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Financial stability: CPPE gives nod to CBN’s recapitalisation plan to safeguard depositors’ funds    

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…Says inflationary challenges drive endorsement of bank recapitalisation

… Non-Performing loans remain below threshold, reflecting positive bank performance — CBN

…Expresses concern over high interest rate spreads in Nigerian banking system

By Sodiq Adelakun

The Centre for the Promotion of Private Enterprise (CPPE) has thrown its weight behind the recent initiative by the Central Bank of Nigeria (CBN) to recapitalise banks in the country.

The CEO of CPPE, Dr. Muda Yusuf, affirmed this endorsement in a statement released on Monday.

He emphasised the critical role of adequate capitalisation in ensuring the efficiency and stability of the financial system.

Dr. Yusuf highlighted that recapitalisation aims to safeguard depositors’ funds, fortify the stability of the financial sector, enhance the resilience of banks, and position them to foster economic growth.

Last Thursday, the CBN introduced new minimum capital requirements for banks. According to a circular signed by the acting Director of Corporate Communications at CBN, Sidi Ali, commercial banks with international authorisation are now mandated to maintain a minimum capital base of N500 billion.

Additionally, banks with national authorisation must adhere to a minimum capital base of N200 billion, while those with regional authorisation face a requirement of N50 billion.

Ali noted that the new minimum capital base for commercial banks with national authorisation is now N200 billion, while the new requirement for those with regional authorisation is N50 billion.

She also disclosed that the new minimum capital for merchant banks would be N50 billion, while the new requirements for non-interest banks with national and regional authorisations are N20 billion and N10 billion, respectively.

Capital adequacy measures the capacity of a bank to meet its financial obligations and absorb any shocks related to losses.

It measures the financial soundness of a bank, ensures the safety of depositors’ funds, deepens financial intermediation, and enhances the capacity to support economic growth through the funding of investments.

Yusuf stated that the last major review of minimum capital requirements was done in 2005. That was under President Olusegun Obasanjo, with Prof Charles Soludo as CBN Governor.

But since then, the value of the minimum capital has been significantly eroded by inflation.

For instance, the official exchange rate in 2005 was about N130 to the dollar. This meant that the N25 billion for a national bank, for instance, was equivalent to $192m. The naira equivalent today is about N250 billion.

For the international banking licence, it would be about $384m, an equivalent of about N500 billion.

He said, “The reality is that the capitalisation requirement has not increased materially in real terms, that is when adjusted for inflation.

“The real issue is that inflation had weakened the value of money over time, which makes recapitalisation imperative and inevitable.”

…Non-Performing loans remain below threshold, reflecting positive bank performance — CBN

Reports from the CBN affirm the robustness of Nigerian banks, showcasing favorable soundness indicators. According to data as of January, the industry’s Capital Adequacy Ratio stood at 13.7 percent, surpassing the prudential threshold of 10 percent.

Additionally, the Non-Performing Loans (NPL) ratio, measuring 4.81 percent of total loan assets, remained below the prudential threshold of 5 percent, indicating positive performance. Furthermore, the liquidity ratio, at 40.14 percent, exceeded the prudential minimum of 30 percent, reflecting a healthy liquidity position.

Yusuf acknowledged the soundness of Nigerian banks based on these metrics. However, he emphasised the importance for regulatory authorities to sustain and enhance this stability, particularly in light of recent macroeconomic challenges.

Yusuf said, “Based on the financial soundness metrics, Nigeria banks are adjudged to be generally healthy. However, this does not diminish the need for regulatory authority to ensure that this soundness and stability is preserved and improved upon, especially because of the recent macroeconomic headwinds.

“This, perhaps, is what informed the current policy of the CBN to review the capital base.”

Commending the CBN, Yusuf said the proposed recapitalisation of banks should be done in a manner that would minimise shocks and disruptions to the banking system and the economy at large.

“We commend the CBN for giving a timeline of 24 months for banks to comply. This would minimise disruptions and dislocations in the financial system. It would also ensure a smooth transition to the new capitalisation regime for banks.

