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Insider lending in banks needs regulatory change

The Central Bank of Nigeria (CBN), on the 29th of April 2021, announced the removal of the board of directors of Nigeria’s oldest bank, First Bank of Nigeria (FBN), as well as that of its holding company, FBN Holdings Plc (FBNH). The dissolved Boards were chaired by Ibukun Awosika and Oba Otudeko, respectively. The CBN, in an intriguing twist, reinstated Adesola Adeduntan, who two days earlier was removed by the Board of FBN as Managing Director.

There were several infractions that were allegedly committed by the bank, including the removal of Dr. Adeduntan without regulatory approvals, which understandable drew the interventions of the CBN. However, non-performing loans arising from insider lending was widely reported to be the underlining cause of the upheaval at the bank. The CBN Governor, Godwin Emefiele, alluded to this when he said that the bank was in a “grave financial condition with its Capital Adequacy Ratio (CAR) and Non-Performing Loans ratio (NPL) substantially breaching acceptable prudential standards.”

Emefiele further said in a statement that “The insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank. The CBN’s recent target examination as at (sic) December 31, 2020 revealed that insider loans were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over 3 years despite several regulatory reminders.”

The chain of events was reportedly triggered by a letter of the 26th of April, 2021, from the CBN, signed by its Director of Banking Supervision, Haruna Mustapha and addressed to the Chairman of the Board of FBN. In the letter, CBN noted that after 4 years the bank is yet to perfect its lien on the shares of Otudeko in FBNH, which collateralized the restructured credit facilities for Honeywell Flour Mills, contrary to the terms for the restructuring of the company’s credit facility. Otudeko is also Chairman of Honeywell Group, of which Honeywell Flour Mills is a subsidiary.

It is important to note that Honeywell has been in a major litigation with another bank, Ecobank, over its credit facilities. An appeal in the case has been lodged at the Supreme Court after the Court of Appeal on the 14th of December 2020, held that Honeywell was indebted to Ecobank to the tune of N3.5 billion.

Insider lending is very common in Nigerian banks. In its 2017 Nigerian Banking Sector Report, Afrinvest West Africa Limited reported that out of 14 banks profiled, only four banks had a ‘low’ level of insider lending. The other ten banks ranged from ‘moderate’ to ‘high.’ With the challenges faced by the Asset Management Corporation of Nigeria (AMCON) with respect to toxic bank loans, capital erosion and difficulty in monetizing seized assets, there are fears that the burden of bad loans in Nigeria would be borne by the taxpayers. AMCON’s current indebtedness to the CBN according to its Managing Director/CEO, Ahmed Kuru, as reported in the media in March 2021, stood at N4.7 trillion. It is only wise and prudent for the banking industry and regulators to not only try to solve the current crisis of toxic loans but go back to the root to review the laws and regulations concerning loans and borrowing. A good place to start is insider lending.

During the public hearing on the bill to amend the Banking and Other Financial Institutions Act (BOFIA) last year, the Nigerian Deposit Insurance Corporation (NDIC) submitted a memorandum to the Senate Committee on Banking, Insurance and other Financial Institutions, seeking the express prohibition of insider loans in the banking industry. In the memorandum, NDIC proposed a criminalization of insider lending by directors of a bank, making it an offence punishable with both imprisonment and fines. The proposal was obviously rejected, as BOFIA 2020 permits insider lending.

Under BOFIA 2020, the duty with respect to secured loans is simply one of disclosure. This is governed by section 17 of the Act, which stipulates that a manager or other officer of a bank who has personal interest in any advance, loan or credit facility must declare the nature of such interest to his or her bank. Where it is a director of a bank who is in anyway, directly or indirectly, interested in the grant of an advance, loan or credit facility by the bank, he or she shall declare the nature of such interest before the meeting of the board of directors of the bank at which the request for the advance, loan or credit facility is first taken into consideration. Where the interest is in respect of an advance, loan or credit facility to be granted by another bank, the director shall declare the nature of the interest to the CBN in writing prior to the grant of the advance or credit facility.

