612 Nigerian Microfinance Banks May Close Shop Over Recapitalisation

More than two-thirds of licensed Microfinance Banks (MFBs) in Nigeria may close shop if they fail to meet the recapitalisation deadline, the first threshold of which is due by the end of April.

Of the 874 licensed MFBs, about 612 may be affected, although the final deadline will be in 2022. These banks were established to meet the financial needs of Nigeria’s low-income earners.

 

Considering the impact of the COVID-19 pandemic on economic activities, Central Bank of Nigeria (CBN), in 2020 revised the deadline for compliance with the minimum capital requirement for microfinance banks by one year.

Outcomes of an internal survey conducted by the National Association of Microfinance Banks (NAMB) show that 30 percent of MFBs will be able to meet this deadline. This means 70 percent of the banks will go out of business with severe consequences for the financial services industry.

“We are advocating through different sources to see how the CBN can shift ground by reducing the capital requirement amount or extending the tenure of the deadline,” Yusuf Gyallesu, national president, National Association of Microfinance Banks (NAMB) said in an exclusive interview with BusinessDay.

One of the NAMB’s lobby objective is a request that the CBN should extend this deadline to at least 2025 because the economy is in bad shape.

An argument the association has presented in support of this extension of the deadline is that Nigeria is just coming out of a depression and there is no money to inject into the banks. This was worsened by the COVID-19 pandemic as the whole of last year there was limited economic transaction.

“So within this COVID-19 period, where can one go to raise 1, 000 percent of the reviewed capital,” Gyallesu said.

Consequently, MFBs operating in rural unbanked and underbanked areas (Tier 2) are expected to meet the N35 million capital threshold by April 2021 and N50 million by April 2022.

MFBs operating in urban and high-density banked areas (Tier 1) are expected to meet the N100 million capital threshold by April 2021 and N200 million by April 2022;

State licenced MFBs are to increase their capital to N500 million by April 2021 and N1 billion by April 2022.

National MFBs are expected to meet minimum capital of N3.5 billion capital by April 2021 and N65 billion by April 2022.

If a microfinance bank collapses as a result of illiquidity it would rub off on the corresponding bank (commercial banks) and impact on customer deposits.

“This issue should not be seen as specific to microfinance banks, it would distort the whole financial system and by extension Nigeria as a nation will be affected by that problem,” Gyallesu said.

At the time of reporting, there are no data to ascertain the number of those MFBs that have met the first threshold of recapitalisation.

This may not be known until the expiration of the deadline, people familiar with the industry have said. Some are still struggling to meet up and some may inject funds before the deadline.

The CBN had in October 2018, reviewed upward the minimum capital requirement of the three categories of MFBs as follows – Unit microfinance banks from N20 million to N200 million, State MFBs from N100 million to N1 billion, and the National MFB from N2 billion to N5 billion.

On March 18, 2019, the CBN reviewed the minimum capital requirements for microfinance banks, allowing for instalment payment and categorisation of Unit Microfinance into two of Tier 1 and Tier 2.

In the new capital requirement guideline, tier 1 MFBs (urban) are to pay N200 million as minimum capital requirement, while tier 2 (rural) are expected to pay N50 million.

As part of efforts to meet up with the capital requirement, many of the operators are considering mergers and acquisition, downsizing, or going to the Stock Exchange to raise funds.

For instance, Baobab Microfinance Bank Nigeria currently has about N4.6 billion capital and would need an MFBsadditional N400 million to fully recapitalise to N5 billion for national licence and the bank plans to achieve that before September 2021.

On acquiring another bank, Kazeem Olanrewaju, managing director/CEO at Baobab Microfinance Bank said, “We have some prospects. We are still discussing but our plan is to fully recapitalise from our retained earnings and that is our first priority before we think of acquiring anybody.”

According to Gyallesu, in the first month that the CBN introduced the new capital requirement the first thing his association did was to put up a technical team that went round the country, in six geo-political zones. They also selected executive members, who went to the Nigerian Stock Exchange (NSE) to ask for a window for long-term funding so that MFBs can meet up with their capital.

They developed some papers, “we did stakeholders sensitisation where we told them the issues on ground and options. The first option was mergers and acquisition. Another option was to downsize or go to the stock exchange to raise money,” Gyallesu said.

NPF Microfinance Bank Plc on December 31, 2018 at its 25th annual general meeting announced plans to do a public offer with a view to raising more funds from the Nigerian Stock Exchange (NSE) to shore up its working capital.

Operators’ request

Operators want the CBN to bring down the N50 million to N35 million so that one who is operating with N20 million could add N15 million. This, they say, makes more sense. The MFB can bring in new investors to inject funds up to that N35 million.

