The performance of Naira was stronger on Tuesday than it was at the previous trading day at the foreign exchange market.
The local currency proved just that against the American Dollar at the Investors and Exporters (I&E) segment of the foreign exchange market yesterday by appreciating by 28 kobo or 0.10 percent to close at N361. 80 from N362.08 recorded on Monday.
Total trade at the I&E segment went down by $21.92 million or 11 percent to $174.59 million on Tuesday from $196.51 million recorded in the previous session.
The Naira also closed stronger at the Central Bank’s interbank segment of the market as the Naira/USD rate also appreciated by N0.05 or 0.02 percent to trade at N306.85 from N306.90.
The local currency closed strongly at the parallel market against the British Pound Sterling as the Naira traded at N446/£1 against a single unit of the British currency note, appreciating N1 following the previous day’s N447/£1.
Against the US Dollar, the local currency closed at N360/$1 against the greenback as it did in the previous trading day.
The Naira followed the same manner with the Euro at the close of Tuesday’s trading as the local currency remained flat at the end of the trading day at N395/€1.
While agent’s commission is often one of the first cost considerations that sellers think of when it comes to selling their home, there are other costs that sellers and buyers need to keep in mind as well.
Trevor Sturgess, MD of Seeff Kibler Park, encourages his clients to look carefully at the other costs involved with selling. He said besides agent’s commission – usually set between 6% and 8% plus VAT of the selling price – sellers will also need to pay the following:
Bond cancellation: This is the cancellation fee payable to the bond attorneys representing the bank that is used. Sellers can save costs by letting the bank know that the property is for sale as soon as the property is listed. Your agent will be able to advise how.
Compliance Certificates: These include the Electrical Certificate of Compliance (COC) and can cost anything from R1200 upwards, depending on the amount of work that is needed. Also keep in mind that an electrical COC expires after two years.
Another certificate that the seller is required to provide is an Electric Fence Certificate that costs around R2,000 or more depending on any work that needs to be done. If you received a certificate when the electric fence was installed this will suffice.
A Plumbing Certificate and Beetle Certificate are also required in some instances. These are to ensure that the plumbing is in order and that there are no insect infestations in the home. Cost is to be quoted for.
Municipality final figures: As the seller you will need to pay around four months extra on your rates and services. You can however claim back a portion of this after the property has been sold.
Relocation costs and administration: Moving trucks, breakages, the administration of informing people of your change of address and taking days off work to coordinate the move should also be considered. Moving can add to your stress levels significantly.
Sectional title clearance figures from the Body Corporate (for sectional title units): This could be a Special Levy which needs to be fully paid before the Body Corporate will issue a clearance certificate.
The followings costs are to be covered by buyers:
Transfer costs to the transferring attorney.
Transfer Duty: This is a tax to the government on properties over R900,000.
Bond attorney costs: The buyer must pay the lawyers handling the mortgage finance for the bank.
A bond initiation fee of around R6,000 plus VAT that is payable to the bank granting the bond. “Banks often add this figure to the bond amount. My advice is to pay extra into your bond every month to bring it down faster,” said Sturgess.
A municipal deposit payable to the municipality when opening the account. You should open the municipal account as soon as possible – usually between one and two months after registration.
“Buying a property of R1.5 million with a 100% bond will attract transfer fees as mentioned above of around R88,000,” said Sturgess.
How agent’s commission is determined and what agents do to earn their commission.
Steve van Wyk, Seeff’s MD in Centurion, said while agent’s commission is often set at around 7% of the value of the property plus VAT, sellers and agents can always choose to negotiate a set fee instead.
“While it may seem like a practical and affordable idea to privately advertise your property instead of using an agent, this decision could end up costing you a lot of time and much more money than what the agent’s commission would’ve been in the first place.
“Agents perform various duties and have knowledge of legislative procedures that an owner will not necessarily even be aware of,” he said.
