CBN Mulls New Recapitalisation For Banks

The Central Bank of Nigeria (CBN) says it is planning to implement a new round of banking recapitalisation for the Deposit Money Banks (DMBs). Mr Olayemi Cardoso, the CBN Governor, announced this at the 58th Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) on Friday night in Lagos. The planned recapitalisation means that DMBs will be required to raise additional capital to meet the demands of Nigeria’s economy. Cardoso noted that President Bola Ahmed Tinubu in his Policy Advisory Council report on the national economy, had set an ambitious goal of achieving a Gross Domestic Product (GDP) of one trillion dollars by 2030, with clearly defined priority areas and strategies. According to him, it is important that banks have a role to play in the anticipated one trillion dollars economy by 2030. Cardoso said going by the huge developmental role the apex bank would want the banks to play in the next seven years, it had become imperative to demand their recapitalisation. To achieve the target, Cardoso said that Nigeria needed to experience a more rapid and inclusive economic expansion. “The administration has already commenced this journey through fiscal reforms, including the removal of petrol subsidies and the unification of the foreign exchange market rate. “Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. “It is not just about the stability of the financial system in the present moment, as we have already established that the current assessment shows stability. “However, we need to ask ourselves: Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1.0 trillion economy in the near future? In my opinion, the answer is “No!” unless we take action. “Therefore, we must make difficult decisions regarding capital adequacy. As a first step, we will be directing banks to increase their capital,’’ he said. The CBN governor also announced the approval of another round of Open Market Operations (OMOs) to mop up excess liquidity from the banking system. OMOs are the main monetary policy instrument, through which the central bank buys or sells securities with financial institutions in the open markets, thereby influencing the amount of money in circulation and/or interest rates. Cardoso said, “An OMO auction was recently held with a stop rate of 17.5 per cent for the one-year tenor, attracting oversubscription of N350 billion. “Another round of OMO has been approved to further reduce excess liquidity. “Offering N108.1 billion worth of Treasury Bills with three tenors to the investing public, which can help reduce liquidity in the banking system and support government fundraising.’’ Cardoso said the apex bank would use its monetary policy tools to keep inflation low and stable. He said, “the Central Bank of Nigeria is committed to achieving monetary and price stability. This is not just a technical objective, but it has real-life implications for the well-being of our citizens. “Through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities, we can ensure a more stable exchange rate, control inflation, and create an enabling environment for businesses and individuals to thrive.’’ He noted that the apex bank had taken steps to improve the effectiveness of its monetary policy tools and to strengthen the transmission mechanism so that its policy decisions have a greater impact on the economy Cardoso added that the ability of the monetary policy committee to influence the economy through its decisions had been weakened because the channels through which monetary policy was transmitted had become disrupted. The CBN governor said the apex bank was planning to make changes to the country’s foreign exchange regulations by developing new guidelines and legislation. He stated that banks and foreign exchange operators would be consulted before making any final decisions.

CBN Didn’t Liquidate New Banks, Clarifies NDIC

The Nigeria Deposit Insurance Corporation (NDIC) has explained its role in the 20 banks liquidated by the Central Bank of Nigeria (CBN). In a signed statement by the Director, Communication & Public AffairsBashir A. Nuhu, the Corporation stated that the report in various social media platforms was misleading. The statement reads: “The Nigeria Deposit Insurance Corporation (NDIC) wishes to address the recent misleading news reports circulating on various social media platforms under the headline “CBN Liquidates 20 Banks – NDIC (Names).” “Contrary to the misleading headline, we would like to clarify that the 20 banks mentioned in those reports were among the banks that had been previously closed due to the revocation of their operating licenses by the Central Bank of Nigeria (CBN) between 1994 and 2018. “The general public should be aware that the NDIC has fulfilled its commitment by paying the guaranteed sums owed to depositors. Additionally, the Corporation has made cumulative payments of liquidation dividends totalling N45.45 billion as of July 2023, representing amounts exceeding the guaranteed sums to depositors of the 20 banks. “In light of further recoveries from debtors of the liquidated banks, the Corporation has announced an additional N16.18 billion in liquidation dividends to be paid to depositors, creditors, and shareholders of the 20 banks in liquidation. It’s important to note that the liquidation dividend represents the amount in excess of the insured sums paid by the NDIC to depositors of a closed bank. This amount is derived from recoveries made from the realization of assets of failed financial institutions and covers payments to creditors and shareholders after the full payment to depositors of the defunct bank. The deposit insurer urge relevant stakeholders to visit any of its offices or access the claims page on our website, www.ndic.gov.ng, to download, complete, and submit the verification form along with the prescribed supporting documents. Submissions should be sent to the dedicated email: claimscomplaints@ndic.gov.ng, it said.   The affected banks are; Liberty Bank, City Express Bank, Assurance Bank, Century Bank, Allied Bank, Financial Merchant Bank, Icon Merchant Bank, Progress Bank, Merchant Bank of Africa (MBA), Premier Commercial Bank, North South Bank, and Prime Merchant Bank. Others are Commercial Trust Bank, Cooperative and Commerce Bank, Rims Merchant Bank, Pan African Bank, Fortune Bank, All States Trust Bank, Nigeria Merchant Bank, and Amicable Bank in-liquidation.