For the N200 million, operators want the apex bank to bring it down to N100 million, for the State, instead of taking it to N1 billion from N100 million, why not to N500 million. In the State license one can open as many branches as possible. For that of National license, instead of N5 billion operators want it reviewed down to N3 billion.

These are recommendations from the association. These recommendations do not mean every member of the association would meet the requirement. However, the serious ones can.

The CBN’s response

The CBN says it is not shifting ground. This means that more than 70 percent of the microfinance banks will collapse and that will affect the remaining 30 percent. It would also have a ripple effect on the deposit money banks because every microfinance banks must have a relationship with a commercial bank.

 

Source: Businessday

Banks Begin Implementation of New Policy on Diaspora Remittances

Nigerian banks have commenced implementation of the Central Bank of Nigeria (CBN)’s new policy on diaspora remittances, tagged ‘Naira 4 Dollar’ scheme, which offers N5 for every Dollar received into domiciliary accounts or as cash over the counter.

The CBN on Saturday announced plans to pay N5 for every one dollar received by all recipients of diaspora remittances through its licensed International Money Transfer Operators (IMTOs).

The move is an incentive introduced by regulator to boost inflows of diaspora remittances into the country.

In a circular dated March 5, 2021 and signed by A.S.Jibrin for director trade and exchange department, the scheme takes effect from Monday, March 8, 2021, and ends on Saturday, May 8, 2021.

The circular stated that the CBN shall, through commercial banks, pay to remittance recipients the incentive of N5 for every USD1 remitted by sender and collected by designated beneficiary.

Following the CBN’s announcement, Ecobank Nigeria on Sunday issued a statement to its customers on the commencement of N5 payment to every dollar received.

Korede Demola-Adeniyi; head, consumer banking, Ecobank Nigeria, who announced this in Lagos stated that the decision is in line with the CBN’s directive and fully aligns with efforts to encourage the inflow of diaspora remittances into the country. She noted that the “CBN Naira 4 Dollar scheme” is an unprecedented incentive for senders and recipients of international money transfers.

Korede Demola-Adeniyi said that the scheme takes effect from 8th March and will run till 8th May, 2021. “Ecobank will pay N5 on every Dollar so beneficiaries will not only get the foreign currency sent from their family and friends abroad, they will also get extra Naira”, she stated.

Only recently, Ecobank had a first of its kind virtual Diaspora summit to discuss opportunities for Nigerians living abroad and the various platforms available to assist them with their investment decisions and remittance needs. The event had major players in the remittance space, diaspora audience, government officials and notable stakeholders in attendance.

Patrick Akinwuntan, managing director, Ecobank Nigeria disclosed that apart from consistent engagement with Nigerians in the diaspora, Ecobank is leveraging its digital technology to make remittances to Nigeria and Africa easy, convenient and affordable.

Akinwuntan stated that growing evidence has shown a positive relationship between diaspora remittances and economic growth. “Ecobank will continue to pursue its mandate of helping to enhance the economic development and integration of Africa, through the 33 countries where the bank operates on the continent. Ecobank’s Rapidtransfer and mobile app (Ecobank Mobile) enable Africans, wherever they are, to easily and instantly send money to bank accounts, mobile wallets and agent locations across 33 African countries”, he stated.

Ecobank Nigeria, a member of the Pan African Banking Group is committed to supporting Africans in the diaspora by providing advisory services, remittance solutions, investment options and financial planning schemes. The bank also offers mortgages, treasury bills, capital market instruments, among others.

At its twitter handle, GTBank stated, ‘for every one dollar sent to you from anywhere in the world via money transfer agents, you’ll receive N5 more into your GTBank account or over the counter at any GTBank branch nationwide.

Fidelity Bank stated in a statement to its customers that “this offer ends on Saturday May 08, 2021. So, hurry now and take advantage of the wonderful opportunity to get extra naira cash. Kindly visit any Fidelity Bank branch now to get started”.

Source: Businessday

FCMB BANK (UK) LIMITED LAUNCHES PERSONAL AND BUSINESS BANKING PROPOSITION TO DEEPEN INCLUSIVENESS

FCMB Bank (UK) Limited, an independently incorporated subsidiary of First City Monument Bank Limited (which is a member of FCMB Group Plc), has introduced its Personal and Business banking proposition in London, United Kingdom and Lagos, Nigeria at an impressive ceremony attended by the top echelon of the business community within and from outside the country.

The development follows the latest variation of permission obtained by the United Kingdom-based Bank to extend its services to include retail (investments) for individuals and business enterprises. This is in addition to the existing wholesale deposit taking activities, foreign exchange, treasury, corporate banking and trade finance offerings to corporate and institutional customers of FCMB Bank (UK) Limited.