“With the current approach and timeline given by the CBN, the risk of banks collapse or hasty mergers and acquisitions should be minimised. It is also laudable that the current categorization of banks with differential capital requirements has been maintained – international, national, and regional. This is necessary to allow for inclusion and reduce the risk of dominance of the banking space by a few big banks,” he said.

He, however, stated that it is important for the CBN to assure depositors of the safety of their funds in the banking system, irrespective of the current level of capitalisations of banks.

“It is important to sustain the confidence of the banking public about the soundness and stability of the Nigerian banking system, especially because of the perception and vulnerable risks of smaller banks.

“We implore the CBN to ensure minimum risk to shareholders and employees in the banking system, across board. It is also imperative to guide against elevated concentration risks and the deepening of oligopolistic structure in the banking system,” he added.

…CPPE expresses concern over high interest rate spreads in Nigerian banking system

Meanwhile, CPPE raised alarms over the substantial interest rate spreads observed within the Nigerian banking sector. According to the CPPE executive, there are significant disparities between deposit and lending rates, with spreads sometimes reaching as high as 20 percent, ranking among the highest globally.

Moreover, it was highlighted that the tenure of funds within the banking system tends to be exceedingly short, with over 80 percent of funds having a tenure of one year or less.

The CPPE remains steadfast in its commitment to delivering quality news and information to its esteemed readership on a consistent basis.

To further support its research efforts, the CPPE appeals for generous donations from its audience to sustain its mission of providing invaluable insights into Nigeria’s financial landscape.

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Alleged N80.2bn fraud: EFCC face resistance as Gov. Ododo rescues Yahaya Bello from arrest

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…As Bello accuses anti-graft agency of flouting Court order

…Supporters allege witch-hunt of former Governor

…EFCC warns individuals from obstructing operatives, insists Bello not above the law

Governor of Kogi State, Usman Dodo rescued his predecessor, former governor, Yahaya Bello from being arrested by operatives of the Economic and Financial Crimes Commission (EFCC) on Wednesday in Abuja.

The EFCC operatives had unsuccessfully tried to arrest Yahaya Bello over an alleged N85 billion fraud.

The commission had earlier declared Bello as being at large, noting that it was conducting a search for the former Governor.

Governor Ododo, who had arrived at the residence amid the standoff, was suspected to have later departed the residence with Bello in his official vehicle with tinted glasses.

Hours after the arrival of the EFCC operatives and inability to achieve their mission, they were reinforced with backup support from the Police and Department of State Services (DSS) operatives.

However, as Governor Ododo was leaving Bello’s residence, the security operatives got the feelers that the former governor was in the governor’s vehicle, a development that didn’t go down well with them.

Meanwhile, supporters of the former Governor addressing pressmen at the Governor’s Wuse residence described the attempted arrest as a witch-hunt by political actors.

Speaking to journalists, the Chairman of the Kogi State chapter of the APC, Hon. Abdullahi Bello said, “Maybe they are not EFCC operatives but people disguised as EFCC. He (Yahaya Bello) still saw Mr President few days ago and now this is happening. This is a witch-hunt by political actors.”

Reacting to the unsuccessful arrest, the EFCC in a statement by its Spokesperson warned individuals from obstructing its operations noting that it is a criminal offence.

“Section 38(2)(a(b) of the EFCC Establishment Act makes it an offence to prevent officers of the Commission from carrying out their lawful duties. Culprits risk a jail term of not less than five years.

“This warning becomes necessary against the background of the increasing tendency by persons and groups under investigation by the Commission to take the laws into their hands by recruiting thugs to obstruct lawful operations of the EFCC,” the Commission explained in a statement.

The Commission further added that its operatives  have had to exercise utmost restraint in the face of such provocation to avoid a breakdown of law and order.

“Regrettably, such disposition is being construed as a sign of weakness.The Commission, therefore, warns that it will henceforth not tolerate any attempt by any person or organisation to obstruct its operation as such will be met with appropriate punitive actions,” the statement concluded.