“Not only do they negotiate for the seller and connect the seller with strategic partners like conveyancing attorneys, but they also research recent sales in the area in order to determine a realistic listing price, advise on repair work that should be undertaken prior to listing, create a marketing plan that works for the seller and screen suitable purchasers before introducing them to the property amongst others.”
The MD/CEO of Access Bank Plc, Herbert Wigwe revealed the bank has set a daily target of N400 million loans daily to at least 20,000 customers. Mr.Wigwe made this comment during the bank’s investor and analyst call on Monday, September 9th, 2019.
Competition: Nigerian Banks are in stiff competition with FinTech startups over what is regarded as the highly lucrative Quick Loan Segment. FinTech’s startups with a huge financial war chest from patient investors have deployed their cash towards marketing and tech innovative products that have changed the way borrowers receive money via loans.
Currently, Nigerians who qualify for these loans can obtain them between 5 minutes to less than a day with no collateral or documentation. Some obtain the loans via native mobile apps owned by the FinTechs relying only on their phone numbers as documentation. These aggressive initiatives have put the banks on the defense, resulting in the release of competing quick lending products.
Target: Access Bank claims its Quick Loan Scheme or Payday Loan (as the bank calls it) disburses about N200 million daily to 4,600 customers and the bank is eager to double that number to N400 million and 20,000 customers by end of the year.
We have also grown our digital loan business as far as our financial inclusion and normal traditional retail strategy by expanding on our digital lending capabilities to include more products such as salary advancements, small tickets, personal loans and device financing in addition to what we call our payday loans.
And all of this is done on our QuickBucks application which basically houses all of these products. Today we are disbursing on average ₦200 million to 4,600 different customers through the click of a button daily. And we have set for ourselves a target of about ₦400 million daily to at least 20,000 customers, and we are on course to achieving this. This basically generates very low NPLs and is properly priced because a lot of it goes to customers who have their salary accounts
Charges: Access Bank charges an upfront fee of 1% flat, 4% flat interest and insurance of 0.15% of the loan amount is taken upon loan disbursement (5.15% total all payable upfront). The loans are for 31 days.Average all-in lending cost in the market is between 4-6% monthly.
On the offensive: Access Bank also claims it has been aggressive with the marketing of its payday loans and has now booked about N18 billion in the first half of 2019 alone from N11 billion a year earlier. The CEO also claimed the bank has issued out about 1 million unique loans as at June this year.
Default rates: Quick lending loans are highly susceptible to default risks so we sought to know what the bank’s response what. They reported that default rates for its payday loans are below 3% claiming that in most cases it is 0%. Explaining further, they assert that the reason for the low default rates was because their borrowers were salary earners who already have accounts opened with the banks and their salaries domiciled in those accounts.
So for the digital loan book, which is largely dominated by payday loans at the minute, the NPL ratios there have typically been well below 3%. Now, the reason for this as Herbert alluded to earlier on is they are based on customers who already have their salaries with us. Therefore, typically the loans do not go bad in the traditional sense. In some cases, you might find the occasionally delayed salary payment, for that period we might see an inching up in the NPL ratio. But the NPL when you get the salaries as you know is going to be very low for a long time to come. So those are the kinds of ratios you have seen. There are periods when it is 0%. Almost every employer has fully paid up the salaries. When there are delays in payment typically in some cases it can take three or four months for those salaries to come through. Eventually, they come through and the NPL again trends to 0%.
On the bank’s website, they highlight that you do not need to have a salary account in Access Bank for you to access the Payday loan. The bank claims you will, however, need to open an account in the bank for the loan to be disbursed.
What this means: Nigerian Banks may not be nimble, but they have the financial muscle to engage in a long-drawn battle in the quick loan space.
While stifling regulations and inroads into this space by deep pockets like MTN remains a huge threat, their acquisition route is shorter as most of the borrowers are already customers within the bank.
Access Bank claims it has 31 million customers and acquires at a rate of 500,000 new customers daily relying mainly on digital means and its agent banking initiative.
Access Bank has signed up about 1.6 million new customers since it merged with Diamond Bank.
