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CBN Rolls Out Guidelines to Boost Bank Lending to Real Sector

…Banks to maintain minimum loan to deposit ratio of 60% …Defaulting banks’ CRR to rise by 50% of shortfall

The Central Bank of Nigeria (CBN) on Wednesday rolled out new guidelines to deposit money banks (DMBs) aimed at boosting bank lending to the real sector.

In a circular to all banks with reference number BSD/DIR/GEN/MDD/01/045, dated July 3, 2019 and signed by Ahmad Abdullahi, director, banking operations of the CBN, the apex bank required all DMBs to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent.

Loan to deposit ratio (LDR) is a ratio between a bank’s total loans and its total deposits. The ratio is generally expressed in percentage terms. If the ratio is lower than one, the bank relied on its own deposits to make loans to its customers without any outside borrowing.

The circular titled ‘Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy’, as seen by BusinessDay, said “all DMBs are hereby required to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent by September 30, 2019”. It said the ratio “shall be subject to quarterly review”.

The CBN said these measures were intended “to ramp up growth of the Nigerian economy through investment in the real sector”.

“To encourage SMEs, retail, mortgage and consumer lending, these sectors shall be assigned a weight of 150 percent in computing the LDR for this purpose. The CBN shall provide a framework for classification of enterprises/businesses that fall under these categories,” it said.

The apex bank warned that failure to meet the stipulated minimum LDR by the specified date “shall result in a levy of additional Cash Reserve Requirement equal to 50 percent of the lending shortfall of the target LDR”.

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

It added that the CBN would continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy.

It said the letter was “with immediate effect”.

The CBN has in recent times been somewhat desperate to increase lending to critical sectors of the Nigerian economy but analysts say an economy fraught with risks has tamed lending appetite.

Source: businessdayng

Kenya Gets $750 Million World Bank Loan, and Eyes Another One

The lender has released the funds, that were approved in May, according to Hafez Ghanem, the World Bank’s vice president for Africa. It will help to finance affordable housing, agriculture and other development projects. These are part of the government’s Big Four agenda, which also aim to boost manufacturing and improving health care.

“It is a very common source of financing, it is just that we had not done this sort of financing for Kenya in a long time,’’ Ghanem said Wednesday in an interview in Nairobi, the capital. “What changed? The government and the bank reached agreement on what we consider to be a very strong and credible economic program.’’

Ghanem didn’t give further details on the new facility that will be negotiated.

The loan comes amid concerns that Kenya is taking on too much debt. This year alone, the country has also accessed a $1.25 billion syndicated loan and raises a $2.1 Eurobond. Government debt has more than doubled since 2013 to 5.42 trillion shillings ($52.8 billion) by March, according to central bank data. Debt-service costs rose to 33.4% of revenue from 23.5% in 2013.

The concessional loan is a better bet than more expensive commercial debt because it has a tenor of 25 years, a seven-year grace period for paying interest and a rate of 2%, which makes it almost a grant, according to the World Bank.

“It is better to use as much as possible concessional loans, and good to diversify as much as possible the sources of financing,” Ghanem said. “If we did not think it was a good thing, we would not have done it ‘’

The loan was granted on the assumption that the government will implement plans to increase revenue and ease the uptake of debt. The Treasury seeks to narrow the budget deficit to 3% of gross domestic product by 2022 from an estimated 6.8% of GDP in the fiscal year that ended June 30.

The reduction in debt and the budget deficit has to be done “in a gradual way that does not reduce investment,” Ghanem said. “Public investment needs to be maintained, and we have to ensure the consolidation does not have a negative impact on growth.’

Source: bloomberg

Trademore Refutes Land Grab Accusations in Abia

Estate development giant, Trademore International Limited and Chairman, Engr. (Dr) Emmanuel Mbaka have refuted purported claims by a former commissioner in Abia state, Eze Chikamnayo, suggesting that over 10, 000 plots of land were illicitly transferred them.

In a statement issued on Thursday, the company regards the open letter by Eze Chikamnayo as a spurious attempt to taint the company and its chairman’s image.