2023 TII: DBN Emerges Highest-Ranked Public Institution – CeFTIW Survey

The Development Bank of Nigeria (DBN) has again emerged as the highest-ranked public institution in Nigeria in the 2023 Transparency and Integrity Index (TII).  The TII index recently released by the Center for Fiscal Transparency and Integrity Watch is a collaboration between the Centre for Fiscal Transparency and Integrity Watch (CeFTIW) and the Bureau for Public Sector Reform, with support from the MacArthur Foundation.  It assesses 511 MDAs and public sector institutions on their level of transparency and accountability in government processes.  To retain its first position, DBN scored 73.26%, moving up from the 58.74% it scored in 2022, a testament to the bank’s commitment to promoting transparency, accountability, and proactive partnerships.  Speaking at the public presentation of the index, the Secretary to the Government of the Federation, Senator George Akume, represented by the Permanent Secretary, Cabinet Office, Mr. Maurice Mbaeri pointed out that “proactive disclosure of information as enshrined in the Freedom of Information Act seeks to enable public institutions to adopt a proactive stance in disclosing information to the public”.  Akume noted that while access to information is a powerful tool that empowers citizens to request and access government-held information, these “tools are essential to reinforce good governance as it enhances openness and accountability”.  Also speaking, the Chairman, Board of Trustees, CeFTIW, Amb. Angela Nworgu explained that the centre introduced the Transparency and Integrity Index as an annual assessment of public institutions’ compliance with national laws and international conventions that promote transparency, and accountability and minimize corruption.  “The Index was developed to strengthen already existing fiscal transparency legal frameworks, institutional capacity on the requirement of these frameworks and most importantly build a well-informed citizenry that holds the government accountable”, she added.  Reacting to this development, the Managing Director/CEO of DBN, Dr. Tony Okpanachi expressed delight at the report, regarding the ranking as a reflection of the company’s corporate governance, ethics and processes.  Dr. Okpanachi further highlighted, “This report underscores our unwavering dedication to fulfilling our mandate, which involves addressing the financing challenges encountered by Micro, Small, and Medium Scale Enterprises (MSMEs) in Nigeria. We achieve this by offering financing, partial credit guarantees, and technical assistance to eligible financial intermediaries in a manner that aligns with market conventions and ensures complete financial sustainability.” He reassured that the organization would continue to actively promote the principles of accountability, transparency, sustainability, excellence, diversity, and innovation that are deeply embedded in its corporate philosophy.  

Unity Bank Suffers N35bn Loss On FG’s FX Policy

Unity Bank Plc’s profit in the first half of 2023 was impacted by foreign exchange revaluation on the back of Nigeria’s recent FX liberalization policy, resulting in the lender suffering a revaluation loss of N35 billion within the period. In the retail lender’s financials for the period, notwithstanding the FX liberalization policy and its impact on the bottom-line, the bank grew its FX trading income significantly by 17 per cent to N239.8 million from N204.4 million in the corresponding period of 2022, underscoring the Bank’s strategic focus on diversifying and growing its earnings portfolio. According to the bank, deposits grew to N333.38 billion, representing a marginal increase of 2 per cent compared to N327.42 billion recorded in the first half of 2022 in its Half-Year unaudited financial statement submitted to the Nigeria Exchange Group Limited. The net loans portfolio reduced significantly by 31 percent to N198.6 Billion as at 30 June 2023 from N289.4 Billion as at 31st December 2022. The Bank’s NPL Ratio remained moderate at below 3 per cent while liquidity ratio stood strong at over 45 per cent. The Managing Director/CEO of Unity Bank Plc, Mrs. Tomi Somefun noted that the significant disruptions which characterized the operating environment has impacted the positions of the Bank to the extent that we have constraints in income generation on the back of revaluation of the bank’s net foreign liabilities occasioned by the Naira devaluation during the period. Mrs. Tomi stated: “In the light of the prevailing FX revaluation in the financial system, what we have is a market-driven impact which is adjustable envisaged from the positive economic outcomes of the government policies in the near term. “Be that as it may, the negative shareholders’ fund has improved considerably through the injection of N135 billion which moderated the negative shareholders’ fund from (-ve) N275 Billion in December 2022 financial year-end to (-ve) N178 Billion as at the end of June 2023, after absorbing the FX revaluation loss suffered in the second quarter of 2023. “We are however, focused with clear-cut plans to close out on our recapitalization programme very soon to enable us do business as expected in the fast-growing markets in Nigeria” She further stated that while we remain optimistic that the government’s policy initiatives will lead to cause correction in the market, the Bank has accelerated measures to ramp up asset creation and liability generation in the short and medium term. “The Bank is aggressively driving its retail growth in every segment of the market, expanding strategic partnerships; and growing commercial banking business to develop new and sustainable income lines for the Bank as well as pay sufficient attention to fast-paced process automation, cost and resource efficiency, targeted value chain relationships, and product marketing to enhance value creation in the market.