President of Dangote Group, Aliko Dangote, Patrick Lumumba, Kenyan’s Anti-Corruption boss, and Ibrahim Magu, acting chairman, Economic and Financial Crimes Commission (EFCC), among others will discuss the way for Nigeria’s sustainable growth and development at the 49th Annual Accountants’ Conference of the Institute of Chartered Accountants of Nigeria (ICAN).
The theme of the conference, scheduled for Monday, September 9 to Friday, September 13, 2019 in Abuja, is ‘Building Nigeria for Sustainable Growth and Development.’ Bunmi Owolabi, senior manager, corporate communications/marketing of ICAN, in a statement made available to BusinessDay, said the theme was specifically carved to evolve ways to strengthen institutional framework to support government’s anti-corruption drive and to chart a new strategy to overcome security and infrastructural challenges in Nigeria.
The lead paper of the conference entitled “Strengthening Institutional Framework to Support Anti-Corruption Drive” to be delivered by Patrick Lumumba will provide an insight into some of the key global trends and reforms aimed at enhancing transparency and accountability in state and economic institutions, Owolabi said. According to Owolabi, “Disruptive Innovations: Challenges and Opportunities in The Accounting Profession” which is the second paper hopes to dissect innovative technologies such as robotics, artificial intelligence, cloud computing, machine learning, block chain, data analytics, as the greatest disruptor of the accounting profession in this age. “The paper will consider the challenges disruptive innovations may bring to the profession and the opportunities therein for accountants. It will also consider the readiness of the accounting profession for digital disruption and how the profession aims to develop future accountants as new technologies significantly changes the role of professionals in this regards.”
In the statement, she observed that the Federal Inland Revenue Service (FIRS) recently issued letters of substitution to commercial banks in Nigeria, appointing them as tax collecting agents for certain listed customers maintaining accounts with such banks. This, she said, form the basis for the third paper entitled “The FIRS Power of Substitution: Critical Review and Matters Arising” and will review the legality or otherwise of the substitution powers of the FIRS to appoint banks as collecting agents and whether the FIRS has the power to instruct banks to freeze the account of tax defaulters.
“A paper will also be presented on “Public Accountability: A Driver of Transparent Leadership and Governance”. The paper will discuss issues bothering on accountability and proffer suggestions for improved public accountability to stimulate transparent leadership and governance in Nigeria,” she said.
Other papers to be presented and discussed at the conference include: Integrity and Meritocracy: The Imperative for Political Leadership, Sustainability: Global Development and Opportunities for Nigeria and Chartered Accountants as well as Public Accountability: A Driver of Transparent Leadership and Governance among other papers. The conference will offer a platform for experts and professionals to rub minds on the way to make accountability the watchword in governance and financial transactions.
Ever since the Central Bank of Nigeria (CBN) approved that telecommunication companies should operate mobile money, there have been talks about the future of banks and how the network providers can affect the growth of lenders. It has however been revealed that the growth of telecom’s mobile money service is dependent on the regulation of the Apex bank.
Speaking on his experience in the mobile money business, the Chief Executive Officer, Standard Chartered Bank for Nigeria and West Africa, LaminManjang, said while telecoms have succeeded in the mobile payment business in Kenya, the network providers have failed in some countries.
Prior to his career at Standard Chartered Bank, Manjang worked as the Chief Finance Officer at Safaricom in Kenya. He was involved in the establishment of M-Pesa, arguably the most successful mobile money service in Africa. M-Pesa was founded by Safaricom in Kenya.
According to Manjang, what can stop the growth of mobile money service owned by telecoms is the regulation of the country. He said countries, where telecom-led mobile money didn’t succeed, had tight regulations, and this prevented the service from gaining ground, explaining that the success of M-Pesa was due to the supportive regulation of Kenya’s apex bank.
“The good thing about the M-Pesa was that at that time, the regulator was very supportive, so the Central Bank of Kenya saw that it was an innovative development and that ‘though it is in the telecom space, let us allow it to flourish and see how it goes … Others have tried it, but their regulations could be too tight and, therefore, the opportunity for the product to gain ground would be lost.