The statement read: ‘’We wish to clarify that as a business man with proven competence and corporate integrity, Engr. Dr Mbaka and Trademore International Limited do not and will not be associated with controversies that will taint our hard earned image over the years.

‘’We have consistently contributed to the economic advancement of our beloved country through multiple investments in many Nigerian cities including Abuja, and our chairman has led several business and corporate organisations.

‘’After great successes in many parts of Nigeria, we thought it was time to reward the love of our people by extending businesses and opportunities that will better the lives of the people of Abia through employment and entrepreneurships.

‘’Contrary to any claim or suggestion of land grabbing, all we have done is change the narrative about our people and reclaim our spot as an economically viable state. We are not a party to any shady deal whatsoever and have only conducted legitimate businesses and transactions both in Abia and everywhere else.’’

According to the statement, the land hosting the Umuahia event centre was neither grabbed nor forcefully taken away from anybody. The statement read that the land was legally acquired by the then Governor of Abia state, Chief T A Orji in accordance with the provisions of land use Act, with verifiable evidences.

‘’We must join hands to develop and move Abia state forward and stop castigating the character and integrity of Abians who have selflessly sacrificed their resources and time to make Abia a great state.

‘’Our investments in the state haven’t even yielded any benefits yet, and sometimes we take it to be a form of corporate social responsibility. Our ultimate dream is to be part of the Abia state that will attract more investments and business opportunities.

‘’We categorically distance ourselves from any brewing controversy and wish to highlight our image as a business with proven competence and integrity – the pillar upon which our success stories have been reliant on.’’

The statement berated the writer for not doing a thorough background check before embarking on what was referred to as a desperate attempt to smear and blackmail innocent people.

How to Differentiate Yourself in an Overcrowded Real Estate Industry

The real estate industry is brimming with eager agents ready to differentiate themselves from the crowd. Every year, real estate agents look for emerging trends and new inspiration at national conventions and workshops alike.

The real industry trendsetters, however, are those professionals that are driving the new trends and teaching innovative concepts. Still, many agents try following in the footsteps of the most successful professionals, instead of paving their own unique path.

Differentiation always starts with one step: brainstorming. Every agent has something that sets them apart, but it is not always obvious. Even talents and interest that are not directly relevant to real estate can help immensely with branding and marketing.

Key Takeaways

  • Brainstorm to determine your unique gift and its potential benefits for your career
  • Reach out to family and friends if you are having trouble identifying your gift
  • Take control of your idea and think about exactly how to use it in your business (i.e., branding and marketing)

First, you need to understand that the gurus making industry headlines are not much different than you. The only difference is that she took a creative risk, tried something different, committed to an idea, and made sure that it would pay off. Metaphorically speaking, she got up from her window seat, walked right past her colleagues, kicked open the door to the cockpit, and bumped the pilot from his seat and took the controls.

Now, let’s assume you’re currently a passenger. How do you truly separate yourself from the other passengers and take off on your own direction? I’d like to suggest a process. Here are some considerations to keep in mind as you break away from your clones and redefine your identity in real estate.

Determine your gift (and un-lame it if necessary)

First, realize that we all have our own gift. Your gift might seem lame. You might realize that the only gift you have is that you can make a ridiculous strawberry cake. Uh oh. It’s up to you to un-lame the gift.

For many, our first response to this realization that our gift is ‘not cool enough’ is to very quickly end our work in this process. I’m going to argue that a killer strawberry cake, as irrelevant as it might seem, could become your secret weapon (see below).

But if you’re not happy with that outcome, copy this email and send it out (privately) to your best of friends and family:

“Hey Brad (or Natasha, or Stewart, or Dad, or Mom…),

I feel a little silly doing this, and I promise I’m not just looking for an ego boost, but I’m doing a bit of a marketing exercise right now. Without telling you too much about it, it’s requiring that I reach out to some people who know me well, who can tell me what’s exceptional about me. I have no idea. Does anything come to mind?