Failure to make the applicable disclosures constitutes an offence punishable with fine or imprisonment or both. A director is, however, not duty bound to disclose, where his or her interest in a company seeking the credit facility is less than 5% of the shares, or where the CBN regards the interest of the director as immaterial.

However, the provisions with respect to unsecured loans are more stringent and require approvals of the CBN. They are governed by the provisions of Section 19 of the Act, which states that a bank requires the prior approval of the CBN to give unsecured advances, loans or unsecured credit facilities of an aggregate amount in excess of N1 million to its directors, significant shareholders; or any firm, partnership or company in which it or its director(s) or significant shareholder(s) have an interest. A bank also requires the prior approval of the CBN to extend unsecured advances, loans or unsecured credit facilities to its officers and employees which in the aggregate for the officer or employer is in excess of his or her one year’s emolument.

The BOFIA Act 2020 bars a bank from lending more than 5% of its paid-up share capital to any one of its directors or significant shareholders. Furthermore, a bank’s aggregate exposure in lending to its directors and significant shareholders must not exceed 10% of its paid-up share capital. The Act also provides that credit extended by a bank to any of its directors or significant shareholders must be on the same terms and conditions as those prevailing at the time for comparable transactions by the bank with persons who are not directors or shareholders of the bank. It should not involve more than normal risk or present other unfavorable features, and it must follow the same credit appraisal procedures as transactions with persons who are not directors or shareholders of the bank. Under the CBN’s Code of Corporate Governance for Banks and Discount Houses in Nigeria, banks are to disclose their “insider-related credits” in their annual reports.

Directors are in a relationship of trust with their companies. Section 305 of the Companies and Allied Matters Act (CAMA) 2020 provides that “a director of a company stands in a fiduciary relationship towards the company and shall observe utmost good faith towards the company in any transaction with it or on its behalf.” A director is to act at all times in what he believes to be the best interests of the company as a whole, so as to preserve its assets, further its business and promote the purposes for which it was formed.

The adjectives used by CAMA for a director in relation to his company are ‘faithful’, ‘diligent’, ‘careful’, and ‘skillful’. In this wise, the CAMA in section 296 generally prohibits companies from giving loans to its directors or directors of its holding company or giving guarantees or providing any security in connection with a loan made to such director. This does not, however, apply to companies whose ordinary business includes lending of money or giving of guarantees such as banks.

One can then argue that insider lending results in a conflict of interests – the director’s personal business interests versus the interests of the bank. The loose regulations governing insider lending makes the director’s position susceptible to abuse as has been the case too many times in the Nigerian banking industry.

One cannot deny the impact of the country’s weak and inefficient legal system as well as poor enforcement of legal and regulatory provisions on toxic, non-performing loans, which are on the increase. However, there has to be tougher protocols beyond mere disclosure for insider lending. While a prohibition of insider lending as suggested by NDIC might be too stringent, or even harsh, the current regulatory regime is susceptible to abuse. More stringent measures are required, which would balance the interests of directors and/or shareholders with those of depositors and other stakeholders.



FirstBank emerges Second Most Admired Financial Services Brand in Africa

First Bank of Nigeria Limited, Nigeria’s oldest bank and one of the biggest financial institutions in the country, has been ranked the “Second Most Admired Financial Services Brand in Africa” – for the second straight year – at the 2021 Brand Africa 100: Africa’s Best Brands event, which held on Africa Day, on 25th May, 2021.

Brand Africa is an intergenerational movement to inspire a great Africa through promoting a positive image for the continent, celebrating its diversity, and driving its competitiveness. It is a brand-led movement, which recognizes that in the 21st century, brands are an asset and a vector of image, reputation and competitiveness of nations, FirstBank said in a statement sent to Financial Nigeria.

With over 127 years history, FirstBank has its financial services footprints – through its subsidiaries – in over half a dozen countries across three continents. The bank’s international business presence includes FBN Bank (UK) Limited in London and Paris, FBNBank in the Republic of Congo, Ghana, The Gambia, Guinea, Sierra Leone and Senegal, as well as a Representative Office in Beijing.