“So, for now, if you go to Kenya, M-Pesa is a way of life; everything from paying your maid to your driver, shopping, paying for a visa is done through the M-Pesa platform. That has also helped in financial inclusion, so Kenya has a financial inclusion rate of about 75% which is one of the highest across the continent.
“I know Nigeria is also very keen to increase the financial inclusion matrix, and of course, the Central Bank (of Nigeria) has indicated that it is very supportive of measures to get telco to start in that space, banks to look at agencies banking model to be able to reach out. I think we can learn some lessons on what other markets have done and see how we can improve statistics inclusion in Nigeria.”
Manjang wants banks to lead: Mobile money service is successful in Kenya because the operation was telecom-led, however, Manjang wants banks to lead the mobile money-drive in Nigeria because banks have taken the initiative compared to what happened in Kenya when the mobile money discussion began in the East African country.
“That is a debate. Of course, in Kenya, it was telco-driven though banks will like it to be bank-driven… I think the banks in Nigeria have clearly taken the lead as opposed to Kenya where Safaricom took the lead. At the end of the day, what we want is for the customers to get the best value for money. It will be bank-led obviously for me.
“If you don’t play in the space, then you give a chance for somebody else to come and play in that space. So, this is our space; payment and money are our strengths.”
With an estimated N250 billion expected to be injected into the Nigerian insurance industry after the ongoing recapitalisation by underwriters, the sector is hopeful to emerge stronger, contribute reasonably to the economy and also offer good returns to investors.
Industry experts believe that the sector post consolidation will have enough resources to attract quality manpower, acquire necessary skills to underwrite big ticket risks, increase retention in the local market, and be able to take advantage of untapped potentials to create shareholder value.
The National Insurance Commission (NAICOM) had in a circular issued on May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; general business from N3 billion to N10 billion; composite business from N5 billion to N18 billion; and reinsurance companies from N10 billion to N20 billion.
The minimum paid-up share capital requirement, NAICOM said, takes effect from the commencement date of the circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies are required to fully comply not later than June 30, 2020.
Shareholder groups who have been pessimistic about investing in insurance companies had said there was not much to cheer about from the insurance industry recapitalisation of 2007, having seen a lot of the companies being unable to pay good dividend since then, while a lot of their stocks have also been at par for a long time.
But operators say there is still much to hope for in investing in insurance as the industry holds a lot of untapped potentials that hold long-term prospect for savvy investors.
Daniel Braie, managing director/CEO, Linkage Assurance plc said the Nigerian investment climate is still one of the most attractive in the world in terms of investment returns, so that in itself is an impetus for new investors.
“Look at it from the point of our population demographics, the insurance industry is a huge market waiting to be unlocked. This should be an attraction for any investor to put in money,” Braie said.
“In addition, the compulsory insurances if adequately enforced will also offer opportunities for the insurance industry to grow and contribute to the overall growth of the economy,” he said. The lack of local capacity for certain classes of risks is still a challenge, Braie said, maintaining that increase in capital base of insurers is expected to make the insurance companies stronger to be able to retain more of the businesses and reduce businesses placed abroad.
“Because of these potentials, companies like Prudential of Britain and Allianz of Germany have recently partnered with local companies in addition to those already operating in the country,” he said.
Mayowa Adeduro of Law Union and Rock Insurance plc said the potential of the industry remains an attraction to any informed investor to put money into insurance business.
“The population of Nigeria is over 200 million people with over 70 percent below 50 years age. The industry is about N400 billion Gross Premium Income (GPI) in 2018 but has the potential to double in five years. The infrastructure deficit means there will be increasing spending on capital projects that attracts insurance,” Adeduro said. “Increasing awareness of risk and insurance means more premiums to the industry. Better regulatory and governance environment creates opportunity for growth.”
Adeduro also noted that the existing six compulsory insurance products have potential to generate N1 trillion gross premium. “The local content law, the Cabotage law, the Pension Reform Act and other state enactments like the Lagos State Safety Control Law will all create opportunity for insurance to thrive,” he said.
