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ABCON Quarterly Economic Report Q2, 2021



By Kayode Tokede

Association of Bureaux De Change Operators of Nigeria (ABCON) has advocated for reforms that will reduce government spending and also curb the rising trend in the nation’s public debt.

The Association made this call in its Quarterly Economic Review for the second quarter of the year (Q2’21), noting that the vulnerabilities identified with the  rising debt profile exposes the country  to  the risk of future high economic and development costs of having to deal with large debt overhangs.

Stressing the need  for caution in decision making in government circles, ABCON said: “The fact that remarkable economic recovery is not certain and the rather unstable state of financial markets is indicating that the country could be on the verge of a major debt crisis.”

In its recommendations on how to tackle the rising profile of the nation’s public debt, the Association said: “There is therefore a serious need for the introduction of fiscal reforms that would scale down government spending and to consider restructuring the loan profile and especially properly examine the conditions tied to Chinese denominated debts.

“We recommended a season of economic austerity to replace the increased debt pile up for the coming generation. Moderation of governance and other administrative costs along with blocking loopholes/leakages from inflated contracts will more than satisfy the need for increased debts.”

ABCON also called for realistic measures to redress the ever existing and increasing margin between the official and parallel market exchange rates.

According to the Association, “It is ambiguous to conclude that because the volume of transactions that pass through the official market is larger than the parallel and thus it is rational to adopt the exchange rate from the official sources as the realistic rate. The obvious mobility of funds between the markets actually voids this proposition.

“Most industrialists, especially from the manufacturing sector patronize the two markets and of course derive their planning data and parameters based on the parallel market exchange rate. Thus, if all other economic indicators take inputs from the industrial sector performances, there is therefore a mismatch in basing other determinants on the official exchange rate.”

Consequently, ABCON called for  an industrial policy to achieve local substitutes for industrial and mercantile input that depend on foreign exchange. “Most industries established in Nigeria are designed to depend on the parent companies abroad for raw materials and thus must always demand foreign exchange. This will reduce the demand-push pressure on the foreign exchange market in the long run and stabilize the exchange rate,” it stated.

Money market

NDIC to pay N16.18bn liquidation dividends of 20 failed banks



The Nigeria Deposit Insurance Corporation (NDIC) says it is prepared to conduct 100 per cent liquidation dividend payments worth N16.18 billion for depositors of 20 failed banks.
Already the corporation has asked depositors to come forward for verification and payment of their deposits that are in excess of the guaranteed sums, otherwise called “liquidation dividends”.
The NDIC Managing Director, Mr Bello Hassan, disclosed this during the NDIC Day at the ongoing 44th Kano International Trade Fair in Kano.
He gave the names of the affected banks as Liberty Bank, City Express Bank, Assurance Batik, 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.
He also listed 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.
Hassan said following the recent revocation of licenses for 179 Microfinance banks (MFDS) and four Primary Mortgage Banks (PMBS) by the Central Bank of Nigeria, the NDIC immediately commenced liquidation of the banks and began disbursing Insured sums to the depositors within just seven days of the closure of the microfinance banks.
“It is Important to note that out of these, the NDIC has paid N1.5 billion to 41,034 depositors of 129 MFBs and PMBs,” he said.
According to him, the payments are still ongoing and depositors with funds exceeding the standard will receive liquidation dividends after recovery of debts and sale of physical assets of the closed banks.
The managing d
irector said it was imperative to note that in the unfortunate event of bank failure, the insurance coverage for depositors varies across different banking institutions.
“While depositors of Deposit Money Banks, Primary Mortgage Banks, Non-Interest Banks, Payment Service Banks, and subscribers of Mobile Money Operators are insured up to a maximum limit of N500,000 per depositor per bank; for depositors of Microfinance Banks, the maximum insurance Limit stands at N200,000 per depositor per bank.
“These insured limits undergo process reviews by the Board of the Corporation, ensuring comprehensive coverage for the majority of depositors.
“Furthermore, depositors holding licenses exceeding the insured sums receive regular payments of the excess in the form of liquidation dividends, that also extends to the benefit of creditors and shareholders of the respective banks,” he explained.
He assured that the NDIC would continue to work in collaboration with the Central Bank of Nigeria to ensure effective supervision of banks and adherence to procedures, guidelines and the Code of Corporate Governance for banks, which safeguards the safety and stability of the Nigeria Banking system.
He called on the general public, especially traders and businessmen, to always ensure that their funds are saved in licensed banks and not kept in their homes or shops to avoid the risks of fire, theft and armed robbery.
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Money market

Effective assets, liabilities management critical in promoting banking stability — NDIC



By Matthew Denis

The Chief Executive Officer and Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Mr. Hassan Bello has disclosed that Effective management of assets and liabilities is critical in promoting stability of the banking operation.

The MD of NDIC made this known at the two days SEC Nigeria-IFSB international Forum held in Abuja on Thursday.

He said, “For the Nigeria Deposit Insurance Corporation (NDIC), our mandate includes deposit guarantee, bank supervision, failure resolution and bank Liquidation.

“This mandate is principally geared at ensuring depositors’ confidence and financial system stability. However, financial system stability is a collective responsibility of the regulators, supervisors and operators.

“While the operators have the duty to play their game according to the rules, the supervisors and regulators on the other hand have the responsibility to provide the enabling framework and guiding principles within which the operators are expected to operate.”

Mr Hassan explained that the NDIC as a deposit insurer and banking supervisor is significantly affected by the activities of the banks particularly in the area of risk management practices.