“We are grateful to Brand Africa for the back-to-back recognition as the ‘Second Most Admired Financial Services Brand in Africa,’” the Chief Executive Officer of FirstBank, Adesola Adeduntan, said to express his appreciation for the recognition of the bank. “This is a testament to the impactful role we are playing in promoting socio-economic development in Africa, which includes being at the forefront of bridging the financial inclusion gap as well as our commitment to supporting Small and Medium Enterprises because of the critical role they play in economic growth and development.” He further noted that FirstBank has created a functional ecosystem for SMEs to thrive through various value adding solutions and value propositions.

FirstBank was recently awarded the 2021 “Retail Banking CEO of the Year Nigeria,” “Most innovative Retail Banking App Nigeria,” and “Best CSR Bank Nigeria” awards by Global Banking and Finance magazine.



Why aren’t the best-known business loan companies available In Nigeria?

While life is going back to normal, the economy in Nigeria is taking its time to build back its strength. This is understandable, as even those businesses that have been able to continue operating locally throughout the pandemic have struggled with international business. The global outlook is still uncertain, and individuals and businesses are still struggling.

Nigerian small business owners that are doing their best to keep the lights on may have turned to private lenders. These business loan companies operate independently from the banks and offer alternatives to the traditional financing options.

However, if you’ve been looking for loans, you may have noticed that some of the best-known business loan companies operating globally do not offer loans in Nigeria. This is strange, considering that Nigerian banks are renowned for their reluctance when it comes to providing business loans.

Why aren’t the best-known business loan companies available in Nigeria? Let’s take a look at how these companies function to get some context.

Private Business Loan Companies

Private business loan companies around the world provide loans without the strict conditions that banks require. While a business owner with no assets or co-signers will struggle to get a big loan from a bank, they can turn to private lenders.

These lenders are able to provide loans that the banks cannot because they are not bound by the same regulations. Governments regulate banks and public institutions, but private business loan companies get relatively free rein.

This benefits many new and struggling small businesses. However, this also leads to major problems. The lack of regulation on private lenders was a significant component in the 2008 financial collapse.

Small businesses can also be burnt by unregulated practices. Unlike traditional lenders, private loan companies can mislead borrowers into taking loans they will never be able to afford. This practice is called predatory lending, and it is the catalyst for many companies (and individuals) ending up in a cycle of debt that ultimately bankrupts them.

While the best-known loan companies offer some excellent products, even some of them engage in unscrupulous practices. Nonetheless, they provide a service that is essential to economies around the world.

Do regulatory measures keep these companies out of Nigeria?

Regulation in Nigeria

Traditionally, the private lending industry has been allowed to operate with little regulation in Nigeria. Lenders have provided quick, unsecured loans requiring little documentation. Many small businesses have taken out these kinds of loans from local companies, as well as the international companies that do operate in Nigeria.

We can see from this that regulation is probably not what has kept well-known business loan companies out of Nigeria. There are conditions businesses have to meet in order to operate in Nigeria, but this is true everywhere and the barriers to entry are not too significant.

In fact, with the collapse of a number of Nigerian banks in the 2010s, there is a lot of room for private lenders, both local and international. Many local fintech businesses have filled this void, but there is always room for more. It is more likely that foreign lenders have avoided branching out to Nigeria due to fears over a lack of opportunity for growth and the economic strife the country has faced.

Interestingly, as of 2021, new regulations now govern financial services providers in Nigeria. This is due to the significant issues banks have faced and the economic pressure this has put on individuals and small businesses. These new regulations are intended to deter unsecured lending and could well keep the best-known business loan companies from trying to break ground here.

Can I Get a Small Business Loan in Nigeria?

The absence of foreign business lenders in Nigeria has not traditionally been a problem for local small businesses. After all, there are many companies providing unsecured loans here which can be sourced with very little documentation.