“As an operator, I foresee improvement in returns on investment after the recapitalisation exercise because companies will likely acquire efficient distribution of products model leveraging on technology. Management cost and other/overhead cost will go down significantly including reinsurance expense as the companies would have acquired higher underwriting and retention capacity,” he said.
Post recapitalisation, Adeduro said there would be lower participants and higher entry barrier and so expects more collaboration and cooperation among remaining underwriters.
“I see an industry collaborating with banks for facilities, project financing, and investment returns will dramatically improve,” he said.
Tola Adegbayi, executive director, general business at Leadway Assurance Company Limited, believes the potential for insurance is great for country.
“The general banter is about population size and the bulk of this relates to the lower income groups where we have the most vulnerable part of our population, thus speaking to the potential for micro insurance,” Adegbayi said.
According to Adegbayi, the core for insurance is then the middle-income persons, SME business owners who desire financial freedom and security.
“Insurance provides that freedom to aspire and the needed security should anything happen, meaning that any investor needs to look at the market potential of this group,” she said.
While Adegbayi believes the potential is huge, she was honest in her position that investment is choice when all variables have been considered because there also the rough side.
“There are no guarantees in business. An investor must look at potentials being presented and make an informed decision on budgeted outcomes and what things are fundamentally required to achieve a targeted level of success within the medium to long term,” Adegbayi said.
“Insurance is not a business for any investor with a short-term focus, in my opinion. With a long-term-focused investor, the potential, looking at the fundamentals of low penetration and essential needs for financial security, is great,” she said.
The African Union (AU) defines the African diaspora as consisting of “people of native African origin living outside the continent, irrespective of their citizenship and nationality and who are willing to contribute to the development of the continent and the building of the African Union”.
It consists of the worldwide collection of communities descended from native sub-Saharan Africans or people from Sub-Saharan Africa, largely from West and Central Africans predominantly in the Americas who were enslaved and shipped to the Americas via the Atlantic slave trade between the 16th and 19th centuries, with their largest populations in Brazil, the United States and Haiti.
It is a critical mass whose brainpower and finance cannot be neglected by those on the continent.
The combination of the Atlantic Slave trade and Arab Slave trade dispersed the African diaspora throughout the Americas, Europe, and Asia.
While the trading of African beings depleted the continent of its brightest and strongest, descendants of the enslaved are reaching out to countries on the continent to reconnect, discover their roots and even relocate. This is largely why now is a fine opportune time to invest in African countries to bolster their economies.
Ghana, for instance, has had a stable democratic governance system which has not seen a military takeover since 1992. With an estimated population of 30 million, mostly youthful, the population requires jobs to stimulate it.
With a reported housing deficit of 1.7 million, real estate developers, engineers, surveyors, architects, masons, electricians, others in a related sector, as well as, those with the money bag, stand making good returns when they invest in the sector.
Any new visitor to the country will be pleasantly surprised seeing the condos and apartments raised and occupied. An investor has the choice to invest in luxurious apartments for the rich or invest in decent mass housing units and make returns through the numbers.
Again, unlike in the 1990s, Ghana has electricity extended nearly to all parts of the country with the hustle with registering business mitigated by the online registration portal (rgd.gov.gh) opened to the public by the Registrar General’s Department in a bid to enhance the ease of doing business.
Ghana, being an agrarian economy, has large tracts of uncultivated land that those with the expertise and experience can make a handsome return all other things being equal should they invest.
Be it the cultivation of pineapple for domestic consumption and export, shear nut processing, cocoa cultivation and processing, or venturing into the processing of fruits and vegetables which go waste needlessly, there’s a hole to fill, given malls and supermarkets in the country import a good deal of their fruit juices.
Turning to Nigeria, since 2005, the country has been considered to be among the “Next Eleven”: the countries identified by Goldman Sachs investment bank as having a high potential of becoming, along with the BRICS, the world’s largest economies.