The variation of permission was granted by the Prudential Regulation Authority, the financial services regulatory body of the United Kingdom, and it became effective on June 8, 2018.

The Personal and Business banking proposition of FCMB Bank (UK) Limited is anchored on the Bank’s London Leverage and Africa Awareness. This will enable the financial institution deliver its promise of being the Corporate and Private Bank for African-oriented entrepreneurs, investors and professionals across all their banking needs.

The Group Chief Executive of FCMB Group Plc, Mr. Ladi Balogun, explained at the ceremony that the launch of FCMB Bank (UK) Limited’s personal and business banking proposition is as much a statement of substance as it is one of intent. According to him, “our successful UK platform has proven to be of great importance to the Nigeria stockbroking and international trade finance activities of FCMB Group. Leveraging our deep networks in Africa’s biggest economy, the importance of a London presence to many of our Personal and Business banking customers, and technological innovation, we welcome this opportunity to meaningfully serve more of our customers and grow the value of our UK franchise”.

Also speaking, the Chief Executive Officer of FCMB Bank (UK) Limited, Mr. James Benoit, said, “with the extension of its services, the Bank is now able to receive deposits from both customer segments as well as provide them bank loans to enable them meet their financing needs. The deposit products on offer include current, notice savings and fixed deposit accounts at competitive rates; while its lending products include Buy-to-Let Mortgage Loans enabling target customers to acquire a piece of London and purchase property to include in their investment portfolios.’’.

He added that the Bank will be expanding its premises and entering into partnerships with Fintech providers to open up service options to its clients and enhance their overall banking experience.

Dignitaries at the launch commended the Board and Management of FCMB Group Plc for going the extra mile in ensuring the institution has a very strong presence in the United Kingdom through FCMB Bank (UK) Limited, which will go a long way to boost individual and business transactions between Nigeria and the United Kingdom, thereby enhancing customer experience.

Operating in the City of London, FCMB Bank (UK) Limited began its operations as a BIPRU €50k investment firm in September 2009 with CSL Stockbrokers (another subsidiary of FCMB Group Plc), providing the services of “receiving and transmitting” institutional client orders for Nigerian listed securities. Subsequent to the variation of its permission on September 27, 2013, the Bank commenced wholesale deposit taking activities across various segments.

CBN ISSUES NEW GUIDELINES ON E-PAYMENT, FINTECH DEVELOPMENT

The Central Bank of Nigeria (CBN) has issued fresh guidelines aimed at strengthening the payment system and development of other disruptive technologies relating to financial services.

The regulatory frameworks are contained in two separate documents issued by the apex banks. The documents are created to address challenges in regulatory sandbox and quick response (QR) code payment operations in the country.

“In furtherance of its mandates to, ensure the safety and stability of the Nigerian financial system, promote the use and adoption of electronic payments and foster innovation in the payments system, the Central Bank of Nigeria hereby issues the framework for QR code payments in Nigeria,” the CBN said in one of the documents that detailed the operational relationships among issuers, acquirers, merchants, other financial service providers and customers.

In the document, the Bank spelt out risk management issues and the reporting processes while allocating responsibilities to relevant participants in the value chain, warning that it “shall apply appropriate sanctions to any party that fails to comply accordingly”.

It stated: “Issuers and acquirers shall agree to minimum due diligence guidance for merchant onboarding without prejudice to know your customers/anti-money laundering (KYC/AML) requirements of the Bank… Issuers and acquirers shall ensure behavioural monitoring and fraud management systems are implemented to prevent, detect and mitigate fraud and money laundering.

“Issuers shall provide quarterly risk management assessment reports to the Director, Payments System Management Department. The risk management assessment report shall include, among others, fraud reports, vulnerabilities assessment and risk-mitigating measures introduced.”

According to the CBN, participants shall ensure full interoperability of QR code scheme in Nigeria and work towards achieving its seamless operation.

The regulator left the determination of transaction limit to issuers alongside customers. It, however, directed that the threshold should be set based on the outcome of a customer’s risk profile assessment.

Merchants are mandated by the regulatory framework to cooperate with acquiring banks or other participants, as the case may be, to investigate reported fraudulent cases. They are also expected to report all suspicious transactions to acquirers for necessary actions.

“QR code payments in Nigeria shall be based on the EMV® QR Code Specification for Payment Systems. The Bank may also approve the implementation of any other QR Code Standard provided it meets the prescribed security requirements within the framework, demonstrates interoperability with other existing implementation in the industry and/or cost benefits to end-users (merchants and customers),” the apex bank said.