However, since the new regulations have been put in place, business loan companies have an upward battle, and this could well make it more difficult for small businesses. In some cases, this will be for the best, as desperate business owners cannot take out loans that will end up bankrupting them.

It is important that Nigeria’s banks step up and start offering better loan options to small business owners. They won’t be able to provide the range of offerings unregulated private lenders once could, but they may come up with products that better serve the businesses they target.

Are There Alternatives?

If you are unable to get a loan for your small business, what are your alternatives?

There is no simple answer to this question, and it ultimately depends on the type of business as well as other factors. The fintech and medtech industries are still popular among investors. If your company operates in one of these sectors, you may be able to find an angel investor or equity investment.

There are other industries in which investment is common, so be sure to do your research to find out whether you can get investors interested.

Otherwise, you can try speaking to a financial planner or bank about the options they recommend. It is possible to use personal loans for your business in certain cases, and this may be an additional option for you.

The best-known business loan companies don’t operate in Nigeria and are unlikely to come anytime soon. However, there are alternatives for small businesses looking for unsecured loans.



Mutual Benefits Assurance pays N19.3bn claims in 2020

Mutual Benefits Assurance Plc said it paid N19.3bn claims to its clients in the 2020 financial period.

It said this in a statement on its 2020 audited financial results released on the floor of the Nigerian Exchange Group.

“The combined claims paid by Mutual Benefits Assurance Plc and its subsidiary, Mutual Benefits Life Assurance, was N19.37bn representing an eight per cent decrease on the claims paid last year,” it stated.

Mutual Benefits also said its gross premium written rose by seven per cent to N19.98bn in the period under review from N18.69bn recorded in 2019.

The results showed that profit after tax rose by 41 per cent from N3.61bn in 2019 to N5.10bn in 2020, while profits before tax stood at N5.04bn, representing a 34 per cent increase from N3.75bn in 2019.

The company recorded a 74 per cent growth in shareholders’ fund which rose to N23.35bn from the N13.43bn of 2019.

Total assets also grew by 22 per cent from N67.78bn in the previous year to N82.87bn in the year under review.

Insurance contract liabilities for the year under review rose by 25 per cent to N17.57bn from N14.1bn in 2019.

A breakdown of the claims profile for 2020 revealed that the life business paid a total of N3.54bn in group life claims, maturity claims accounted for N7.76bn, while credit life claims was N140m.

Other claims paid included individual death claims, annuity claims, surrender claims and partial withdrawal claims at N213m, N44m, N3.65bn and N870m respectively.

The gross claims paid for non-life business was N3.14bn. Motor claims were N919m, fire claims N476m and general accident claims were N663m.

Special risks (Aviation/oil & gas) and marine claims were N737m and N349m respectively.

Commenting on the company’s performance, the Managing Director, Mutual Benefits Assurance Plc, Femi Asenuga, said, “The financial result is a testament of the resilience of the Mutual Benefits brand; strong, well-capitalised and dynamic.

“The year 2020 was difficult globally with Nigeria not being an exception; organisations also had to contend with the devaluation of the naira, COVID-19 and other issues.”

The Managing Director/Chief Executive Officer, Mutual Benefits Life Assurance Limited, Mr Ademola Ifagbayi, said, “Our business continuity plan enabled us to be there for our customers at their hours of need.

“This is attested to by the volume and quantum of claims we settled in 2020 and the speed with which we did it.

He added that the quantum of claims paid was a proof of the company’s commitment to its customers.


Source: Punch

Existing Companies and the Requirements of Issued Share Capital Under the CAMA 2020

All Existing Companies, Esteemed Customers and the General Public are hereby informed that the Minister of Industry, Trade and Investment has approved an amendment to Regulation 13 of the Companies Regulations, 2021 allowing an extension to the period for complying with the requirements of issued share capital under Section 124 of the Companies and Allied Matters Act 2020 (CAMA) by Existing Companies with unissued share capital up to 31st December 2022.


Existing Companies with unissued share capital are advised to take advantage of the extended period to comply with the requirements of issued share capital under the Section.