Talk to you soon, Mark”

Read whatever responses you get. Often, we perceive ourselves differently than our peers.

Take control of your idea

Now that you’ve got your idea, it’s time to plan; what’s one thing you could do with your gift?

Let’s go back to our strawberry cake example.  Mmmm it’s such a good cake. Everyone loves it.  But it has nothing to do with real estate. Welcome to the pilot seat. You’re now spiraling down to earth. Better think fast or die.

How could your strawberry cake define you and your brand?  By reverse engineering the problem, I’m seeing an influx of happy buyers, celebrating the close of their new home, digging into an ingeniously-presented strawberry cake in their new, empty kitchen. I’m seeing hundreds of pictures of happy customers posting to social media (with hashtags galore) photos of themselves holding a strawberry cake.

Be consistent

Is making a strawberry cake every time you close on a house going to catapult you into the big leagues of real estate?  Probably not. But when you apply that one unique identifier to your business over and over again—compounded months and months and years down the road—that’s when you develop your signature differentiator.

Let it evolve…

I said it—everyone’s on the Facebook Live kick.  The message here is not to ignore the other marketing tactics that your competitors are doing.  Facebook Live is hot for a reason. But rather than going live for the sake of being live, give yours a theme; only film Facebook Live videos in your kitchen as you’re pulling your next cake out of the oven, and talk about how excited you are to leave it on the counter for your client.  The excitement of knowing you’ve got another transaction will become apparent to your audience.

Source: Realvolve

Halfway Into 2019, How Is The Housing Market Holding Up?

Hard to believe we’re already halfway through 2019.

Headed into the year, all eyes were on the housing market as it showed signs of softening for the first time in recent memory. A sharp rise in inventory, talk of more rate hikes and shrinking home price gains in the fourth quarter of 2018 created a cloud of uncertainty.

Six months in, it’s safe to say that the sky isn’t falling. But you might think of the real estate market right now as behaving like a C student that isn’t living up to its full potential.

“The housing market is doing fine,” said Lawrence Yun, Chief Economist for the National Association of Realtors. “But it certainly can do better given what’s happening with job creation and the historically low mortgage rate that is currently in place.”

To make sense of this transitional period, it’s time for a midyear market pulse check. Here’s how leading industry economists are piecing together the first stretch of 2019 and what they say is in store for the future of housing.

Affordability challenges yank back price growth 

“For the first time in a long time, we’re starting to see prices correct,” said Skylar Olsen, Director of Economic Research at Zillow. “And the big thrust that’s changing that narrative is the affordability challenge.”

She explains that when home values outpace incomes so aggressively, the two “have to snap back together eventually,” which is in effect what’s happened.

In April, the S&P Case-Shiller Home Price Index dropped for the 13th month in a row. To be clear, home values are still going up nationally; they’re just rising at a more moderate rate. Annual gains for April clocked in at 3.5%, down from 3.7% in March.

But in some markets the shift has been far more dramatic.

Take Seattle. For two years price growth accelerated faster there than anywhere else in the country. Then between April 2018 and April 2019, the year-over-year price change shrunk from 13.8% growth to a 0.0% flatline. Over the same time frame, San Francisco fell from 10.9% to 1.8% annual gains.

Notice a trend? The markets with the fastest growth fell the hardest. Some exceptions bucking the norm have been Las Vegas, Phoenix and Tampa, their resilience due to how hard they were hit by the 2008 housing crisis.

“I would say the price appreciation of 3% is a healthy development,” added Yun.

Mortgage rates drop, but buyers aren’t jumping the gun

After four benchmark rate hikes in 2018, the Federal Reserve signaled it planned on two more increases this year. That gave analysts every reason to believe mortgages were well on their way 5.5%.

But in March the Fed moved away from that intent and showed signs of even lowering the interest rate (whether that will happen is still TBD). As expectations changed, mortgage rates dropped from 5.09% to 4.09% between November 2018 and June 2019.

