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BDAN calls for regulations review, says CBN, NDIC, AMCON stifling bank’s growth 

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By Idris Bakare

Bank Directors Association of Nigeria (BDAN) has called for the review of necessary regulations to prevent the deposit money banks from paying insurance on deposits sterilised with the Central Bank of Nigeria (CBN).

The Directors said banks have been compelled to insure all their total deposits whereas about 50 per cent of funds are available to the operators for lending and other investments.

They called on the CBN and the Nigeria Deposit Insurance Corporation (NDIC) to, as a matter of necessity, begin the process of reviewing the regulations to insulate banks from paying premiums on risk-free deposits.

President of the Governing Council, BDAN, Mustafa Chike-Obi, said the banks could not continue to insure non-trading deposits. He wondered why the funds should be insured when it does not carry any risk and sits in the vault of the apex bank.

He also questioned the contributions of banks to the Asset Management Corporation of Nigeria (AMCON)’s sinking fund, saying AMCON’s existence could be perpetual.

There have been arguments against the contribution of banks, which are owned by private investors, to the funding of AMCON, a creation of the Federal Government.

According to him, “Why do banks pay deposit insurance on money that has been sterilised at the CBN as CRR? If the cash ratio has been sterilised by the CBN, there is no reason to insure it and so at a minimum, all discretionary normal CRR that are at CBN should not be subject to the calculation of deposit insurance. This is saving close to N50 billion.”

Also speaking Managing Director of NDIC, Bello Hassan, said the deposit premium payment is important to enable the Corporation to fulfill its obligation to the sector in event of failure. He argued that certain banks pay much because of their high-risk level.

He charged the Directors to engage their respective management to justify their NDIC premiums.

In his keynote address, the Founding Managing Director, Agusto & Co., Olabode Agusto, also pointed at the activities of the regulators and the Federal Government constituted major risk factors to the sector.

“The pre-tax return on asset (ROA) for Nigeria’s banking sector was 1.7 per cent in 2021 and the same percentage is projected for 2022. In Ghana, a country that has the same long-term rate of inflation as Nigeria, pre-tax ROA was 4.6 per cent in 2021. Why is the profitability of Nigeria’s banking industry significantly below expectations? We estimate that above-normal CRR, negative real interest rates and AMCON levy reduce the banking sector’s ROA by about three per cent.

“These rules, therefore, impair the ability of the banking sector to build capital from internally generated profits. Because of this, capital buffers in the banking industry are thinning. In 2017, the banking sector had an equity capital to assets ratio of 14.2 per cent, by 2021 this ratio had gone down to 10.4 per cent.

“Can the banking industry shore up its capital by raising additional capital from the markets? Yes, but at a great discount. Investors will surely be wary of investing in an industry that is seen as under-performing because it delivers ROE that is below the rate of inflation,” Agusto explained.

Money market

FBN Holdings’ market capitalisation hits $2.6bn after week of growth

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FBN Holdings, one of Nigeria’s oldest banks on Wednesday has achieved a market capitalisation of N1.06 trillion ($2.6 billion) after a week of growth, with the share price rising by around 10 per cent.

The surge began in 2022 after billionaire investor Femi Otedola acquired a majority stake in the bank, triggering investor enthusiasm and a flurry of stock purchases.

At the time of Otedola’s acquisition, FBNH traded at just under N6 per share, meaning the stock price has quadrupled since the announcement.

In its third-quarter financial statements for the period, FBN Holding’s profit after tax (PAT) was N236.4 billion, a 159.2 percent increase from the N91.2 billion recorded in the corresponding period in 2022.

By surpassing the N1 trillion market cap, FBNH joins the exclusive group of Nigerian publicly traded companies known as SWOOTs (Stocks Worth Over One Trillion).

Other members of the SWOOTs group include Dangote Cement, Airtel Africa, MTN, BUA Cement, BUA Foods, Seplat, Zenith Bank, and GTCO.

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W’ Bank commits $5bn to expand electricity access in Africa by 2030

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The World Bank has announced plans to allocate $5 billion towards bringing electricity to 100 million people in Africa by 2030.

The announcement was made by the President of the World Bank, Ajay Banga, during his speech at the mid-term review of the International Development Association’s $93 billion replenishment package in Zanzibar, Tanzania.

Banga highlighted the importance of providing support to low-income countries through the bank’s IDA, which offers zero- or low-interest loans.

He cited the initiative to bring electricity to millions of people in Africa as an example of how the funds from IDA will be used.

The World Bank’s plan to bring electricity to 100 million people in Africa by 2030 is a significant step towards improving the quality of life for millions of people on the continent.

The lack of access to electricity has been a major hindrance to economic development in many African countries, and this initiative will help to address this issue.

The allocation of $5 billion towards this project is a clear indication of the World Bank’s commitment to supporting sustainable development in Africa.

Banga said World Bank shareholders, donor countries and philanthropies needed to dig deeper to help IDA deliver better development outcomes to low-income countries.

He said, “The truth is we are pushing the limits of this important concessional resource and no amount of creative financial engineering will compensate for the fact that we need more.”

He also said the World Bank needs to revamp how it evaluates its performance to focus on improved outcomes, not numbers of projects or dollars disbursed.

That means moving towards platforms that can be replicated, such as an IDA-financed mini-grid that delivers electricity to rural communities in Nigeria.

“But this is just one example, I want to see 100,000 – 200,000 – half a million more,” he said, adding that IDA was investing $5 billion to deliver affordable renewable electricity to 100 million Africans before 2030.

The World Bank boss added, “But how can we hope to make even adequate progress while 600 million people in Africa – 36 million of whom live here in Tanzania – still don’t have access to reliable electricity? Put simply: We can’t.”

The current, 20th IDA funding round is due to be completed on June 30, 2025, with the Zanzibar conference aimed at adding to that funding.

Banga used to launch his campaign for the subsequent round of funding to well exceed $93 billion.

The World Bank President in Zanzibar said, “The truth is we are pushing the limits of this important concessional resource and no amount of creative financial engineering will compensate for the fact that we need more funding. This must drive each of us to make the next replenishment of IDA the largest of all time.”

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CBN approves reviewed service charter to enhance business facilitation

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By Sodiq Adelakun

The Central Bank of Nigeria (CBN) has announced the approval of its reviewed Service Charter by Governor Olayemi Cardoso.

The Service Charter is a requirement of the Business Facilitation Act (BFA) 2022 and aims to improve the ease of doing business in Nigeria.

It also enables the Bank to comply with SERVICOM Nigeria’s directives on improving customer service delivery.

The Charter outlines the Bank’s promises to work with its external customers to meet their service expectations, as well as what the Bank expects from them.

In the foreword, the Governor reiterated the Bank’s “commitment to providing more responsive and citizen-friendly governance through quality service delivery that is efficient, accountable and transparent,” the CBN stated on its website.

The document outlines the Bank’s mandates, vision, mission, and core values. It contains the services the Bank offers through its various departments and the service standards for each service.

The Service Charter also includes a standardised customer complaints form for reporting service failure and a mechanism for addressing service failure in any of the Bank’s services.

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