All Existing Companies are further advised that in line with the definition of “share capital” in Section 868 CAMA as “the issued share capital of a company at any given time”, any share capital of a Company that shall remain unissued after 31st December 2022 shall not be recognised as forming part of the share capital of the Company until the share capital of the Company is fully issued or reduced accordingly.

The General Public, all Existing Companies and Esteemed Customers should note that any application filed in compliance with Section 124, CAMA after the extended date shall attract the applicable penalty prescribed under the Section and the Companies Regulations 2021.


Source: KPMG

Millennials and future of the Nigerian Stock Exchange

An article by Helen Oji published recently by The Guardian newspaper expressed concern about the future of the Nigerian stock market in the face of waning interest from millennials who are increasingly turning to alternative investment options in micro-finance, fintech, and cryptocurrencies.

Stakeholders are reportedly worried about losing market patronage on the exit of the older generation, who thus far form the largest segment of investors.

This article piqued my interest and mirrored the outlook of millennial investors I had interacted with in the past who laughed and sighed when I suggested the Nigerian stock exchange as a viable investment option. What I found most concerning was the stark contrast between young Nigerian investors and my colleagues from business school in the UK, who have constantly badgered me to scout investment opportunities for them in Nigeria. This article examines the long-term potential of Nigerian equities and aims to predict patterns of growth by analyzing policy, social trends and economic data.

A 2008 study investigated the connection between stock market performance and economic growth in Malaysia by using annual data on real GDP growth and the Kuala Lumpur composite index. Findings revealed that causality runs from the stock market to economic activity and not the other way around. Therefore, policymakers have a significant role in ensuring the smooth operations and growth of financial markets. In recent times, a large portion of global stock trading volumes has been driven by retail trade due to the democratization of access to the markets by fintech applications. For example, Robin Hood, a fee-less trading app, recorded $350 billion worth of transactions in 2020 alone. Several mobile trading applications have been launched in Nigeria over the past few of years, leading to an uptick in retail trading volumes on the Nigerian Stock Exchange (NSE).

One of the most significant events within the fin-tech space in recent times was the first issuance of a sub-broker license for digital platforms to Chaka (a retail trading application). In December 2020, the Securities and Exchange Commission (SEC) released a statement banning Chaka for operating “outside the regulatory purview of the Commission and without requisite registration, as stipulated by the Investment and Securities Act 2007.” This came on the heels of a draft publication released by the SEC in July 2020 containing proposed rules for collaboration between fintech operators and brokers. Chaka understandably did not realize the need to obtain the license, leading to their temporary ban.

Subsequently, a successful dialogue between Chaka and the SEC led to a resolution and Chaka became the first company to obtain a sub-broker license for digital platforms. According to TechCabal, Chaka’s CEO noted upon obtaining the license that “We’ve built a great relationship with SEC that we think will be beneficial for the whole ecosystem moving forward.” This was a major victory for the fintech space, as there now exists a clear regulatory framework for innovators and investors to work within. The SEC has a major role in promoting the stock market’s development and expansion over the next few years; ensuring fluid communication with stakeholders will be a significant factor in the growth of investor confidence and the market as a whole.

The Nigerian Stock Exchange was founded in 1961 and has 161 listed companies across a number of sectors. Many of the companies are market leaders within the continent and have expanded their operations significantly with Nigeria as a base. For example, Access Bank started in Nigeria and now has subsidiaries in the Democratic Republic of the Congo, Ghana, Kenya, Rwanda, Gambia, Sierra Leone, Zambia, and the United Kingdom. Many other companies on the NSE, such as Dangote Cement, UBA, and Oando have experienced similar growth and expansion. If this trend continues, it is fair to assume that Nigerian companies will possess a significant market share of the continent’s major industries. While many young Nigerians have shied away from the NSE, several foreign investors have realized Nigeria’s potential and placed a bet on its growth. Zenith’s Bank’s 2nd, 3rd, and 4th largest shareholders are Invesco Limited, Russel Invest Management Limited, and Mirae Global Asset Investments.