The growth is driven by a population of 193.4 million (2016 National Bureau of Statistics estimate) – growing at over 3% per annum – and by an affluent and an increasing middle class.
The “cosmopolitans” (higher middle class) and the affluent, together 10% of the population or 17 million people, account for 40% of total consumption. Another 21% of the population, or 36 million people, could be considered “rising strivers!” and are, therefore, of interest to multinationals. About 65% of the Nigerian population is younger than 25 years.
Nigeria’s foreign direct investment (FDI) stock reached 98.73 billion in 2016, a 3% increase from 2015 and while its economy is oil and gas sector dominated, FDI flows are diversifying.
Other incentives include a favourable Companies Income Tax, Pioneer Status Grants, Free Trade Zones and tax relief for research and development.
Africa’s larger economic growth prospects are among the world’s brightest. Six of the world’s 12 fastest-growing countries are in Africa (Ethiopia, the Democratic Republic of Congo, Côte d’Ivoire, Mozambique, Tanzania, and Rwanda).
From now till 2023, Africa’s growth prospects will be among the highest in the world, according to the IMF, with banking, telecommunications and infrastructure among the drivers of the current economic growth in Africa.
Africa’s growing, youthful population, amidst an ageing population in most other regions, constitutes a formidable market. The continent’s population is predicted to quadruple from 1.19 billion in 2015 to 4.39 billion by 2100.
In 2015 alone, 200 million Africans entered the consumer goods market. Maximizing this bourgeoning market size calls for actively engaging Africa’s structural economic transformation.
Africa’s large deposits of natural resources promise a bright future for developing value chains. Agriculture and the extractive sectors are linchpins of national, regional and global value chains. The continent hosts 60% of the world’s uncultivated arable land.
In 2017, the Democratic Republic of Congo alone accounted for 58% of the world’s cobalt (used in electronics production) while South Africa accounted for 69.6% of the world’s platinum production in 2016 (used for catalytic converters and in other goods).
Actively investing in adding value to these commodities by the African diaspora will shape global economic activities over the next five decades.
Already, the African diaspora accounts for large volumes of remittances to the continent – $38 billion recorded in 2017 – with the volume of remittances outstripping foreign aid to some of the African countries while levelling with the Gross Domestic Product (GDP) of others.
Federal Government social housing scheme, Family Homes Funds have signed a landmark agreement with the government of Borno state to build at least 1700 homes for civil servants on low income and another 3200 for Internally Displaced Persons (IDPs).
The agreement which was signed on Sunday at the Borno state government liaison office in Abuja will mark a new beginning for the state which has been largely devastated by the Boko Haram insurgency, leading to the destruction of at least 1 million homes.
Speaking at the event, the Governor of Borno state, Professor Babagana Umara Zulum stated that the state is excited about the project and the commitment of Family Homes Funds to fund such a massive project that will benefit both IDPs and civil servants, and with a loan repayment plan of up to 25 years for civil servants.
He said: ‘’The responsibility of the government of Borno state is to act as an intermediary to ensure that the houses are built in conformity with the standards, and we shall guarantee the payment of the loan back to family homes funds. The urban buildings are meant for the civil servants while the ones in the rural areas are for IPDs.
‘’It is a continuous process, and as time goes, we shall continue to engage Family Homes Funds to ensure that more homes are built, especially for IDPs. We have identified the locations and ready to go.
‘’We also have the responsibility to ensure protection and ensure safety because of the security situation in the state. We will cooperate with them to ensure no delay at all. And the beneficiaries, especially the 1700 civil servants earning below 100, 000 will be meticulously selected.’’
Speaking on the agreement, the MD/CEO of Family Homes Funds, Femi Adewole also expressed his satisfaction with working with the Borno state governor and his government whom he said has a pedigree that gives them assurance that this is not just a paper signing ceremony.
‘’We are delighted about this partnership with the Borno State Government which will provide much needed homes for 3200 internally displaced persons and 1700 civil servants on low income. With a total investment of about N15 billion this partnership will be making a difference in the lives of some of the most vulnerable people in our society and giving them hope and opportunity to participate in viable economic activities.