Meanwhile, in a statement from the Yahaya Bello Media Office, Bello described the action of the EFCC as contrary to a subsisting court order granted February 9, 2024 by the Kogi State High Court of Justice, Lokoja Division, in Suit No. HCL/68M/2024 between Alhaji Yahaya Bello Vs. EFCC, restraining the Commission either by itself or its agents from harassing, arresting, detaining or prosecuting him, pending the hearing and determination of the substantive fundamental rights enforcement action.

The former governor said judgement was being awaited in the same suit this same Wednesday and despite all that, the EFCC has now laid siege to his Abuja house seeking to arrest him in contravention of the extant court order.

“About 9:30 am today, the 17th day of April 2024, persons who described themselves as officers of the Economic and Financial Crimes Commission (EFCC) arrived at the Wuse Zone 4 Residence of His Excellency, Alhaji Yahaya Bello to effect his arrest.

“This is despite a subsisting Order of injunction granted on 9th February 2024 by the High Court of Justice, Lokoja Division in Suit No. HCL/68M/2024 between Alhaji Yahaya Bello v. Economic and Financial Crimes Commission, restraining the Commission either by itself or its agents from harassing, arresting, detaining or prosecuting Alhaji Yahaya Bello, pending the hearing and determination of the substantive fundamental rights enforcement action.

“The EFCC was duly served with that Order on 12th February 2024 and on 26th February 2024; the EFCC filed an Appeal (Appeal No.: CA/ABJ/CV/175/2024: Economic and Financial Crimes Commission v. Alhaji Yahaya Bello) against the said Order to the Court of Appeal Abuja division. The Appeal was accompanied by a Motion for Stay of Execution of the Order of the High Court which the Court of Appeal adjourned for hearing till the 22nd day of April 2024.

“Furthermore, Judgement in the substantive case between Alhaji Yahaya Bello and the EFCC is to be delivered at 12 Noon today in Lokoja.

“Contrary to all of the above, the EFCC has now laid siege to the home of H.E Yahaya Bello seeking to arrest him in contravention of the extant orders!

“It is a surprise that an agency led by a lawyer could flagrantly disobey a subsisting court order by taking actions contrary to the reliefs granted.

“We are aware of the total commitment of the current administration of President Bola Ahmed Tinubu to the rule of law and can say categorically that the leadership of the EFCC might have offered the agency on a platter of gold to desperate politicians to convert to their score settling tool without minding the effect on its integrity and the image of Nigeria as regards the rule of law.

“A situation where law enforcers disregard the rule of law is a definite recipe for anarchy, which will adversely affect every aspect of the nation’s economy.

“Nigerians have perceived the desperation of the anti-graft agency to embarrass and harass the former Governor by all means through spurious allegations, especially the latest one dating back to September 2015, way before he assumed office.

“We are aware that there are clandestine moves to correct the error, but with even more questionable allegations, which would embarrass the Commission and Nigeria more than the initial one.

“It is unfortunate that an agency that is supposed to enforce the law is now the first culprit with respect to disobedience of court orders. This is a big dent on the fight against corruption. He who comes to equity must come with clean hands.

“We call on President Bola Ahmed Tinubu to call the EFCC to order in the interest of legal sanity,” the statement read.

Similarly, the EFCC has stated that it will arraign the former governor before a Federal High Court sitting in Abuja despite the resistance it met in arresting Bello.

The anti-graft agency revealed that Bello will be arraigned before Justice Emeka Nwite alongside three other suspects, Ali Bello, Dauda Suleiman and Abdulsalam Hudu on 19-count charges bordering on money laundering to the tune of N80,246,470,088.88 (Eighty Billion, Two Hundred and Forty Six Million, Four Hundred and Seventy Thousand and Eight Nine Naira, Eighty Eight Kobo).