These three companies are based in New York and London. Most of the blue-chip companies on the NSE have similar patterns in shareholding and in my opinion, this poses a large risk to country’s future growth. It could be argued that if foreign companies increase their dominance on the NSE, Nigeria will miss out on a large portion of dividends from major companies as they would be repatriated to investors outside of the country. A number of Nigerian companies such as GT Bank and Seplat Petroleum Development Company have been able to secure dual listings on the NSE and the London Stock Exchange (LSE). These have enabled access to a far wider pool of investors who have acquired shares in large amounts and driven prices higher over the past few years. Seplat’s share price has risen from N200 per share in January 2016 to N700 as at June 2021.

The global market crash of 2008 led to the Dow losing $1.2 trillion of value in a single day. At this point, investors sold their stocks in panic and left the market in droves. While this was the point of maximum loss, it was also the point of maximum opportunity, and the few who recognised this were able to capitalise and multiply their wealth over the following years. Warren Buffet was one of such investors; during the financial crisis he bought large amounts of shares in American companies, and these investments were primarily responsible for making him one of the wealthiest people in the world.

In 1979 India faced its worst recession to date due to drought, falling oil prices, and political instability. The BSE SENSEX is an index comprising of 30 major companies on the Bombay Stock Exchange. SENSEX has been one of the best performing indexes in the world, providing a compounded annual growth rate of 16.1% from 1979 to 2019. While economic shocks at different points in this time period led to temporary weakness, an investment of N10,000 in 1979 would have provided a return of over N45,0000,000 as of 2019. Macro-economic similarities and Nigeria’s current economic challenges lead me to believe that we stand at a similar crossroad as India in 1979. While many of the companies on the NSE provide value and are growing rapidly, they are significantly undervalued. Investors who capitalise on low stock prices and accumulate shares in market-leading companies may face a similar fate as those who invested in India after its largest recession and global equities in the aftermath of the 2008 financial crisis.

One of my favourite indicators for analysing stocks is the price to book ratio. According to Investopedia, “Companies use the price-to-book ratio (P/B ratio) to compare a firm’s market capitalisation to its book value. It’s calculated by dividing the company’s stock price per share by its book value per share (BVPS)”. Book value per share is derived by subtracting a company’s total liabilities from its total assets. If a company’s price to book ratio is one, its share capital is equal to its assets minus liabilities, and the company is reasonably valued. A stock with a price to book ratio of 3 or under is generally considered a good buy. However, the retail frenzy surrounding global stocks has driven companies to high price to book ratios in recent times. For instance, Tesla’s P/B ratio is currently at 26; this means that Tesla’s share capital is valued at 26x its assets minus liabilities. This leads me to believe that Tesla and many other similar companies are overvalued. On the other side of the coin lies Nigerian companies. The average P/B ratio for Nigerian banks currently stands at 0.4. As such, the average Nigerian bank is valued at 60% less than its assets minus liabilities.

While I agree with Oji’s observation on scant youth participation, I disagree that this lack of participation will lead to the loss of relevance and eventual extinction of the Nigerian stock market. Instead, I am led to believe that the country may lose out on dividends and control of Nigeria’s largest companies if the current patterns of shareholder demographics are maintained.

Osinbajo is a technology entrepreneur, who graduated with an MSc in Management of Information Systems and Digital Innovation from the London School of Economics and a BA/QLD in Law and Business Studies from the University of Warwick, UK.



‘How Nigeria can attract FDIs, tackle liquidity constraint’

For Nigeria to surmount its liquidity challenges, generate foreign exchange (forex) and remain competitive, there is a need to target a heavy inflow of foreign direct investment (FDI) through a wholesale listing of its corporate assets, liberalise infrastructure and commercialise greenfield real estate portfolio.

An economist, Dr. Ayo Teriba, while addressing participants at the Economic Associates (EA) one-day quarterly conference on ‘Nigeria’s Economic Outlook’ in Lagos on Thursday, said aside from unbundling its assets, Nigeria needs to aggressively increase its average cross-border mergers and acquisition deal counts from six deals a year in the next 15 years.