‘’We are also delighted to be working with a trusted partner. Probably unknown to many, His Excellency has personally overseen the completion of over 20000 homes. His active commitment to this project leaves us in no doubt that the homes will be completed to good quality within the agreed 18 months period.
‘’The 18 months starts now. Both parties are going to work hard to deliver on this commitment and bring hope to about 4900 families. With unit costs starting from N1.8m this is part of the Government Social Investment Programme committed to improving the quality of life of Nigerians. This will also improve the local economy through creation of jobs.
‘’We are doing two things. First, we are providing construction finance to ensure that the beneficiaries get their houses, on the back of that we will be providing the individual civil servants with homes loans assistance to ensure that they can afford the purchase of those homes for a figure that is no more than a third of the salary that they earn, and depending on individual circumstances, the tenure of that financing will stretch up to 20 years.
‘’The mission is to work together to ensure that fellow Nigerians that are living in very unacceptable conditions are allowed to have a home as quickly as possible.
‘’We are happy because up to 3200 people whom have been living in tents will now have a home that they can call their own which is safe and secure.
‘’We have worked with the government to provide the initial financing, the government will transfer these homes for free to the IDPs. So this is a significant initiative by the state government and they will pay back over an extended period of time which is up to an average of about 15 years,’’ he said.
Family Homes Funds is also currently developing low cost housing projects in at least 12 states of the federation in fulfilment of the mandate of the newly established organisation.
With the current licensing of new banks by the Central Bank of Nigeria (CBN), Nigeria will have about 26 commercial banks when operations commence.
A key question is if we really need more banks just 14 years after the 2005 banking consolidation, with the present state of our economy.
According to sources familiar with the licensing, CBN is not only concerned that the sector is shrinking, but is eager to attract new investment and ensure that over 50 million unbanked and under-banked Nigerians are financially included and properly served.
While the adduced reasons might be perceived as cogent, a critical assessment of the sector, the economy and the purpose of a banking sector to the economy reveals otherwise.
It is also important that we remember what necessitated the 2005 banking consolidation and be sure that we are not preparing for the same situation where we had about 89 banks with many mainly involved in activities that can be best described as anti-banking and anti-Nigerian economy.
The principal purpose of banks in an economy is to provide financial intermediation services mainly through the collection of deposits from areas of surplus and allocations of credits or loans to areas of need.
In addition to other variables, a common way to examine the extent to which the banks in any economy are achieving expected tasks is through the credit provided by the banking sector to the private sector as a percentage of the GDP.
In Nigeria, the average from 1960-2017 is 12.52%. While it is 98.1% in South Africa from 1965-2016, it is 81.2% in the United Kingdom from 1960-2016 where we got our banking model from.
As we are gearing to about 26 commercial banks in addition to five merchant banks with only about 36.8 million bank account holders in a country of about 180 million people, South Africa with about 57 million people has mainly 10 local banks and seven foreign banks with about 22 million bank account holders.
In the UK with a population of about 64 million people, there are about 150 million bank accounts (savings, deposits and current) and about 95% of adults have at least one bank account.
With about 64,000 ATM machines with no withdrawal charge in over 98% of them, the financial sector employs about 1million people. Interestingly, there are only five independent British banks.
From the above, it is clear that effective provision of the required financial intermediation services is not really about having a high number of banks in an economy; it is about the depth of the economy and financial sector, infrastructure and other critical institutions and factors for robust development of the sector.
Using all relevant variables to compare Nigeria with other peer countries, we cannot be said to be doing well; these include inflation, financial sector contribution to the GDP, interest rate, depth of the financial market, net interest margin, return on assets ratio, loan to assets ratio etc.
With a total domestic credit provided by Nigeria’s financial sector to the private sector as a percentage of our GDP just at 23.3% in 2018 as compared to South Africa with 180.4%, it is very clear that Nigerian banks are not lending to our private sector.