However, low interest rates aren’t like an immediate caffeine jolt for the housing market. “It doesn’t impact the down payment,” said Olsen. “And that’s the real struggle, right? Just because mortgage rates dropped doesn’t mean I can suddenly reenter the housing market.”

Demand is also tied to homebuyer sentiment, which isn’t necessarily strong right now. In June, consumer confidence dropped 9.8 points to the lowest level since September 2017 as a result of tensions surrounding the trade wars, according to the Conference Board.

“Consumers are picking up on that lack of certainty about the economic outlook,” said Danielle Hale, Chief Economist at realtor.com. “And that’s not necessarily going to inspire them to make large purchases like a house.”

Inventory challenges persist on the low-end price points 

Overall inventory has started to creep up a bit this year, though it’s deceiving to try and judge the state of affairs without seeing how the market is truly split in half.

“There is plentiful inventory on the upper end market, so the housing shortage is really on the mid-priced and low ends,” said Yun. “Because the property tax deduction has been limited, there is less desire or greater financial burden from owning than before, so the upper-end market appears to be generally softer.”

In addition experts say builders have faced a number of obstacles to ramping up new construction, including high land prices, labor barriers, material costs, and the onerous process to obtain permits.

All this puts pressure on profit margins so when builders do construct a new house, it tends to be more on the luxury end.

Finally, as people move less often and more boomers decide to age in place rather than downsize, “that’s just kind of holding up a lot of the inventory that otherwise would be lubricating the whole system,” Olsen added.

So together these dynamics have created a tale of two markets.

“If you’re selling an entry level home, you’re probably still looking at a pretty competitive market in most places,” said Hale. “But if you’re selling a more expensive home you probably have to adjust your expectations.”

Cost of living and taxes sway local market conditions 

Nationally, housing conditions could be described as a seller’s market that’s gradually moving more in favor of buyers.

Drill down to the regional or local level though, and it varies. For one, some metro areas outside of major cities have stayed warmer as they catch the spillover of priced-out buyers (see: Tacoma). Strong job creation and reasonable cost of living has kept Midwest markets like Louisville and Indianapolis thriving, along with markets that resemble the Midwest in affordability. Rochester, New York is a prime example.

But there’s always exceptions. Go to Chicagoland, and you’ll hear agents tell a very different story.

“It’s definitely a buyer’s market here,” said Kim Alden, a Realtor with Baird & Warner in the Chicago suburb of Barrington, Illinois. “Inventory is a lot higher. Buyers are negotiating harder than ever because there’s a lot of people who want to sell their house and they’re using that to get the lowest price that they can.”

Alden says that 65%-75% of her listings come from people who want to leave the state of Illinois altogether to escape new and existing state tax laws.

With supply high, she’s seeing sellers experience disappointment that they can’t get as much money for their house as they expected, with one exception: updated, smaller homes are “flying off the shelves.”

“I listed a little three-bedroom, bath and a half for $178,000, and in the first weekend we had 33 showings,” Alden recalled.

Apparently anywhere, an affordable turn-key home remains a hot commodity.

But high-end sellers will need to bust out the paint and spruce up their curb appeal to attract buyers.

What about the rest of the year? 

Real estate experts remain optimistic about housing’s prospects for the latter half of 2019. Olsen expresses that even if GDP growth weakens and wages slow, it’s likely that the market is primed for some kind of a rebound.

The biggest reason for this is that as huge waves of millennials continue to reach peak home-buying age, that will put pressure on demand not only this year but in the years to come. And it’s hard to argue with long-term demographics. If a recession does hit at some point as part of the economic cycle, housing would therefore be impacted though perhaps not devastated.

Ultimately after a long post-recession hot streak, housing was due to break fever. The hope is that the market will heat up a little slower next time and create some normalcy. For now, consider it a short-term correction, and hope that more homes will come on the market that people can actually afford.

“The perfect scenario going forward,” Yun said, “even off into the next couple of years, is if there can be a robust increase in new home construction, the housing market will be more of a bright spot for the broader economy.”