According to him, Nigeria needs to initiate policies that will boost its FDI and remittance inflow sustainably.

He pointed out that this would enable the country to attract huge capital inflows, record domestic liquidity, stability, inclusiveness, diversified growth, shared prosperity and national cohesion post-pandemic.

Teriba insisted that the only way Nigeria could achieve sustainable growth is through privatisation of public assets and subsequent listing them on the stock market.

He said ensuring speedy listing of the companies would ultimately improve the depth of the capital market and create wealth for the people.

“There should be a policy that any company that Nigeria has equity in, must be listed on the exchange. It is only when these assets are listed that you can securitise them for financial value.

“Until we generate a third party claim in any of our assets, it cannot be financial. It is only when it is in a financial firm that we can raise liquidity from it to impact our balance sheet.

“To have companies in the petroleum sector that do not have any market value is a tragedy to Nigeria,” he said.

The economist argued that the country is rich in assets but economically poor, noting that until the nation generates optimal returns from its assets, it may not record any meaningful growth.

He also pointed out that trade flows are drying up globally while financial flows are surging significantly due to cross-border investment deals.

Teriba stressed the need for the country to be more strategic to stay ahead of trends in attracting sufficient financial inflow to grow the economy.



UBA resets credit philosophy with machine lending

United Bank of Africa Plc has rolled out an audacious but “prudent” machine-lending programme, which promises to scale up competition in the technology-driven lending space.


With its new template, the bank is looking at increasing the share of the consumer segment in the total credit portfolio beyond the current 25 per cent and expanding its hold in mortgage, auto, SME and insurance premium lending.

Its new credit programme is being pursued under a mandate to reset the bank’s credit philosophy and leverage smart lending to stimulate Nigeria’s economic growth and impact people’s lives, the Group Head, Consumer Lending, Anant Rao, told journalists yesterday during a virtual meeting.

Rao said artificial intelligence (AI) and big data would play a major role in the implementation of the emerging lending template, from processing, risk profiling, collection to recovery.

He stressed that credit to an individual with low risk would be priced lower than others with high risk when the programme takes full effect and that the application of the technology would lead to a lower interest rate in the long run.

A mass roll-out of credit and secured cards, he said, would be central to the new credit philosophy, adding that the bank “will be using credit cards to track transaction patterns and consumption/spending behaviours” of its customers.

“Customers can also borrow at point of sale (PoS). We are turning debit cards into credit cards… Customers would be able to process and access credit within a few minutes; everybody that has a mobile phone will be able to borrow from UBA. We are ambitious but very prudent and not reckless,” he said, adding that integrity, transparency and data privacy would be critical to the bank’s smart credit.

In the heart of the bank’s credit culture is 3-1-0 credit system. With this, Rao explained, UBA would only require four minutes to process loans and grant approvals.

He noted that the bank would build adequate infrastructure, including “creating a credit bureau or working with an existing one”, to achieve its ambition of supporting the country’s economic growth by increasing access to credits.

According to him, increasing consumer credit implies consistent engagement with customers to identify their challenges and innovate support areas.

Rao said the bank would focus on the “customer first principle, speed, technology and risk reduction” in its renewed drive to increase the country’s credit market, which he said is growing very fast.

“There is clear evidence that credit is a major economic stimulant and growth driver. Credit has been largely inaccessible to the informal sector, which dominates the African economies and also harbours the SMEs that constitute the primary growth engine.

“Even for the formal sector that accesses credit, affordability remains a major issue. Convenience is the important plank that brings credit to the doorstep of every individual through a robust infrastructure that makes credit information readily available and accessible to a credit grantor,” he said.

On verification and assessment, Rao, who had over a decade at Citibank Group before joining UBA, said Nigeria was passing through a phase, noting that there was an era Indian banks were doing a home assessment.



