Besides, the group resolved that all cases of defaults would be presented and passed through the Bankers’ Committee Ethics Committee just as it intends to work with legal councils and come up with ways and strategies to manage related cases effectively without disrupting businesses and the system.

Source: The Guardian

ACCESS/DIAMOND BANK MERGER: We expect final regulatory approval in HI’19 – Wigwe

The Chief Executive Officer, Access Bank Plc, Mr Herbert Wigwe, in this interview, spoke on a lot of issues surrounding the proposed merger between Access Bank and Diamond Bank Plc as well as the benefits of the merger to the shareholders, customers and banking industry among others. Excerpts:

WHAT prompted Access Bank to a merger with Diamond Bank?
It (the merger) followed the signing of the Memorandum of Agreement and announcement of headline terms. In the memorandum of agreement to get into a merger with Diamond Bank, we believe that the combined enterprise will be a large diversified bank with an extreme extensive retail foot print. Together we will have 27 million customers which is basically the largest customer base of any bank in the continent, about 33,000 Point of Sale, PoS, terminals, and 3,000 Automated Teller Machines, ATMs, as well as 13 million mobile customers. Read More