Lagos and Abuja Remain top Destinations for Foreign Investment in Nigeria

The latest capital importation data released by the National Bureau Statistics (NBS) revealed that Lagos and Abuja are Nigeria’s biggest destinations of foreign capital inflows. The two received $8.35 billion out of the entire $8.48 billion in the first quarter of 2019, representing about 98% of Nigeria’s total capital inflow.

According to the NBS data, Lagos is officially Nigeria’s biggest destination of capital inflow with $4.77 billion or 56% as at the end of March 2019. Also, Nigeria’s Federal Capital Territory, Abuja, received a total of $3.55 billion or 42% of capital importation.

Breakdown of States’ capital inflow: Analysis of the NBS data shows that only 20 states in Nigeria were listed as destinations for capital inflows. Asides Lagos and Abuja which received the largest chunks, other states included:

  • Rivers ($41 million),
  • Adamawa ($25 million),
  • Benue ($25 million),
  • Cross River ($25 million),
  • Imo ($3 million),
  • Ogun States ($2.21 billion),
  • Kaduna ($2.16 billion),
  • Kano ($1 million).
  • Katsina ($576 million),
  • Borno ($500 million),
  • Oyo ($249.9 million),
  • Kwara ($200 million),
  • Bauchi ($99 thousand),
  • Niger ($67 thousand),
  • Akwa-Ibom ($55 thousand),
  • Anambra ($50 thousand) and
  • Delta ($40 thousand).

Note that the traditional foreign investment destination in Nigeria has always been Lagos, usually followed by Abuja. Although, this order was reversed in 2017 (fourth quarter) when Abuja attracted $2.68 billion while Lagos only trailed behind with $2.55 billion. However, Lagos has since overtaken Abuja to become the top destination for capital inflows.


The U.K tops Capital investments into Nigeria: Further analysis shows that the largest capital inflow into Nigeria was from the United Kingdom with $4.5 billion, which represents 53% of total capital inflow in Nigeria.

Also, the United States ranks second with an estimated $1.53 billion or 18% of total capital inflows.

Other countries that make up the top ten biggest share of capital inflows into Nigeria include: South Africa ($763 million), United Arab Emirates ($272 million), Switzerland ($271 million), Mauritius ($268 million), Belgium ($240 million), The Netherland ($208 million), Singapore ($92 million), and Zambia ($60 million).

Ranks of countries of origin for Nigeria’s capital importation as at Q1 2019

Best cities to start a business: According to the World Bank report on ease of doing business, Lagos ranked low in terms of ease of doing business in 2018. Specifically, Lagos State ranked number 28th with 54.90 index points, while Abuja ranked 9th with 59.85 points. However, despite being ranked low in the ease of doing business by the World Bank, most investors still prefer to invest in Nigeria’s commercial hub, Lagos.


The World Bank aggregated four indicators in arriving at the ease of doing business index. These include – starting a business, dealing with construction permits, Registering Property, and Enforcing Contracts. In terms of “starting a business”, Abuja ranked first with 85.61 index points, while Lagos State ranked second with 83.67 index points in 2018.

Source: nairametrics

Nigeria’s investment inflows near 6-year high on carry trade

After declining for three straight quarters, capital importation into Nigeria rose to the highest in almost six years and gained the most on a quarterly basis since third quarter (Q3) 2017 as carry trade increased in first quarter (Q1) 2019.

This followed the peaceful conclusion of the 2019 general elections, an attractive yield environment in Nigeria, and the fact that most central banks in developed economies dropped interest rates, analysts say.

Carry trade is a strategy that involves borrowing at a low interest rate and investing the amount in an asset offering higher returns.

Data released Tuesday by the National Bureau of Statistics (NBS) showed that the total value of capital importation into the country stood at $8.49 billion in the first three months of this year, the highest since Q3 2014, when $6.54 billion flowed into the country.

On a quarterly basis, capital importation rose by 216 percent, the highest gain since Q3 2017, when it increased by 131.27 percent. The latest figure also represents a 34.61 percent increase from $6.3 billion in the first quarter of 2018.