Count one of the charges reads: “That you, Yahaya Adoza Bello, Ali Bello, Dauda Suliman, and Abdulsalam Hudu (Still at large), sometime, in February, 2016, in Abuja within the jurisdiction  of this Honourable Court, conspired amongst yourselves to convert the total sum of N80,246,470,088.88 (Eighty Billion, Two Hundred and Forty Six Million, Four Hundred and Seventy Thousand and Eight Nine Naira, Eighty Eight Kobo), which sum you reasonably ought to have known forms part of the proceeds of your unlawful activity  to wit, criminal breach of trust and you thereby committed an offence contrary to Section 18(a) and punishable under Section 15(3) of the Money Laundering (Prohibition) Act, 2011 as amended”.

Count 17 of the charges read: “That you Yahaya Bello between 26th July 2021 to 6th April 2022 in Abuja within the jurisdiction of this Honourable  Court aided E-Traders International Limited to conceal the aggregate sum of N3,081,804,654.00 (Three Billion, Eighty One Million Eight Hundred and Four Thousand Six Hundred and Fifty Four Naira) in account number 1451458080 domiciled in Access BankPlc, which sum you reasonably ought to have known forms part of proceeds of unlawful activity to wit, criminal breach of trust and you thereby committed an offence contrary to Section 18(a), 15(2) (d) of the Money Laundering (Prohibition) Act, 2011 as amended and punishable under Section 15( 3) of the same Act.”

Count 18 of the charges reads: “That you Yahaya Adoza Bello  sometime in November 2021 in Abuja within the jurisdiction of this Honourable Court  indirectly procured E-Traders international Limited to transfer the aggregate sum of $570,330.00 (Five Hundred and Seventy Thousand , Three Hundred and Thirty Dollars) to account number 4266644272 domiciled in TD Bank, United States of America which sum you reasonably  ought to have known  forms part of proceeds of unlawful activity to wit, criminal breach of trust and you thereby committed an offence contrary to Section 15(2) (d) of the Money Laundering (Prohibition) Act, 2011 as amended and punishable under Section 15( 3) of the same Act.

“It is needful to state that Bello is not above the law and would be brought to justice as soon as possible,” The statement read.

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All who threaten Nigeria’s sovereignty will have themselves to blame — Tinubu to Yoruba agitators

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…Afenifere urges Tinubu to review command structure of security agencies

President Bola Ahmed Tinubu has sounded a strong warning to agitators for Yoruba nations and terrorists that they will have themselves to blame for the actions they are taking.

Speaking when he received leaders of Afenifere, at the State House in Abuja, the President said his administration is re-engineering Nigeria’s finances and seeking to boost the purchasing power of citizens, and spread prosperity down the line, by instituting a credit system where the element of cash is not an impediment to a significantly enhanced standard of living for all citizens.

He said Nigeria must secure itself economically first before it can achieve any of its more sophisticated objectives.

The President in a statement issued by his Special Adviser on Media and Publicity, Chief Ajuri Ngelale, was quoted as saying, “We are committed to the economic survival of our country. To re-engineer the finances of our country, we must start in earnest. So first, retool, revamp the economic opportunities available, and resolve to continue taking the firm and steady baby steps that are necessary.

“Education is a strong weapon against poverty. To empower the people, we must invest in the future of our youths. We have seen the problems parents face in training their children in school; it is the reason why we established the National Student Loan Programme, which is taking off well.

“We are equally examining what to do with the high degree of unemployment. We must help vulnerable people by providing social security. We are looking at how to provide allowances for the unemployed, and we are developing ways to boost the purchasing power of citizens with the Consumer Credit Scheme. If we remove the cash upfront element to buy a car or a house, we will reduce the propensity for fraud and corruption across the land,” Tinubu said.

Speaking on security, the President declared that those who threaten the sovereignty of Nigeria would pay a heavy price.

Tinubu said, “I am irrevocably committed to the unity of Nigeria and constitutional democracy.

“Constitutional democracy is reflected greatly here since we assumed office. What we face now is the challenge of terrorism. Security of life and property is very necessary for development. I can tell you we are achieving success. We have degraded terrorism to a level that they cannot threaten the sovereignty of Nigeria any longer.