Worse still, even the very little they lend is highly concentrated with allegations that about 100 Nigerians and their affiliated companies account for over 60% of all the total credit provided by the banks.
If this is the case, which is evidently true with over 80% of our Small and Medium Enterprises (SMEs) maintaining that lack of finance remains one of their critical challenges, the question then is if the huge profits declared by banks are from financial intermediation or from anti-banking and exploitative activities.
Using the 2018 annual performance as announced by the banks themselves, only about 10 banks can be said to be doing well in terms of declaring good profits or paying encouraging dividends.
In a bid to survive the intensely competitive environment therefore, many banks have devised all kinds of nefarious charges through which they generate significant portions of their non-interest incomes.
An experience shared two weeks ago explains this; on the first day of carrying out a transaction with one of the banks after opening an account with a good deposit, he was asked to re-submit his BVN number for re-confirmation.
This he gladly did only to be alerted by his phone that he has been charged N2.50 as BVN enquiry charge. As he made a transfer from his account to another account, he was further charged N210.00 for the small transfer form he used in inputting the transfer details.
In addition to these two exploitative charges, he paid another N52 as transfer charge and his phone credit further debited N8.00 as fees for the debit alert messages.
This scenario is the experience with many of our banks, it is difficult to agree that having more banks is what the economy really needs now and that the banks will be different from the existing 21 commercial banks.
Given the current state and performance of our banks and as economies of scale and scope are critical factors in a sector like banking, it seems that what we need now might be more consolidation and regulatory reforms rather than new banks.
Of the many reforms needed, a few stands out; first is the need for the development and enthronement of an effective and sustainable strategy for the integration of the informal finance sub-sector with the formal sub-sector.
Second is urgency for a deep understanding and utilisation of the recommendations of the recently released code for corporate governance by the Financial Reporting Council of Nigeria; third is the need to review the current cash reserve and liquidity ratios to see the possibility of reduction to free up some idle cash.
The fourth regulatory reform is to explore how the banks can be helped to reduce their increasing non-performing loans and interest rates, fifth is the necessity to eliminate the opaqueness of our foreign exchange administration either through full liberalisation or a more transparent and beneficial system.
In addition to other required reforms, it is believed that the few identified above might better enhance the contribution of the banking sector to the economy than the emerging proliferation of banks and other financial institutions.
The Chairman of United Bank for Africa (UBA)and Heirs Holdings, Tony Elumelu has revealed the impact of Japanese funds on Nigeria and African countries after many African leaders, including the President of Nigeria, Muhammadu Buhari visited Japan for the Tokyo International Conference on African Development (TICAD).
The event, as expected, was based on the development of Africa and the role of capital support. During his speech at the conference, Tony Elumelu said if 2% of Japan’s $50 billion commitment to Africa was properly utilised for African entrepreneurs, 500,000 livesacross the 54 African countries would be positively impacted.
Elumelu told the audience, who included President Patrice Talon of Benin Republic and South African President, Cyril Ramaphosa, that the funding would ensure poverty alleviation and increase employment opportunities in Sub-Saharan Africa.
“At TICAD 2016 in Kenya, Japan pledged $30 billion for Africa. This year, you have generously increased it to $50 billion.
“If we invested just 5% in Africa’s new generation of entrepreneurs, following my Foundation’s robust, proven model of getting capital directly to those best placed to catalyse growth and create real impact, we could touch 500,000 lives, across the 54 African countries, broadening markets, facilitating job creation, improving income per capita, and laying the key foundation for political and economic stability.”
Speaking further about the partnership between Japan and Africa, Tony Elumelu said if the African continent is to be transformed, then the focus of the leaders should be investment in infrastructure, partnership with the African private sector and investment in the youth of Africa.
The UBA Chairman, who operates Tony Elumelu Foundation, said the Asian country could replicate the method of his foundation which has empowered many Africans with job opportunities by financially supporting 7,500 African entrepreneurs across every African country. The Tony Elumelu Foundation offers seed capital, capacity building, mentorship and networking opportunities.