Nnamdi Olisaeloka, a fixed-income analyst at ZedCrest, said the figure was not surprising.

“When investors became convinced of a win for the incumbent president, they had a risk-on appetite for fixed-income securities even though they were wary of equities,” he said.

Olisaeloka pointed out that investors were lured by the high interest rate and yields environment which buoyed carry trade in Q1.

“Foreign portfolio investors were basically cherry-picking on interest rate opportunities given the expectations of continuous stability of the naira,” Olisaeloka added.

Capital importation rose to $2 billion, but rose 129 percent to $4.6 billion by March.

Favourable oil cycle and the dovish monetary policy stance in developed countries are also factors supporting carry trade across emerging markets including Nigeria, Omotola Abimbola, macroeconomic and fixed-income analyst at Chapel Hill Denham, said.

Abimbola, however, warned that while the interest environment has been juicy, levels of inflow have slowed down since March.

“Data from FMDQ are showing that from April to June, capital inflow, portfolio inflows, and even FDIs have gone back to trend level. March was a one-off jump as underinvested foreign investors increased their level of naira holdings post-elections,” he said.

For the quarter under review, the largest amount of capital importation by type was received through portfolio investment, which accounted for 84.21 percent ($7.15 billion) of total capital importation.

Other investment accounted for 12.91 percent ($1.1 billion) of total capital, while FDI accounted for 2.86 percent ($243.36m) of total capital imported in 2019.

By sector, banking received the most capital in Q1 at 33.6 percent. The sector grew its receipt by 976.57 percent quarter-on-quarter and 141.45 percent year-on-year to $2.85 billion.

Shares (equities) were the second largest destination with 28.32 percent or $2.4 billion. The figure represents a 126.25 quarterly rise although inflow was down 37 percent year-on-year.

Financing amassed a total of 25.21 percent of total capital importation in Q1 amounting to $2.139 billion. Growth was up year-on-year by 236 percent and quarterly by 232 percent.

Cumulatively, the top three sectors accounted for 87.13 percent of total capital importation in Q1.

According to the report, United Kingdom emerged as the top source of capital investment in Nigeria with $4.53 billion accounting for 53.40 percent of the total capital inflow in Q1 2019, while Lagos State emerged as the top destination of the capital investment at $4.78 billion, representing 56.25 percent of the total capital inflow during the period.

Similarly, capital inflow distribution by bank shows that Stanbic IBTC Bank plc emerged at the top of capital investment in Nigeria with $3.61 billion, representing for 42.50 percent of the total capital inflow in Q1 2019.


Banks record ₦1.5tr non-performing loans in 2018

Analyst links incidence to macroeconomic headwindsFollowing the adoption of IFRS 9, about 10.9 per cent of the loan book in the banking industry, representing ₦1.5trillion are in Stage 3 (impaired), as at December 2018, according to the recently released banking industry report by Agusto & Co.

The figure represents 15 per cent increase in non-performing loans (NPLs), when compared to the N1.3 trillion posted in the industry in 2017.Already, Federal Government’s bad debts company, Asset Management Corporation of Nigeria (AMCON), has already warned that it will no longer buy such debts, even as it is still struggling to recover outstanding N5trillion unpaid banks loans before its wind-down by 2023.

Debts in Stage 3 are loans with objective evidence of impairment at the reporting date. In the previous period, Stage 3 loans can be assumed to be ‘individually impaired or non-performing loans (NPLs). They also comprise credit-impaired loans, including all loans that are 90 days’ overdue.

Also, debts in this category are where the financial asset is credit impaired. This is effectively the point at which there has been an incurred loss event under the IAS 39 model.
Specifically, in 2017 non-performing loans was ₦1.3trillion, this accounted for 9.5 per cent of the loan book. The 15 per cent increase in Stage 3 loans in 2018 compared to 2017 is evidence of the deterioration of the loan assets recognised by Nigerian banks.

According to the report, the increase in NPL is largely due to the fact that most companies are yet to recover from the economic recession particularly the impact of the foreign exchange rate crises. This is also a reflection of the weak domestic operating conditions, and sluggish economic growth witnessed in the past few years.