QR code is a type of barcode that could be read by a digital device and which is used for financial transactions. QR code merchant payment is a growing innovation in the payment system. On the other hand, a regulatory sandbox is a formal process where firms conduct live tests of new, innovative products, services, delivery channels or business models in a controlled environment. Regulatory oversight, subject to appropriate conditions and safeguards, is an essential component of the process.

The CBN said: “This framework, therefore, defines the establishment, rules and operations of a regulatory sandbox for the Nigerian payment system to promote effective competition, embrace new technology, encourage financial Inclusion and improve customer experience, with a view to engendering public confidence in the financial system.”

It listed the objectives of the guidelines thus: increasing the potential for innovative business models that advance financial inclusion, reducing time-to-market for innovative products, services, increasing competition, widening consumers’ choice and lower costs and ensuring appropriate consumer protection safeguards in innovative products.

Other objectives are to define the roles and responsibilities of stakeholders and the operations of the sandbox for the Nigerian payments system, to ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system and to provide an avenue for regulatory engagement with financial technology firms in the payment space.

To participate in the regulator sandbox, products are expected to improve accessibility, enhance the efficiency and effectiveness of financial institution risk management and address gaps or open up new opportunities for financial benefits.

“An applicant shall identify the potential risks to financial institutions and financial consumers that may arise from the testing of the product, service or solution in the sandbox and propose appropriate safeguards to address the identified risks,” the CBN stated.

TAJ BANK SEEKS NATIONAL LICENCE

Nigeria’s second non-interest Bank, Taj Bank, has revealed that it broke in its first eight months of operation, a rare feat that takes some bank’s many years to accomplish.

The Bank, which already has five branches, including the National Assembly Abuja, Abuja Corporate Headquarters, Kano, and Lagos, hopes to expand to the North East states of Borno and Gombe before the end of the first quarter (Q1) of this financial year.

Thereafter, it hopes to expand operations across the entire states of the Federation when its national licence would have been granted by the banking sector regulator, the Central Bank of Nigeria (CBN) by the Q1 end.

These were unfolded by TAJ Bank Founder/Chief Operating Officer, Hamid Joda, and Co Founder/Chief Marketing Officer, Sherif Idi, when The Guardian Newspapers, Abuja Bureau, led by its General Manager, Abuja/Northern Region, Auwal Sa’id Mu’azu, paid a courtesy visit to the Bank.

Joda also indicated that within the short span of operation, the Bank had contributed in reducing unemployment with the recruitment of 213 staff with a potential for many folds increase once the CBN awards it a national license.

He said; “Within this short span, we have also won three key operational awards, namely: Bank of the Year: Best Non-Interest Banking in Nigeria; and Best Islamic Bank in the World.”

He noted that non-interest banking holds several benefits, which most Nigerians are unaware of, and sought the partnership of stakeholders in educating the public on such benefits.

The Guardian’s General Manager, Mu’azu, had earlier explained that the visit was to identify and consolidate corporate relation with TAJ Bank and increase awareness in the area of non-interest banking in Nigeria, and to also congratulate it for its expansion drive within its short existence.
He assured that The Guardian Newspapers was ready to partner with TAJ Bank on its vision by educating the masses about its unique selling points.

Source: The Guardian

SUSTAINED BARGAIN-HUNTING BOOSTS CAPITALISATION BY N325B

For four consecutive sessions, sustained bargain hunting in the shares of blue-chip stocks pushed the Nigerian Stock Exchange (NSE) market capitalisation up by N325 billion.

At the close of trading yesterday, the All-Share Index (ASI) gained 622.09 absolute points, representing an increase of 1.54 per cent to close at 40,963.14 points.

Similarly, the overall market capitalisation value appreciated by N325 billion to close at N21.419 trillion. The uptrend was driven by price appreciation in medium and large capitalised stocks such as Seplat Petroleum Development Company (SEPLAT), Dangote Cement, MTN Nigeria Communications, Ardova Plc and NASCON Allied Industries

For four consecutive sessions, sustained bargain hunting in the shares of blue-chip stocks pushed the Nigerian Stock Exchange (NSE) market capitalisation up by N325 billion.

At the close of trading yesterday, the All-Share Index (ASI) gained 622.09 absolute points, representing an increase of 1.54 per cent to close at 40,963.14 points.

Similarly, the overall market capitalisation value appreciated by N325 billion to close at N21.419 trillion. The uptrend was driven by price appreciation in medium and large capitalised stocks such as Seplat Petroleum Development Company (SEPLAT), Dangote Cement, MTN Nigeria Communications, Ardova Plc and NASCON Allied Industries.