‘’Banditry and kidnapping will be defeated. And there is no payment of ransom whatsoever. We are taking the battle to them. We are getting results more rapidly than before.

“We are working hard on intelligence gathering. Those who think they can threaten the sovereignty of Nigeria will have themselves to blame. They have a price to pay. And we are not going to relent.”

Earlier in his remarks, His Royal Majesty, Oba Olu Falae commended the President for his courageous decisions and for the rehabilitation of the Third Mainland Bridge in Lagos, as well as other critical ongoing projects.

He urged the President not to relent in ensuring fairness and equity for all Nigerians while noting the importance of a constitutional amendment to devolve more powers to the states.

“We are delighted about what you are doing for our country, and we assure you of our continued support. We thank you for your visit to Akure in February 2024, and we believe it is right and proper to reciprocate your kind gesture. We appreciate this relationship, and we need to make it work in the interest of Nigeria.

“Mr. President, you are the leader of Nigeria now and the most important political figure in Africa. We expect you, in view of your legacy and pedigree, to lead our country with knowledge, courage, and integrity. We have no doubt that your tenure will mark a turning point in the history of our country. Under your leadership, Nigeria will be repositioned.

“We will stand by you as you make all efforts to change the Nigeria story for the better. Be assured Afenifere will not abandon you in fair or foul weather. As long as you remain faithful to the principles of fairness, integrity, and courage that is expected of you as the leader of Nigeria, we will stand by you,” Oba Falae said.

The Yoruba socio-cultural group also urged the President to review the command structure of security agencies.

The group alleged that some ethnic groups have certain security agencies in their pockets.

The delegation was led by Pa Reuben Fasoranti, leader of Afenifere; Oba Falae, alongside other eminent citizens.

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Banks’ LDR lowered to 50%

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The Loan to Deposit Ratio (LDR) of Banks in the country rose to 50 percent from 65 percent.

This was disclosed by the apex Bank, Central Bank of Nigeria (CBN) in a circular to Deposit Money Banks titled “Re: Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy.”

The LDR is a metric used to evaluate a bank’s liquidity by comparing its total loans to its total deposits over the same period, expressed as a percentage. An excessively high ratio may indicate insufficient liquidity to meet unexpected fund requirements.

In a bid to increase lending to the economy especially Small and Medium Enterprises, SME, retail mortgage and consumer loans, the CBN on July 3, 2019 increased Banks’ LDR to 60 per cent from 57 percent. The LDR was further raised to 65 per cent in January 20020.

The circular read, “The Central Bank of Nigeria’s (CBN) regulatory directive on the above subject dated January 20, 2020, referenced BSD/DIR/GEN/LAB/12/070 refers.

“Following a shift in the Bank’s policy stance towards a more contractionary approach, it is imperative to review the loan-to-deposit ratio (LDR) policy to align with the current monetary tightening by the CBN.

“Accordingly, the CBN has decided to reduce the LDR by 15 percentage points to 50 percent, in a similar proportion to the increase in the CRR rate for banks. All DMBs are required to maintain this level and are further advised that average daily figures shall continue to be applied to assess compliance.

“While DMBS are encouraged to maintain strong risk management practices regarding their lending operations, the CBN shall continue to monitor compliance, review market developments, and make alterations in the LDR as it deems appropriate.”

The reduction in the LDR according to analysts at Afrinvest Securities is to allow banks to comply with the Cash Reserve Ratio, CRR of 45 percent.

They said, “Today, the CBN in a circular to Deposit Money Banks titled “Re: Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy” announced a scale down of the Loans to Deposits Rate (LDR) by 15.0ppts to 50.0 percent – reversing previous threshold set by the past CBN administration in January 2020.’

“In our view, this downward review of LDR allows banks to comply with the 45.0 percent CRR directive, and eases off pressure on the lenders considering the restrictive nature of other CBN directives including the Net Open Position (NOP) ceiling of 20.0 percent short and 0.0 percent long. Thus, we believe this policy would enhance the ability of banks to sweat out assets without creating unnecessary risks.”

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