The IFRS9 talks about how loan provisions are accounted for in an annual report whether performing or non-performing.Furthermore, the report said the industry’s Stage 2 loans and advances as at December 2018 were ₦2.9 trillion, representing 22 per cent of gross loans.

“In prior periods, Stage 2 loans can be assumed to be ‘past due but not impaired’, and it amounted to ₦793 billion in 2017.  Although Stage 2 loans do not have objective evidence of credit loss, these loans should be monitored closely to ensure that it does not deteriorate to Stage 3.

“If after 90 days, there is no longer evidence of a significant increase in credit risk, such loans could be transferred back to Stage 1. Comforting, however, the banking Industry has provided for 87.35 per cent of the industry’s non-performing loans.”

The report also revealed that the banking industry’s total loans declined by 2.8 per cent, largely due to the repayment by some customers and the cautious approach by banks towards extending further loans due to weak macro-economic climate.

“In the near term, Agusto & Co expects a reduction in NPL ratio, but this will not be significant. We also expect that there will be no significant growth in the Industry’s loan book, as banks will continue to be risk-averse in the face of harsh operating terrain.”

Speaking on the implication of the rising banks’ NPLs, the Managing Director, GTI Asset Management and Trust Limited, Amos Aladere, said this will impact negatively on lenders’ capacity to declare huge profits.  Given the rate of rise, he said the Central Bank of Nigeria (CBN), may issue a directive soon compelling banks to clean up their loan books, which would put pressure on them to make more provisioning that will ultimately impact on their profitability, as they gradually write off the loans.

Source: Guardian Ng

Nigeria counts losses as delay in ministerial appointments hits investors

There are signs of growing discomfort among investors over the delay in Nigerian President Muhammadu Buhari’s appointment of cabinet ministers and it is taking a toll on businesses and the economy.

More than a month after Buhari was sworn in for a second four-year term in the month of May, local and foreign investors are in the dark over who heads which ministry, particularly key positions like finance as well as industry, trade and investment.

Being a developing country with a history of policy inconsistencies and a public sector that is larger than life, foreign investors typically interface with high-level government officials – a category ministers fall under – to set an investment in motion. This way, they hope to get some assurance over the safety of their investment dollars.

The uncertainty over the identity of Nigeria’s next batch of ministers has led some foreign direct investors to hold off on potential big-ticket deals while portfolio investors are beginning to redirect cash to other countries that are ready for business, two chief executive officers of leading financial houses told BusinessDay.

According to them, some foreign government agencies and Development Finance Institutions (DFIs) are also staying away or not engaging because there are no ministers.

“There are people who are currently negotiating to invest in the country but they are waiting to see those that would be appointed to engage with them,” one of the CEOs whose investment firm manages over a thousand foreign clients said.

“Whenever we engage with investors, they are curious about knowing who the new minister of finance and who the new minister of trade and investment would be,” another CEO confirmed

A six-month delay in the appointment of ministers during Buhari’s first term formed part of the recipe for an economic recession in 2016 after it contributed to a steep decline in foreign investment.

Total foreign investment into the country nearly halved to $5.1 billion in 2016 from $9.6 billion in 2015, and was down 75 percent from $20.8 billion in 2014, according to NBS data.

Many Nigerians and international observers had expected President Buhari to hit the ground running in his second term.

“There is nothing to suggest that we have learnt the lessons of 2015,” an independent economist who consults for one of Nigeria’s state governments said on condition of anonymity.

“It adds like an extra 50 basis points on the country’s risk premium,” the economist said.

Yields on Nigeria’s benchmark 10-year Federal Government bond have ticked upwards, albeit by a mere 4 basis points to 14.39 percent as at July 2, from 14.35 percent at the end of May.

Traders say yields have reacted more to the movement in oil prices and the stability in the naira than the delay in ministerial appointments.