External reserves drop by over $100m in three days

Nigeria’s external reserves fell by $100 million in three days, from June 26 to June 28, as the figures continued to witness historic depletion.

According to data sourced from the Central Bank of Nigeria (CBN), the gross reserves have fallen to approximately $33.4 billion on June 28 against the $33.5 billion balance as of June 25, 2021.

The liquid form also fell from an excess of $33.3 billion to $33.2 billion within the three days, leading the country with a shortfall of over $100 billion.

The external reserve fell to a fourteen-month as of Monday. The figures have been on a reducing balance since last May 28. They appreciated briefly between May 26 and 28 after which they pulled back.

Month-on-month, the gross and liquid reserves have lost an average of $0.8 billion. While the gross figure, which comprises invested and liquid proportions, depreciated by $0.85 billion, the liquid form lost $0.77 billion.

The Guardian had reported that Nigeria faced a tough challenge financing its huge import as the foreign reserve holdings continue to tumble.

The falling reserves, experts warned, could leave the country’s battled economic outlook worse off as the confidence of foreign investors is partly influenced by the size of the reserve.

David Adonri, an investment expert and economist, warned that Nigeria, like every other import-dependent country, needed a supportive foreign reserve to meet its needs.

“The value of the naira and foreign investors’ confidence in the economy is tied to the level of foreign reserve available. As it depletes, foreign investors’ confidence in the economy is being eroded.

“The main source of forex inflow is earnings from crude oil export held by CBN in foreign reserves supported by diaspora remittances and export proceeds. As the major provider of forex in the economy, CBN can determine the value of the naira and influence imports. With the depletion of the foreign reserve, that power is diminished considerably,” Adonri said.

The declining reserve at a time when oil prices are rising, he said, raises a question on the tidiness of the national economy management.

But a former Deputy Director of the Central Bank, Stan Ukeje, explained: “The rise in price in the spot market for oil does not affect Nigeria’s oil revenue because the country sells on contract. A rise in price in the futures market will materialise only in the future after delivery. Also, not all oil cargoes have off-takers. Only international oil companies (IOCs) have steady market access because they are linked with oil refineries, petrochemical plants and strategic storage facilities. Politically connected firms which are awarded oil lifting contracts by the Nigerian National Petroleum Corporation (NNPC) have neither vessels nor market access.”

Ukeje, a financial and investment consultant, also noted that “some of Nigeria’s oil outputs are pledged to export-import (EXIM) banks and other state lenders in repayment of infrastructure loans” while the portion so pledged does not bring in foreign exchange inflow “even as the foreign contractors from the lending countries do not bring money into Nigeria”.

Nigeria’s current reserve is among the poorest in the comity of oil-producing and leading African economies, including South Africa, Egypt and even Morocco.

The falling reserve is complicated by a historic foreign exchange crisis that has worsened in recent months. The naira has become increasingly more volatile since the CBN adopted the Nigerian Autonomous Foreign Exchange (NAFE) window for official transactions.

Findings have shown that some foreign online platforms are trading naira at N508/$ even as the local currency faces renewed pressure at the parallel market where it has sold at N502/$ since the beginning of the week.

At NAFEX, the dollar opened at N411.01/$ yesterday and rose to N42.9/$ before retracement that saw it closing at N411.28/$. The pseudo-market-led window has been battling with limited supply, challenge experts suggested would need to be addressed through an aggressive reform to make it a clearing market.



CAC Extends The Deadline For Companies To Issue Unallotted Share Capital

The Honourable Minister of Industry, Trade and Investment, through the Corporate Affairs Commission (CAC or “the Commission”), has extended the deadline for existing companies to fully issue any unallotted share capital to 31 December 2022. It will be recalled that Regulation 13 of the Companies Regulations, 2021 (“the Regulations”) had fixed an initial deadline of 30 June 2020 for all companies in Nigeria to comply with this requirement.


Further, the CAC noted that any unissued share capital after 31 December 2022 will be derecognised from a company’s share capital until such shares are re-issued or reduced.

Source: KPMG