“Risk management must be comprehensive and should cover all aspects of risks including but not limited to operational, market, credit and liquidity risks.”

According to him, their regular reviews of the banks’ risk management practices showed significant improvement since the adoption of Risk Based Supervision (RBS) Framework by the CBN/NDIC.

He stressed that effective management of assets and liabilities is critical in promoting stability of the banking operation as significant maturity mismatch can prevent banks from meeting obligations, including its ability to respond to depositors’ demand.

“This challenge largely arises as a result of the significant mismatch between the tenors of the available funding to the banks and the tenors required by the seekers of funds. Typically, while the primary source of funds for our banks is short term in nature, the demand side on the other hand is significantly medium to long term.

“This, therefore, results in maturity mismatch causing high vulnerability to risks and by extension safety and stability of the banking sector.

“As regulators and supervisors within the financial sector, our concern would surely be beyond managing the above risks. We must deeply think on how to create enabling policies and frameworks that will support the supply side for our banks.

“In this regard, deposit liabilities that are predominantly short term will not be adequate in providing the required portfolio of funding for the banks to support the real economy with its long term funding needs.

“The question we must therefore ask ourselves, is, how and where should the long term funding be sourced? Non-interest Capital market (NICM) plays a greater role in the provision of long-term financing for the real economy including developmental and infrastructure projects.

“Robust NICM provides products in equity markets, sukuk markets and pooled investment vehicles that provide practical solutions to challenges identified in the financing of real sector and infrastructure projects.”

The MD revealed the NDIC is therefore proud to be associated with the SEC on this giant initiative.

 ”It is our firm belief that, this Roundtable, would provide a platform for brilliant ideas and experience-sharing, that will open our financial system to foreign direct investments and foreign portfolio investments that will provide both the required long term financing need for our banks, the real economy as well as support foreign exchange liquidity thereby promoting the stability of the financial system not only in the short term but in the medium to long term, in line with the Renewed Hope Agenda of the President.”

He noted that the role of an effective, liquid and well-functioning capital market, cannot be overemphasised in promoting capital formation and economic growth.

Backing this up, he said, “Studies have indicated strong correlation between capital market and economic growth. Broad and deep capital market plays a significant role in supporting and promoting savings mobilisation, resource allocation and diverse sources of funding to the real-economy, thereby facilitating better diversification and management of risk.

“It is instructive to note that a robust capital market is a result of deliberate efforts by the relevant stakeholders. There must be a thoughtful determination by the policy makers to create the enabling environment that allows capital market development to thrive.

“I would like to appreciate the foresight of the SEC’s Management Team for organising this international roundtable targeted at further deepening and broadening our capital market. The global opportunities offered by the non-interest capital market are enormous and can only be fully harnessed if and only when we are able to address some of the challenges inhibiting its growth.

“The Commission as the national regulator of the capital market has commendably done so much in this regard as more still needs to be done in conjunction with relevant stakeholders at both national and regional levels particularly in the area of regional regulatory and policy coordination.”

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Money market

DMO encourages residents to invest in FGN securities



The Debt  Management Office (DMO)  has urged the people of Niger State to consider investing in Federal Government of Nigeria (FGN) securities.

This call to action was made during a public awareness event held in Minna, which was a collaborative effort between the DMO and CSL Stockbrokers Group.

The Director-General of the DMO, Patience Oniha, whose message was conveyed by the Head of the Strategy Programme Department at DMO, Ms. Elizabeth Ekpeyong, emphasised the safety of investing in FGN securities.

Oniha assured potential investors that their capital would be secure, highlighting that such investments are protected by law and carry no risk of loss.

The DMO’s initiative aims to bolster the financial future of Niger State residents by presenting FGN securities as a reliable investment option that not only preserves wealth but has the potential to increase it. The event underscored the government’s commitment to fostering economic growth and financial literacy among its citizens.

Investors were reassured of the stability and legal backing of these securities, making them an attractive option for those looking to secure their financial future.

The DMO’s outreach is part of a broader strategy to deepen the domestic bond market and encourage local investment in government-backed securities.

“Investing in Federal Government securities and bonds will increase you financially, and it is the best way to invest your money.

“You are not going to lose anything as long as the federal government is concerned,” she said.

She said that such investment would also help the federal government raise more funds to attract more foreign investors into the country.

Oniha advised the public to invest in the government securities and bonds facilities, as they serve as lifetime financial security for the future.

Managing Director, CSL Stockbrokers Limited, Mr Abiodun Fagbulu explained that the federal government securities were financial instruments issued by the DMO on behalf of the government.

Fagbulu, who was represented by Lead Sales, Northern Region of CSL, Mrs Foluke Samuel assured that the facilities were safe because the federal government was serving as the insurance cover for any investor.

“FGN securities are backed by law, so when you invest, you get a steady flow of income,” he said.

He said that the facilities included the Nigeria treasury bills, FGN bonds, FGN savings bonds, the Sovereign Sukuk and FGN green bonds.

Reacting, Mr Anthony Akuh, a business man and participant, said that he had no knowledge of the securities and bonds but for the opportunity of the awareness programme.

Akuh commended the DMO and CSL for bringing the awareness programme to Minna.

“I will approach a stockbroker immediately for possible investment,” he said.

Recall the programme which was inaugurated in Lagos in March 2022, rounded up its 2023 outing in Minna.

It had also been held in Enugu, Ibadan, Kano, Yola, Umuahia, Gombe, Osogbo, Port Harcourt, Benin, Uyo, Asaba, Maiduguri, Abeokuta and Makurdi.

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