The performance of Nigeria’s publicly-quoted companies has been woeful. Stocks are down an average of 6.5 percent since the beginning of 2019. Blue chips from Dangote Cement to Guaranty Trust Bank have been hit by negative investor sentiment no thanks to the perceived lack of urgency in the implementation of reforms needed to boost economic growth.

“These delays are becoming the norm in Nigeria and it shows how unserious we are as a nation,” a former public official told BusinessDay.

The delay slows down the pace of critical reforms since action typically comes from the ministerial pool, not civil servants who want things to remain as they are to extract rent.

“That gives the impression that we are not keen on implementing the reforms that will open up the economy,” the former government official added.

At 2 percent, the economy is growing at a rate below that of the population (2.6 percent). It means per-capita GDP is on the decline which the IMF expects will last eight years if Nigeria continues to hold off on critical reforms in power and the oil sector.

Some sources, however, told BusinessDay that President Buhari is set to release a list of nominees to the Senate.

They blamed the delay on the inability of the Senate to constitute its principal officers, especially the election of the Senate Leader whose responsibility it is to announce such requests from the President.

BusinessDay findings show the President had on Monday invited the two senior special assistants in charge National Assembly Matters, Ita Enang (Senate) and Umar Yakubu (House of Representatives) to a closed door meeting.

The meeting, BusinessDay gathered, was summoned ahead of Tuesday’s resumption of the National Assembly for full legislative business.

Although the list is ready, our correspondent at the Presidential Villa was told, the President has kept the names of nominees as a top secret.

For President Buhari, forming a cabinet might not hold much weight for the economy going by a statement he made in an interview with a French TV station France 24 in 2015, where he argued that “ministers are noise makers”.

However, if examples from other countries are anything to copy from, it took South Africa’s President Cyril Ramaphosa only 96 hours from the day he was sworn in to appoint a cabinet.

Immediately the 66-year old president announced the naming of the ministerial cabinet, it sent a signal of his readiness to hit the ground running. The South African rand reacted positively, gaining some 0.5 percent against the dollar, after an initial loss of 1 percent prior to the announcement.


International Breweries Woes Deepen, Declares N4bn Loss

The excise duty and situation in the country, which has affected the brewery sector in Nigeria, further had negative effect on International Breweries, plunging the brewery firm into another loss in the first quarter of 2019.

The company, which released its results to the Nigerian Stock Exchange (NSE) today, recorded a 78.04 percent year-on-year loss in Q1 2019 despite the 35.17 percent year-on-year growth in the revenue generated in the period under review.

A brief analysis of the results by Business Post showed that in Q1 2019, International Breweries closed with a loss after tax of N3.99 billion, higher than the loss after tax of N2.24 billion in Q1 2018. Also, the loss before tax in the period under review was N5.09 billion against loss before tax of N2.56 billion.

During the period under consideration, the company raked N35.10 billion as revenue, higher than N25.97 billion generated in the same period of 2018.

The company further said cost of sales gulped N22.61 billion in Q1 2019, more than N15.86 billion in Q1 2018, while administrative expenses went up to N4.70 billion from N4.10 billion, with finance cost taking the sum of N5.09 billion in Q1 2019 in contrast to N3.60 billion in Q1 2018.

In addition, marketing and promotion expenses took N7.66 billion from the purse of the company in the period under review compared with N4.68 billion spent for the same purpose in Q1 2018.

In the unaudited interim financial statements, International Breweries said its gross profit in the first three months of this year was N12.49 billion against N10.11 billion in the first three months of last year.

Under the other income, the company recorded N2.93 million compared with N15.41 million a year earlier, while the finance income was about N511,000, higher than about N308,000 in Q1 2018.

Business Post reports that last year, International Breweries commissioned a new factory in Sagamu, Ogun State. The plant was built to ensure the company boost its earnings and return it to profitability.

International Breweries, a subsidiary of Anheuser-Busch InBev (ABInBev), a multinational drink and brewing holdings company based in Leuven, Belgium, faces stiff competition in Nigeria with other leading brewery companies like Nigerian Breweries, Guinness Nigeria and others.

Source: businesspostng

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