Analysts at Vetiva Dealing & Brokerage said: “Following four consecutive sessions of closing in the green, we expect the market to close the week on a bullish note, as the domestic bourse continues to move higher amidst dominance of the bulls. However, with the index now trading in the overbought region, the possibility of profit-taking cannot be overruled.”

Market sentiment, as measured by market breadth, was positive as 49 stocks gained, relative to seven losers. Champion Breweries recorded the highest price gain of 9.82 per cent to close at N1.23 kobo.

NASCON Allied Industries followed with a gain 9.72 per cent to close at N17.50, while Japaul Gold and Ventures rose by 9.45 per cent to close at N1.39 kobo.

AXA Mansard Insurance went up by 9.42 per cent to close at N1.51, while Ardova appreciated by 9.25 per cent to close at N21.85 kobo. On the other hand, Courteville Business Solutions led the losers’ chart by 8.33 per cent, to close at 22 kobo.

 

Neimeth International Pharmaceuticals followed with a decline of 6.36 per cent, to close at N2.06, while Union Diagnostic and Clinical Services shed 3.13 per cent to close at 31 kobo.

The total volume traded rose by 72.9 per cent to 809.362 million shares, worth N8.906 billion, and traded in 6,706 deals. Transactions in the shares of Transnational Corporation of Nigeria topped the activity chart with 136.578 million shares valued at N130.187 million.

Mutual Benefits Assurance followed with 70.591 million shares worth N27.389 million, while Guaranty Trust Bank traded 68.993 million shares valued at N2.252 billion.

Lafarge Africa traded 61.852 million shares valued at N1.424 billion, while FBN Holdings transacted 44.534 million shares worth N329.473 million.

Source: The Guardian

COVID-19: Africa To Enter Recession With -5% Growth, World Bank Predicts

The COVID-19 pandemic will drive Sub-Saharan Africa into recession with -5% growth, this year, the World Bank has predicted. It would be the first regional recession in 25 Years, the bank said.

The fall would be a sharp contrast from the 2.4% regional growth in 2019 as the new forecast has put it at between -2.1 % to -5.1% in 2020. The forecast was contained in the latest Africa’s Pulse, the World Bank’s twice-yearly economic update for the region. Hafez Ghanem, World Bank Vice President for Africa, was quoted as saying, “The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard.

“We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term – including calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with COVID 19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security.” The Pulse recommend that African policymakers focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains. It also recommends implementing social protection programs, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sector. The analysis shows that COVID-19 will cost the region between $37 billion and $79 billion in output losses for 2020 due to a combination of effects.

 

Source: Vanguard

Net Foreign Inflow Hit $9.35bn In February – CBN

The nation’s economy recorded a net foreign exchange inflow of $9.35bn in February.

The Central Bank of Nigeria disclosed this in its February monthly report.

It said, “Foreign exchange flows through the economy resulted in a net inflow of $9.35bn in the review period, compared with $9.99bn and $4.58bn at end-January 2020 and end-February 2019, respectively.”

It said the external sector performance declined in February due to the 11.7 per cent decrease in the international price of crude oil to $58.45 per barrel.

This was attributed mainly to the continuous spread of COVID-19.

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Labour Ministry, Senators Clash Over Banking Bill Amendments

The relationship between the Ministry of Labour and the National Assembly worsened on Wednesday when the representative of the Minister of Labour, Chris Ngige, clashed with members of the Senate Committee on Banking, Insurance, and other Financial Institutions, at a public hearing.

The public hearing was on Banks and other Financial Institutions Act Cap B3 LFN 2004 (Repeal and Reenactment) Bill 2020 (SB.178) and Electronic Transaction Bill, 2020 (SB.155).

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Why We Increased 2020 Budget Despite Low Revenue ― Presidency

The Presidency at the weekend explained the reason behind the upward review of the 2020 budget, saying it was premised on the need to tailor funds to address critical infrastructure gap and the consequences of the coronavirus pandemic on the economy.

Recall that President Muhammadu Buhari, Friday, signed the Appropriation (Repeal and Amendment) Act, 2020 of N10.8 trillion, which has N216 billion higher than what was initially proposed in the 2020 Appropriation Act. into law. Speaking to State House correspondents on why the revision was made, Senior Special Assistant to the President on National Assembly Matters (House of Representatives) Umar el-Yakub, said the budget was raised to N10.8 trillion after certain realities were considered. He pointed out that whereas the initial 2020 budget was benchmarked on $25 dollars per barrel of crude oil, the revised one had $28, which gave a bit of increased revenue.

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